A central tenet of Theodore Roosevelt’s leadership was the idea that no one should be above the law. He was deeply troubled by excessive concentrations of wealth in the hands of a few; such a situation was, he knew, inimical to the interests of a democratic republic. He did not begrudge a man his wealth fairly earned, but he believed that the accumulation of vast treasure should not come at the expense of the public good. The super-rich could not plunder at will and, at the same time, expect the public to operate under a different set of rules. What especially galled Roosevelt was the arrogant way that the “captains of industry” of his day expected to reap all the benefits of the American economic system while feeling bound by no reciprocal duties to it.
The economic picture of the United States at the turn of the twentieth century was for many a grim one. Industry and manufacturing were controlled by a very few hands, and (as now) the majority of the nation’s capital was aggregated in the hands of a very few. There was no regulation of Wall Street; that would not come until 1933, when the Great Depression made it impossible to ignore. There was no central bank. Some historians have noted that it was a “toss-up” whether Roosevelt or financier J.P. Morgan was the most powerful man in the country. Morgan was a cold-eyed and ruthless figure with a skin condition that made surface of his nose look like a mass of warts; but this seemed only to enhance the intimidating aspect of his appearance. He had a brilliant mathematical mind, and was able to keep track of numbers and figures to an extent that astounded his assistants. He did not, however, believe that he owed the public anything; to the extent that he ever even thought about such things, he liked to believe that monopolies were actually “good” for the country. But so believes every monopolist of every era.
In our day, the major levers of power in the United States are the internet, the media, the arms industry, and the industries connected with information and entertainment. In Roosevelt’s day, the linchpin industries were railroads, mining, and steel. Sooner or later, Roosevelt knew, he was going to have to confront the plutocratic monopolies in the United States and try to break them up. A failure to do so would leave the control of the country in the hands of economic forces that would seek to enrich itself at the expense of everything else. And once Roosevelt set his mind on something, he was not the kind of man who would back down from a fight. He would soon find his opportunity to engage these dark economic forces.
In 1901, railroad men James J. Hill and Edward Harriman solicited the support of J.P. Morgan (as well as J.D. Rockefeller) to form a corporate entity called the Northern Securities Company. Northern Securities was essentially a huge holding company that held the shares of several different railroad companies. If this arrangement were allowed to continue, it would enable Northern Securities to monopolize the rail transport system for most of the western United States. When Roosevelt found out about it, it seemed to him as practically a declaration of war against the public good. In 1902, he ordered his Justice Department to initiate legal proceedings against the Northern Securities behemoth and break it up; it was a combination in restraint of trade, and it had to go.
But how could this be done? What legal mechanism could be used to take the fight to J.P. Morgan? The weapon found was the Sherman Anti-Trust Act of 1890. While today it seems a routine matter to use this kind of tactic, the situation was entirely different in the early 1900s. The federal government had never used the Act in the way it was proposing to use it now. In the few times that the Act had actually been used, courts and judges were unwilling to give it much teeth. Even in situations where obvious monopolies existed (as in the 1895 antitrust case against the American Sugar Refining Company), the courts dragged their feet and failed to take decisive action against corporate interests that were acting “in restraint of trade.” In February 1902, Roosevelt’s attorney general filed suit against Northern Securities. It was a risk, and a big one; there was no legal precedent for what Roosevelt was doing, and no guarantee he would succeed. If he failed, it might embolden big business even more.
But something had to be done. There was no advance notice, no chummy, back-slapping phone calls of the type that happened in the wake of the financial meltdown of 2008. According to some accounts, J.P. Morgan was informed of the suit while enjoying a sumptuous dinner with friends; infuriated by the news, he sought an audience with Roosevelt himself. “If we have done anything wrong, send your man to my man and they can fix it up,” Morgan told Attorney General Philander Knox. “We don’t want to fix it up…we want to stop it,” was Knox’s acid reply.
Morgan basically communicated to the White House that the issue should be amicably resolved and that he was willing to reach some reasonable accommodation. Roosevelt was polite but firm. He let it be known that he could not be bought off; his goal was not to settle with a financial slap on the wrist but to end the abusive practices of the arrogant plutocracy. When the case finally wound its way up to the US Supreme Court, Roosevelt narrowly won by a 5 to 4 vote issued in March 1904. Northern Securities Company was dissolved. The Court’s written opinion duly noted:
It cannot be said that any State may give a corporation, created under its laws, authority to restrain interstate or international commerce against the will of the nation as lawfully expressed by Congress. Every corporation created by a State is necessarily subject to the supreme law of the land. And yet the suggestion is made that to restrain a state corporation from interfering with the free course of trade and commerce among the States, in violation of an act of Congress, is hostile to the reserved rights of the States. The Federal court may not have power to forfeit the charter of the Securities Company; it may not declare how its shares of stock may be transferred on its books, nor prohibit it from acquiring real estate, nor diminish or increase its capital stock. All these and like matters are to be regulated by the State which created the company. But to the end that effect be given to the national will, lawfully expressed, Congress may prevent that company, in its capacity as a holding corporation and trustee, from carrying out the purposes of a combination formed in restraint of interstate commerce.
[Northern] Securities Company is itself a part of the present combination; its head and front; its trustee. It would be extraordinary if the court, in executing the act of Congress, could not lay hands upon that company and prevent it from doing that which, if done, will defeat the act of Congress. Upon like grounds, the court can, by appropriate orders, prevent the two competing railroad companies here involved from cooperating with the Securities Company in restraining commerce among the States. In short, the court may make any order necessary to bring about the dissolution or suppression of an illegal combination that restrains interstate commerce. All this can be done without infringing in any degree upon the just authority of the States. The affirmance of the judgment below will only mean that no combination, however powerful, is stronger than the law or will be permitted to avail itself of the pretext that to prevent it doing that which, if done, would defeat a legal enactment of Congress is to attack the reserved rights of the States.
Roosevelt’s victory in Northern Securities v. United States, 193 U.S. 197 (1904) was used as a legal precedent for breaking other monopolistic restraints of trade. The message went out from Washington that corporate abuses of power would be rolled back with a firm hand.
Sadly, one cannot help comparing Roosevelt’s moral courage with the behavior of two recent occupants of the White House, presidents Obama and Bush. During the financial crisis of 2008-2009, when fear gripped Wall Street, President Obama called a handful of bankers to a meeting in March 2009. The concentrated power of the financiers, as well as their greedy practices, had caused the crisis; yet the American president greeted them with smiles and compliments. He talked tough, telling them that “the only thing between you and the pitchforks is my administration,” but in the end the response was toothless. Nothing changed. The plutocracy got everything they wanted: bailouts, unrestricted promises, and blank checks. All of them kept their jobs, their positions, their outrageous salaries and bonuses, everything. The American taxpayer was left to foot the bill. Congress did next to nothing in the way of meaningful reform. If Theodore Roosevelt had lived to see this charade, I believe he would have had nothing but scorn for the moral cowardice of Presidents Bush and Obama.
Victories once won do not stay won unless they are fortified and renewed with each successive generation. We live in an era now where the super-rich have surpassed their Gilded Age predecessors in venality and avarice. They care nothing about the public good; they believe the public exists to serve them. They snort in contempt at the very suggestion that they should accept any restraints on their appetite for money and power. They begrudge the public the basic necessities of human life, health, and advancement. Congress and the presidency are firmly in their pockets. Things have gotten so bad that some military analysts have started to call this state of affairs what it is: a form of insurgent warfare waged by the rich against the public.
The time will come–very soon–when the need for drastic reform will become too compelling to paper over with smiles and benedictions. And when this day does come, the plutocracy will be brought to heel once again.
Learn more about ethics and responsibilities in my new, original translation of On Duties: