In 1908, President Theodore Roosevelt proposed that Congress repeal the Sherman Antitrust Act and replace it with an expansive set of laws that would allow combinations of corporations to exist but give the Executive branch broad authority to regulate every aspect of these corporations. Such a move would take power away from the judicial branch and give it to the administration. It would allow industries to become more and more centralized but under the heavy hand of the Federal government. It was a bold move by a very bold president, and it was a message of regulation, not obstruction that he would continue to push through his years as president.
The Sherman Antitrust Act was passed in 1890 and prohibited anti-competitive agreements and unilateral conduct that monopolized or attempted to monopolize a relevant market. Despite the law, anti-competitive activity continued. One of the most egregious examples became known as the "Boston Agreement". In 1900, practically all the steel companies in New England organized a carefully planned and combined effort to manage contracts and increase bids. At the top of the organization was the "commissioner" who kept a record of all work its members planned to bid on or desired to secure. The commissioner then met with members of the organization and determined whether to enter into a collusive bidding agreement. The agreement included who should get the job and at what price. Sometimes, the agreement was simply a gentleman's agreement, and other times cash payments were made to ensure the selected bidder would win. In one 1902 example, two leading competitors submitted bid for the Boston Broadway Bridge, the contract was awarded to Boston Bridge Works who had the lowest bid of $112,450 but it was found that New England Structural Company submitted an artificially higher bid of $116,450 in return for a $5,000 cash payment from Boston Bridge Works. Similar agreements were made for the Bennington Street Bridge, the Cove Street Bridge and many other public and private contracts.
In 1905, Nathan Matthews the Chairman of the Finance Commission in Boston and former Mayor created a very detailed report of the extensive collusion by the members of the "Boston Agreement". As Commissioner, he expressed his belief "that an example should be made of these men” and that the members of the 'Boston Agreement' should be "brought before a Federal grand Jury". This report of Matthews got national attention, and in part prompted President Theodore Roosevelt to deliver a special message in April 1908 on strengthening the power of the Executive branch to prosecute collusion and put in controls to regulate interstate commerce. Roosevelt used Matthews' report as proof that there is a real need for new laws to have more effective control of the great corporations. Roosevelt shared what he believed to be Mr. Matthews reporting of "certain evil practices of various corporations which have been bidders for furnishing to the city iron and steel".
These acts were in clear defiance of the Sherman Antitrust act that prohibited anti-competitive agreements and attempts to monopolize a market. Matthews concluded in his report said that the collusive bidding was not only "repugnant to common honesty, but is plainly obnoxious to the Federal statue known as the Sherman or antitrust law." Roosevelt, in response submitted the report to his Department of justice for a thorough investigation and possible action. The Sherman Antitrust act gave the Department of Justice broad authority to bring suits to enjoin or prohibit conduct that violated the Antitrust Act. Combinations like the 'Boston Agreement' were forbidden and punishable by law, but the federal government failed to enact any real regulations to control it. In Roosevelt's special message he explained that the regulation of the laws was left to the state, but the states did not have the constitutional authority needed to prosecute the law. Because of this, corporations were able to create schemes to avoid any effective regulation from the states. To make matter's worse the only intervention from the Federal courts was to restrain the States from exercising the enforcement of state regulations against interstate commerce as something that was both unwise and unconstitutional. According to Roosevelt the result of this was "mischievous in the extreme", and such short-sighted and utter failure made it painfully obvious that the Sherman antitrust law either needed to be abolished outright or amended to "simply condemning 'unreasonable' combinations. In other words, the law did absolutely nothing to stop the activity it intended to prohibit. The nation would be better off, just creating a wall of shame for offenders and leave it at that.
Nevertheless, President Theodore Roosevelt in 1908 wanted to address the problem head on. In his 1908 State of the Union address, Roosevelt urged Congress to abolish the Sherman Antitrust act and in instead allow the federal government to fully regulate corporations and combinations that partake in interstate commerce. Roosevelt told Congress that it was "worse than folly to attempt to prohibit all combinations as is done by the Sherman antitrust law' because such a law could only be enforced "imperfectly and unequally". In his opinion, such enforcement was producing as much hardship as good. At the core of this suggestion, was taking the power of enforcement out of the hands of the judiciary branch and into the executive branch, giving the executive branch full power to regulate interstate commerce. To start with, Roosevelt suggested that the railroads should be removed from the domain of the anti-trust laws and put completely under the Interstate Commerce Commission which would have complete control over the issues of securities and all rate tables. Rather than forbid the railroads to enter into combinations or agreements, they would be allowed to do so, but only under the supervision of the Commission. The Commission would ensure that rates are as low as is compatible while giving proper returns all shareholders and to all the employees of the railroad no matter what their level. The same would be for the telegraph and telephone companies.
Roosevelt knew this would be a hard-sell to Congress. On one side of the aisle were the "preachers of unrestricted individualism" and on the other side were the "preachers of an oppression which would deny to able men of business the just reward". Roosevelt understood both sides. "To permit, every lawless capitalist, every law-defying corporation, to take any action" would bring ruin to the nation. On the other hand, to see only wrongdoing among the wealthy is "exactly as evil as corruptly to defend the wrongdoing of men of wealth". The solution was to wage war against the wrongdoing wherever it is found, not on the rights of decent men, whether they are striving to achieve great wealth or just earn a decent living. Still, many in Congress were in opposition to giving the federal government control of the railways and corporations. They argued it was a matter of states' rights, but Roosevelt reminded them that among the chief reasons that led to the formation of a strong central government the first place was the absolute need for the Union, not each of the several states to deal with interstate and foreign commerce. Furthermore, the constitution granted the federal government absolute and plenary power to deal with interstate commerce. At our founding, interstate commerce was exercised by individuals and partnerships among the waterways and "highroads", but by 1908 it was chiefly conducted by railroads and great corporations. Roosevelt argued that by giving the National Government supreme rule over the railroads and great corporations they would be merely carrying out "to the letter" one of the prime purposes of the constitution. Such a law would not be centralizing the railroads or industry, but rather just acknowledging that they were already centralized and could only be controlled by the power of the National Government. Leaving it up to the states was not an option, individually they are unable to exercise that power over the corporations because they not only lack the authority but would be susceptible to conflicts of authority.
Finally, Roosevelt explained that such power to regulate corporations was in their best interest. There would always be those rugged individualists and big corporation allies who oppose any regulation, and those who still believe in repressing corporations rather than regulating them, but for those who believe in efficient national control would see the benefit. These folks would neither reject combinations or the concentration of business but favor both so long as they work in the interest of the general public. America should not object to the concentration of wealth and administration, but rather insist in the distribution of the profits from this wealth go to real owners and to the benefit of the public at large. Roosevelt wrote out what seems to be his declaration of what American capitalism is.
- “We do not object to the concentration of wealth and administration.”
- “We believe in the distribution of the wealth in profits to the real owners, and in securing to the public the full benefit of the concentrated administration.“
- “We believe that with concentration in administration there can come both be advantage of a larger ownership and of a more equitable distribution of profits, and at the same time a better service to the commonwealth.“
- “We believe that the administration should be for the benefit of the many; and that greed and rascality, practiced on a large scale, should be punished as relentlessly as if practiced on a small scale.”
To bring this about was not going to be easy, and Roosevelt wrote that it would take "various concurrent remedies". Some remedies would come from the government and others from outside. Nevertheless, legislation was needed that could only be enacted by the Federal Government. Roosevelt listed out a number of these including supervision of securities and allocation of water rights, but explained that the power to do this already existed. The question for Congress was not whether new powers needed to be enumerated, but whether or not the federal government would leave these powers sit idle while the great corporations continue to grow. Roosevelt closed out this section by reminding Congress, that the "danger to American democracy lies not in the least in the concentration of administrative power in responsible and accountable hands. It lies in having the power insufficiently concentrated, so that no one can be held responsible to the people for its use." Roosevelt explained that "concentrated power" is transparent and easily held to account, but power scattered through many administrators, legislators and men working behind the scenes is invisible and not easily held to account. Thus, it was time to repeal and replace the Sherman Antitrust Act with laws that gave the Executive branch the "concentrated power" to regulate all interstate commerce. To leave it scattered was to leave "Democracy in peril". In the end, Roosevelt did not fully get what he desired. The Sherman Antitrust Act of 1890 was not repealed but was expanded in 1914 by the Clayton Antitrust Act of 1914 and the Robinson-Patman Act of 1936. Yet, over the years, the regulating power of the Executive branch did grow by leaps and bound.
Here is the full except of Roosevelt's 1908 State of the Union Address on Corporations.
"As regards the great corporations engaged in interstate business, and especially the railroad, I can only repeat what I have already again and again said in my messages to the Congress, I believe that under the interstate clause of the Constitution the United States has complete and paramount right to control all agencies of interstate commerce, and I believe that the National Government alone can exercise this right with wisdom and effectiveness so as both to secure justice from, and to do justice to, the great corporations which are the most important factors in modern business. I believe that it is worse than folly to attempt to prohibit all combinations as is done by the Sherman anti-trust law, because such a law can be enforced only imperfectly and unequally, and its enforcement works almost as much hardship as good. I strongly advocate that instead of an unwise effort to prohibit all combinations there shall be substituted a law which shall expressly permit combinations which are in the interest of the public, but shall at the same time give to some agency of the National Government full power of control and supervision over them. One of the chief features of this control should be securing entire publicity in all matters which the public has a right to know, and furthermore, the power, not by judicial but by executive action, to prevent or put a stop to every form of improper favoritism or other wrongdoing.
The railways of the country should be put completely under the Interstate Commerce Commission and removed from the domain of the anti-trust law. The power of the Commission should be made thoroughgoing, so that it could exercise complete supervision and control over the issue of securities as well as over the raising and lowering of rates. As regards rates, at least, this power should be summary. The power to investigate the financial operations and accounts of the railways has been one of the most valuable features in recent legislation. Power to make combinations and traffic agreements should be explicitly conferred upon the railroads, the permission of the Commission being first gained and the combination or agreement being published in all its details. In the interest of the public the representatives of the public should have complete power to see that the railroads do their duty by the public, and as a matter of course this power should also be exercised so as to see that no injustice is done to the railroads. The shareholders, the employees and the shippers all have interests that must be guarded. It is to the interest of all of them that no swindling stock speculation should be allowed, and that there should be no improper issuance of securities. The guiding intelligences necessary for the successful building and successful management of railroads should receive ample remuneration; but no man should be allowed to make money in connection with railroads out of fraudulent over-capitalization and kindred stock-gambling performances; there must be no defrauding of investors, oppression of the farmers and business men who ship freight, or callous disregard of the rights and needs of the employees. In addition to this the interests of the shareholders, of the employees, and of the shippers should all be guarded as against one another. To give any one of them undue and improper consideration is to do injustice to the others. Rates must be made as low as is compatible with giving proper returns to all the employees of the railroad, from the highest to the lowest, and proper returns to the shareholders; but they must not, for instance, be reduced in such fashion as to necessitate a cut in the wages of the employees or the abolition of the proper and legitimate profits of honest shareholders.
Telegraph and telephone companies engaged in interstate business should be put under the jurisdiction of the Interstate Commerce Commission.
It is very earnestly to be wished that our people, through their representatives, should act in this matter. It is hard to say whether most damage to the country at large would come from entire failure on the part of the public to supervise and control the actions of the great corporations, or from the exercise of the necessary governmental power in a way which would do injustice and wrong to the corporations. Both the preachers of an unrestricted individualism, and the preachers of an oppression which would deny to able men of business the just reward of their initiative and business sagacity, are advocating policies that would be fraught with the gravest harm to the whole country. To permit every lawless capitalist, every law-defying corporation, to take any action, no matter how iniquitous, in the effort to secure an improper profit and to build up privilege, would be ruinous to the Republic and would mark the abandonment of the effort to secure in the industrial world the spirit of democratic fair dealing. On the other hand, to attack these wrongs in that spirit of demagogy which can see wrong only when committed by the man of wealth, and is dumb and blind in the presence of wrong committed against men of property or by men of no property, is exactly as evil as corruptly to defend the wrongdoing of men of wealth. The war we wage must be waged against misconduct, against wrongdoing wherever it is found; and we must stand heartily for the rights of every decent man, whether he be a man of great wealth or a man who earns his livelihood as a wage-worker or a tiller of the soil.
It is to the interest of all of us that there should be a premium put upon individual initiative and individual capacity, and an ample reward for the great directing intelligences alone competent to manage the great business operations of to-day. It is well to keep in mind that exactly as the anarchist is the worst enemy of liberty and the reactionary the worst enemy of order, so the men who defend the rights of property have most to fear from the wrongdoers of great wealth, and the men who are championing popular rights have most to fear from the demagogues who in the name of popular rights would do wrong to and oppress honest business men, honest men of wealth; for the success of either type of wrongdoer necessarily invites a violent reaction against the cause the wrongdoer nominally upholds. In point of danger to the Nation there is nothing to choose between on the one hand the corruptionist, the bribe-giver, the bribe-taker, the man who employs his great talent to swindle his fellow-citizens on a large scale, and, on the other hand, the preacher of class hatred, the man who, whether from ignorance or from willingness to sacrifice his country to his ambition, persuades well-meaning but wrong-headed men to try to destroy the instruments upon which our prosperity mainly rests. Let each group of men beware of and guard against the shortcomings to which that group is itself most liable. Too often we see the business community in a spirit of unhealthy class consciousness deplore the effort to hold to account under the law the wealthy men who in their management of great corporations, whether railroads, street railways, or other industrial enterprises, have behaved in a way that revolts the conscience of the plain, decent people. Such an attitude can not be condemned too severely, for men of property should recognize that they jeopardize the rights of property when they fail heartily to join in the effort to do away with the abuses of wealth. On the other hand, those who advocate proper control on behalf of the public, through the State, of these great corporations, and of the wealth engaged on a giant scale in business operations, must ever keep in mind that unless they do scrupulous justice to the corporation, unless they permit ample profit, and cordially encourage capable men of business so long as they act with honesty, they are striking at the root of our national well-being; for in the long run, under the mere pressure of material distress, the people as a whole would probably go back to the reign of an unrestricted individualism rather than submit to a control by the State so drastic and so foolish, conceived in a spirit of such unreasonable and narrow hostility to wealth, as to prevent business operations from being profitable, and therefore to bring ruin upon the entire business community, and ultimately upon the entire body of citizens.
The opposition to Government control of these great corporations makes its most effective effort in the shape of an appeal to the old doctrine of State's rights. Of course there are many sincere men who now believe in unrestricted individualism in business, just as there were formerly many sincere men who believed in slavery--that is, in the unrestricted right of an individual to own another individual. These men do not by themselves have great weight, however. The effective fight against adequate Government control and supervision of individual, and especially of corporate, wealth engaged in interstate business is chiefly done under cover; and especially under cover of an appeal to State's rights. It is not at all infrequent to read in the same speech a denunciation of predatory wealth fostered by special privilege and defiant of both the public welfare and law of the land, and a denunciation of centralization in the Central Government of the power to deal with this centralized and organized wealth. Of course the policy set forth in such twin denunciations amounts to absolutely nothing, for the first half is nullified by the second half. The chief reason, among the many sound and compelling reasons, that led to the formation of the National Government was the absolute need that the Union, and not the several States, should deal with interstate and foreign commerce; and the power to deal with interstate commerce was granted absolutely and plenarily to the Central Government and was exercised completely as regards the only instruments of interstate commerce known in those days--the waterways, the highroads, as well as the partnerships of individuals who then conducted all of what business there was. Interstate commerce is now chiefly conducted by railroads; and the great corporation has supplanted the mass of small partnerships or individuals. The proposal to make the National Government supreme over, and therefore to give it complete control over, the railroads and other instruments of interstate commerce is merely a proposal to carry out to the letter one of the prime purposes, if not the prime purpose, for which the Constitution was rounded. It does not represent centralization. It represents merely the acknowledgment of the patent fact that centralization has already come in business. If this irresponsible outside business power is to be controlled in the interest of the general public it can only be controlled in one way--by giving adequate power of control to the one sovereignty capable of exercising such power--the National Government. Forty or fifty separate state governments can not exercise that power over corporations doing business in most or all of them; first, because they absolutely lack the authority to deal with interstate business in any form; and second, because of the inevitable conflict of authority sure to arise in the effort to enforce different kinds of state regulation, often inconsistent with one another and sometimes oppressive in themselves. Such divided authority can not regulate commerce with wisdom and effect. The Central Government is the only power which, without oppression, can nevertheless thoroughly and adequately control and supervise the large corporations. To abandon the effort for National control means to abandon the effort for all adequate control and yet to render likely continual bursts of action by State legislatures, which can not achieve the purpose sought for, but which can do a great deal of damage to the corporation without conferring any real benefit on the public.
I believe that the more farsighted corporations are themselves coming to recognize the unwisdom of the violent hostility they have displayed during the last few years to regulation and control by the National Government of combinations engaged in interstate business. The truth is that we who believe in this movement of asserting and exercising a genuine control, in the public interest, over these great corporations have to contend against two sets of enemies, who, though nominally opposed to one another, are really allies in preventing a proper solution of the problem. There are, first, the big corporation men, and the extreme individualists among business men, who genuinely believe in utterly unregulated business that is, in the reign of plutocracy; and, second, the men who, being blind to the economic movements of the day, believe in a movement of repression rather than of regulation of corporations, and who denounce both the power of the railroads and the exercise of the Federal power which alone can really control the railroads. Those who believe in efficient national control, on the other hand, do not in the least object to combinations; do not in the least object to concentration in business administration. On the contrary, they favor both, with the all important proviso that there shall be such publicity about their workings, and such thoroughgoing control over them, as to insure their being in the interest, and not against the interest, of the general public. We do not object to the concentration of wealth and administration; but we do believe in the distribution of the wealth in profits to the real owners, and in securing to the public the full benefit of the concentrated administration. We believe that with concentration in administration there can come both be advantage of a larger ownership and of a more equitable distribution of profits, and at the same time a better service to the commonwealth. We believe that the administration should be for the benefit of the many; and that greed and rascality, practiced on a large scale, should be punished as relentlessly as if practiced on a small scale.
We do not for a moment believe that the problem will be solved by any short and easy method. The solution will come only by pressing various concurrent remedies. Some of these remedies must lie outside the domain of all government. Some must lie outside the domain of the Federal Government. But there is legislation which the Federal Government alone can enact and which is absolutely vital in order to secure the attainment of our purpose. Many laws are needed. There should be regulation by the National Government of the great interstate corporations, including a simple method of account keeping, publicity, supervision of the issue securities, abolition of rebates, and of special privileges. There should be short time franchises for all corporations engaged in public business; including the corporations which get power from water rights. There should be National as well as State guardianship of mines and forests. The labor legislation hereinafter referred to should concurrently be enacted into law.
To accomplish this, means of course a certain increase in the use of--not the creation of--power, by the Central Government. The power already exists; it does not have to be created; the only question is whether it shall be used or left idle--and meanwhile the corporations over which the power ought to be exercised will not remain idle. Let those who object to this increase in the use of the only power available, the national power, be frank, and admit openly that they propose to abandon any effort to control the great business corporations and to exercise supervision over the accumulation and distribution of wealth; for such supervision and control can only come through this particular kind of increase of power. We no more believe in that empiricism which demand, absolutely unrestrained individualism than we do in that empiricism which clamors for a deadening socialism which would destroy all individual initiative and would ruin the country with a completeness that not even an unrestrained individualism itself could achieve. The danger to American democracy lies not in the least in the concentration of administrative power in responsible and accountable hands. It lies in having the power insufficiently concentrated, so that no one can be held responsible to the people for its use. Concentrated power is palpable, visible, responsible, easily reached, quickly held to account. Power scattered through many administrators, many legislators, many men who work behind and through legislators and administrators, is impalpable, is unseen, is irresponsible, can not be reached, can not be held to account. Democracy is in peril wherever the administration of political power is scattered among a variety of men who work in secret, whose very names are unknown to the common people. It is not in peril from any man who derives authority from the people, who exercises it in sight of the people, and who is from time to time compelled to give an account of its exercise to the people."
References
Presidency.ucsb.edu. (2019). Eighth Annual Message | The American Presidency Project. [online] Available at: https://www.presidency.ucsb.edu/documents/eighth-annual-message-4 [Accessed 17 May 2019].
Presidency.ucsb.edu. (2019). Special Message | The American Presidency Project. [online] Available at: https://www.presidency.ucsb.edu/documents/special-message-359 [Accessed 17 May 2019].
The Bridgemen's Magazine, Volume 8. (1908). 8th ed. International Association of Bridge and Structural Iron Workers, pp.252-255. [online] Available at:
En.wikipedia.org. (2019). Sherman Antitrust Act of 1890. [online] Available at: https://en.wikipedia.org/wiki/Sherman_Antitrust_Act_of_1890 [Accessed 17 May 2019].
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