3. The struggle had not been without casualties. Morse was on his way to prison for misuse of the funds of his bank. Heinze was under indictment; and although the indictment was later dismissed, his bright career was tarnished. Barney committed suicide.
4. Financial power had become more nearly centralized than ever. There were fewer banks in New York now; the Clearing House’s authority was greater (and was peremptorily if not needlessly used, during the aftermath of the disturbance, against other small institutions); the Morgan and Stillman banks were relatively stronger. Stillman himself had found that there were advantages in an alliance with Morgan; from this time on he played less of a lone hand, associated his National City Bank more frequently with Morgan enterprises. “Keep on good terms with J. P. Morgan,” he wrote to his aide, Vanderlip, in 1915; it was a text the full virtue of which he had apprehended in 1907. Harriman, weakened by what was to prove a mortal illness, was no longer so fierce a Morgan antagonist as before. Rogers and William Rockefeller had suffered in the collapse of securities in the panic year; Rogers had been forced to sacrifice millions, and no longer commanded a worshipful following in the Street.
Where there had once been many principalities, there was now one kingdom, and it was Morgan’s.
He was an old man now, and as the years went on he was seen less and less at Broad and Wall Streets; but even when he was at Prince’s Gate in London, or at Aix, or in Egypt, his son and his other partners carried on in the reflection of his glory, merging banks, consolidating and extending their sphere of influence.
One rival power, however, had not yet learned deference. There were forces outside Wall Street which in the next few years were to cause frequent embarrassment and tribulation to the ruling powers. To appreciate how these forces developed and how their counter-offensive took shape we must go back a few years and examine their origins.
Chapter Five
COUNTER-OFFENSIVE
THE great reform movement which was destined to fill the air with clamor, the statute-books with new legislation, and the hearts of financiers and industrialists with trepidation during the years between the Panic of 1907 and the war boom of 1915–16 was not a thing of sudden origin. To understand it, in fact, one must go far back beyond the bland days of 1900 and take note of the ferments which had been working during the preceding quarter century.
Of these ferments, the most potent had been the perennial discontent of the Western farmers. Marching out into a wide land of supposedly free opportunity, these farmers had found themselves surrounded by hostile circumstances. The era of subsistence farming with hand implements was drawing to a close; the era of money-crop farming with the aid of expensive machinery was beginning; for countless farmers this meant going into debt, which in turn meant coming under the sway of the local banker. In the deflation of the eighteen-nineties they suffered as debtors always do in deflations. Farmers who raised money-crops had to buy many goods and supplies which in a more primitive economy they would have raised or made for themselves, and the prices of these goods and supplies were often outrageously high. To ship their crops to distant markets they had to rely upon the railroads, many of which were scandalously managed for the profit of Eastern owners and manipulators and set their freight rates arbitrarily high. Hence there arose in the West a widespread and confused agitation against bankers, the gold basis of the currency, industrial monopolists, and above all the railroads: an agitation which in the eighteen-eighties had been chiefly responsible for the passage of such regulatory laws as the Interstate Commerce Act.
These farmers, being mostly property-owners, were not in any true sense enemies of capitalism, but where big business seemed to stand in their way they fought it tooth and nail. During the depression of the eighteennineties, their Populist Party became a formidable power in American politics from South Carolina to the Dakotas and beyond—a strange and motley band, animated by a revivalist fury and organized by a curious assortment of leaders: hard-headed opponents of privilege, visionary intellectuals, and bewhiskered hayseed demagogues. Some of the measures proposed in the Populist platform of 1890 had looked toward fundamental changes in the control of economic processes: for example, public ownership of the railroads and of the telegraph and telephone systems. Before long, however, the Populists succumbed to a fate which has often overtaken radical groups: they pinned their chief hopes on a single measure which seemed a simple panacea for their ills, they attracted to the support of that measure a huge and unmanageable following, and when the measure was voted down their strength was dissipated. “Free silver,” said Henry Demarest Lloyd, “is the cowbird of the reform movement.” So persuasive was the silver argument when young William Jennings Bryan uttered it at the Democratic Convention in 1896 that the Democratic Party advocated it and thereby inherited most of the Populist strength. After the vociferous campaign of 1896 ended in a public repudiation of free silver, and after Bryan in 1900 chose imperialism as his major issue and was beaten once more, the conservative journals had good reason to gloat with triumph: the farmers’ revolt was broken—for the time being.
Another element in the revolt against big business which preceded the reform movement of 1900–15 was the long uphill battle waged by organized labor to secure union recognition, better wages, and relief from vicious working conditions. At intervals the battle had been bloody, as during the days of the Haymarket bomb tragedy in Chicago in 1886, the Homestead strike of 1892, and the Pullman strike of 1894. Nearly always the odds were against labor. The vast majority of employers resisted unionism strenuously. Only a small percentage of the workers were organized. When they used their only effective weapon, the strike, they found the temptation to resort to violence (to prevent other men from taking their places) almost irresistible, and usually violence alienated the sympathies of the general public. The courts, reflecting the prevailing conservative opinion of the day, had come to the remarkable conclusion that the Sherman Anti-Trust Act and other almost moribund measures originally designed to curb the great industrial combinations might be invoked to curb organized labor; thus workmen on strike often found themselves facing injunctions, the police, and the militia. Furthermore, their bargaining power was constantly being undermined by the annual influx into America of hundreds of thousands of immigrants. So long as there was still an open Western frontier, the plight of the laborer was mitigated by the hope of moving on to a new land of promise; but as the twentieth century dawned this outlet was closing.
In 1900 the strongest labor alliance, the American Federation of Labor, had 550,000 members; these mostly represented skilled crafts from which newcomers could be excluded. The Federation leaders, headed by the bespectacled, square-faced Jewish cigar-maker, Samuel Gompers, were mostly men of limited vision, sharp bargainers for practical advantage for their organizations; some of the lesser union leaders used dynamite as a means of persuasion; some were in secret alliance with employers (as in many rackets of later date). In the nature of things the majority of their followers were ignorant and undisciplined men, incompetent to understand and cope with the processes by which corporate power was being extended. Yet within the Federation and without, there burned a fierce resentment against the inhuman conditions prevailing in most industries—ten- and twelve-hour days, squalid and degrading slums and company villages, meager pay, utter insecurity, devious schemes for exploiting the worker through high rents in employer-owned houses and high prices in employer-owned stores. Under the pall of smoke which overhung the industrial towns this resentment was forever smouldering, and with it was allied the compassion of sympathetic men and women who felt that such conditions were a blot upon the face of America.
A third, though minor, element in the gathering ferment was the gradual importation and domestication of radical economic ideas of European origin, especially Marxian socialism. A fourth element was the influence of a number of widely circulated books of home-grown protest and challenge, of which perhaps the most seminal were Henry George’s Progres
s and Poverty (published in 1879), Edward Bellamy’s Looking Backward (published in 1887), Henry Demarest Lloyd’s Wealth Against Commonwealth (published in 1894), and William H. Harvey’s paper-covered manual of plausible monetary theory, Coin’s Financial School. Young Robert LaFollette, borrowing a worn copy of Progress and Poverty from a Wisconsin blacksmith and gaining from it new assurance for his fight against privilege, was one of scores of future reformers whose thought was fertilized by one or the other of these books.
Such were the chief precursors of the reform movement. Along with them, and stimulated by them, went a subtle change in the attitude of innumerable men and women toward the American economy. We have seen how industries and financial operations had expanded in scope as if responding to a blind urge toward development on a national scale. This expansion was accompanied by a laggard and uncertain expansion in the individual sense of social responsibility—as if the democratic and humanitarian impulses were reluctantly feeling their way into the wider fields toward which the acquisitive impulse had broken a path. Timid and halting as was this social conscience when confronted by the interests of entrenched property, and almost imperceptibly as it undermined the traditional American belief in unregulated competition, it was a power of great potential force.
2
Of the men who did most to liberate this force in the early years of the twentieth century, some were governors or mayors, like LaFollette in Wisconsin, “Golden Rule” Jones of Toledo, and Tom Johnson of Cleveland; one of course, was President Theodore Roosevelt; and one, as it happened, was a magazine publisher.
Samuel S. McClure was not a reformer by nature; he was simply a shrewd editor looking for popular reading-matter in order to be able to apply to magazine publication the principle of mass-production. The respectable monthlies of the time were discreetly written, gorgeously illustrated, and far less interested in the sordid drama of economic survival than in the well-bred consideration of highways and byways of Old Provence and first folios of Shakespeare. The supremacy of these respectable monthlies had been challenged during the eighteennineties by Frank Munsey’s cheap and easy magazines, which became hugely successful. McClure, agreeing with Munsey that in low prices and popular reading matter lay the best hope of success, but bringing to the editorship of his magazine an intelligence of a much higher order than Munsey’s, looked about for subjects of lively consequence to ordinary men and women. With the instinct of a born journalist, he realized that there would be popular interest in unflinching accounts of contemporary business; and he set a young woman named Ida M. Tarbell to work on a history of the Standard Oil Company, and did not abandon the project even though her colossal research went on for five long years. As she was finishing her study of Rockefeller’s business methods, Lincoln Steffens, another of McClure’s writers, went to Missouri and unearthed the scandalous story of municipal graft in St. Louis. “Tweed Days in St. Louis” appeared in McClure’s in October, 1902; the first installment of Miss Tarbell’s chronicle appeared in November, 1902—roughly a year and a half after the formation of the Steel Corporation and the Northern Pacific Panic, and a little over a year after Theodore Roosevelt’s arrival at the White House. The era of the muckrakers had begun.
Not that the reproof implied in the term muckraker—which was first used by Roosevelt in one of the moments when he was leaning to the right to keep his balance on the political tightrope—was deserved by McClure’s writers. Miss Tarbell in her Standard Oil history and Steffens in his series of articles on “The Shame of the Cities” were thorough and conscientious reporters of fact, as were Ray Stannard Baker in his examination of railroad practices and labor-union corruption, and Samuel Hopkins Adams in his articles on patent-medicine frauds. It was not until the egregious Thomas W. Lawson, a copper-company promoter and stock-market plunger, feigned conversion to the ranks of the righteous and sold “Frenzied Finance” to Everybody’s Magazine, and William Randolph Hearst turned a lurid light on Washington in David Graham Phillips’s series in the Cosmopolitan, “The Treason of the Senate,” that Roosevelt pinned his phrase to the journalists of exposure. By that time there was good reason for reproof. Already, however, the country had been astonished and shocked by a prodigious array of diligently reported financial and political scandals. One of the muckraking books, Upton Sinclair’s The Jungle, actually had an immediate and practical legislative result: it caused the passage by Congress of a packing-house inspection bill and hastened the passage of a pure-food bill.
To these disclosures in books and magazines were added disclosures by investigating committees, such as that of the life-insurance scandals in New York by Charles Evans Hughes. It was in the autumn of 1905, when prosperity was fat in Wall Street and speculation was roaring, that Hughes—then almost unknown to the public—revealed some of the uses to which the life insurance companies had put their policyholders’ funds. It appeared that officers of the companies and members of their families drew large salaries and expense-moneys and were able to rake in additional profits through the use of company funds in favored enterprises. It appeared that insurance companies kept inordinate deposits in banks in which their officers were financially interested, and that on the other hand they were much too closely allied with investment banking houses to find it easy to preserve the disinterested attitude of trustees. For instance, George W. Perkins was simultaneously a partner in J. P. Morgan & Co. and an officer of the New York Life; in his former capacity he had sold to himself in his latter capacity four hundred million dollars’ worth of bonds of the struggling International Mercantile Marine—eighty million dollars’ worth of which, oddly enough, had been taken back temporarily by the House of Morgan as the day approached when the books of the insurance company must be examined by the State. Hughes revealed the disbursement of huge sums for surreptitious lobbying purposes, as in the maintenance of a mysterious establishment in Albany jocularly known as the “House of Mirth”; he revealed also the payment of comfortably large retainers to Senators Chauncey Depew and David B. Hill.
Gasping with astonishment at what they read in books and magazines and in the newspaper reports of the Hughes inquiry and other investigations, a vast number of men and women who had hitherto known little and cared less about the methods of expanding industry and high finance and about the way in which political pressures were exerted, were driven to the conclusion that the American economy and American public affairs were due for a housecleaning on an Augean scale. Meanwhile in a number of cities and states the cleansing process was already under way: in Toledo, for instance, where Mayor “Golden Rule” Jones and his successor, Brand Whitlock, single-taxers and disciples of Henry George, had been fighting the street-railway and electric-light corporations; in Cleveland, where fat, smiling Tom Johnson, whom Lincoln Steffens called “the best mayor of the best-governed city in America,” had battled for a three-cent fare and had got it; and above all in the state of Wisconsin, where little Governor Bob LaFollette, whose stormy pompadour crowned a very hard head, had been making an astonishing record for legislation to subject the railroads to regulation, to restore popular rule, and to improve the calibre of men in the public services of the state.
Labor was simultaneously gaining in strength. In the five years between 1900 and 1905 the American Federation nearly trebled in membership. Socialism was growing: The Appeal to Reason, a Mid-Western socialist paper, had half a million readers by 1904. Debs, the Socialist candidate, had received less than a hundred thousand votes for President in 1900; four years later he received over 400,000. Big Bill Haywood’s Western Federation of Miners, as fierce and uncompromising a labor organization as the country had ever seen, was on the rise. Early in 1905 Haywood and others met in Chicago and formed the International Workers of the World with the ringing declaration, “There is but one bargain that the I.W.W. will make with the employing class—complete surrender of all control of industry to the organized workers.” And at the very end of the year 1905, just as the Hughes investigation was closi
ng, the country had a terrifying glimpse of what uncompromising warfare on the part of a militant labor organization might involve. Frank Steunenberg, ex-governor of Idaho, who had once put down a miners’ strike with the aid of colored soldiers, was blown to pieces by a bomb placed at his front gate.
Haywood and Moyer and Pettibone of the Western Federation of Miners were tried for the Steunenberg crime (and acquitted) in July, 1907. The trial—with William E. Borah serving as counsel for the prosecution and Clarence Darrow serving as counsel for the defense—was a national sensation. Even in New York, two thousand miles away, Fifth Avenue was jammed, one day in May, 1907, with thousands upon thousands of workmen marching to the thrilling music of the Marseillaise and carrying banners which announced their sympathy for Haywood. It was a sight to make financiers, looking down from the windows of their great houses and their comfortable clubs, more than a little uneasy. Not only reform appeared to be gathering headway, but proletarian revolt of the most aggressive and vindictive sort.
3
Throughout the early years of the reform movement the evolution of President Theodore Roosevelt was very significant, for he was its chief spokesman and exhorter and also a fairly reliable barometer by which to gauge its strength. As Henry Pringle has justly remarked, “The significance of Roosevelt’s corporation activities lay in what he said rather than in what he did.” Roosevelt was not in fact very much of a “trust-buster.” During his seven and a half years in the White House, only twenty-five proceedings leading to indictments under the Sherman Anti-Trust Law were brought by the federal government; during the four years of the supposed conservative, Taft, forty-five were brought. In Roosevelt’s first term, as we have seen, his chief onslaughts against the right of business to do as it pleased were his action against the Northern Securities Company and his insistence upon settling the anthracite coal strike of 1902; during the rest of the term his tendency was to play safe. Even during his second term he pushed to enactment few important measures designed to curb business: the only really vital one was the Hepburn Act, which permitted the Interstate Commerce Commission to regulate railroad rates.
Lords of Creation Page 15
