American Colossus: The Triumph of Capitalism, 1865-1900

by H. W. Brands

  Hanna’s nightmare materialized in September 1901. Leon Czolgosz, an anarchist of Polish descent and unstable mind, determined to commence the overthrow of the capitalist system by murdering McKinley. On September 6 at the Pan American Exposition in Buffalo, he shot the president twice at short range. McKinley survived the shooting but not the infection. He died on September 14.8

  Roosevelt received the news atop Mt. Marcy in the Adirondacks. He raced to Buffalo to pay his respects and take the oath as McKinley’s successor. “It is a dreadful thing to come into the presidency this way,” he wrote Henry Cabot Lodge. “But it would be a far worse thing to be morbid about it. Here is the task, and I have got to do it to the best of my ability; and that is all there is about it.”9

  Roosevelt initially pledged to carry out the policies of his predecessor. One wit who knew Roosevelt suggested that he would indeed carry out McKinley’s policies—much as people carry out their garbage. Roosevelt’s actions soon made the joke seem true. In his first annual message, in December 1901, he acknowledged America’s debt to capitalism and its leaders. “The captains of industry who have driven the railway systems across this continent, who have built up our commerce, who have developed our manufactures, have on the whole done great good to our people,” he declared. Moreover, capitalism functioned best when unburdened by excessive regulation. “The mechanism of modern business is so delicate that extreme care must be taken not to interfere with it in a spirit of rashness or ignorance.” Yet the capitalists needed to understand and acknowledge the debt they owed to democracy. “Great corporations exist only because they are created and safeguarded by our institutions; and it is therefore our right and our duty to see that they work in harmony with these institutions.”10

  Roosevelt moved rapidly from warning the capitalists to attacking them. In February 1902 he directed the Justice Department to bring an antitrust suit against Northern Securities, the Morgan railroad combine.

  Morgan received the news badly. Having several times rescued, as he saw it, the American railroad system from self-inflicted disaster and the financial markets from full-blown panic, he thought he deserved gratitude, not sanction, from the government. At the very least he expected the kind of consideration other presidents, in particular Grover Cleveland, had accorded him. He once again made the journey from Wall Street to Washington. Roosevelt, unlike Cleveland, had no compunctions about a face-to-face meeting. Morgan cut straight to the point. “If we have done something wrong,” he said, regarding the railroad trust, “send your man to my man and they can fix it up.”

  “That can’t be done,” Roosevelt replied. The president turned to Philander Knox, his attorney general (and a railroad lawyer by profession), who added, “We don’t want to fix it up. We want to stop it.”

  “Are you going to attack my other interests?” Morgan demanded. “The steel trust and the others?”

  “Certainly not,” Roosevelt said, “unless we find out that in any case they have done something that we regard as wrong.”

  Morgan left angry, whereupon Roosevelt remarked to Knox, “That is a most illuminating illustration of the Wall Street point of view. Mr. 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.”11

  Roosevelt proceeded to prove he wasn’t an operator but the chief executive of a democratic government. He pushed the Northern Securities prosecution forward and won a signal victory in 1904 when the Supreme Court, which included four justices new since the Knight decision, ordered the dismantling of the railroad trust. John Marshall Harlan, the veteran dissenter, wrote the opinion for the 5 to 4 majority.

  This breakthrough for democratic oversight of corporate capitalism gave rise to other antitrust prosecutions. Ida Tarbell had nursed her father’s grudge against John Rockefeller for decades; starting in November 1902 she published a nineteen-part exposé of Standard Oil in McClure’s Magazine. Tarbell’s indictment spurred the newly created federal Bureau of Corporations to conduct its own investigation and Roosevelt’s Justice Department in 1906 to file an antitrust suit. Other legal actions followed, including prosecution for accepting banned rebates. One such case yielded the largest fine in American history till then: $29 million. Rockefeller learned of the decision amid a round of golf; unruffled, he kept playing and shot one of his best scores ever. (Mark Twain’s reaction was more newsworthy. He quoted a bride on the morning after: “I expected it, but didn’t suppose it would be so big.”) The coup de grâce came four years later when the Supreme Court ordered Standard Oil dissolved. This time Harlan had more company; the decision was unanimous.12

  WHILE ROOSEVELT ASSAULTED the citadel of capitalism by design, he affronted the racial mores of the South by accident. Just weeks after entering the White House he brought Booker Washington to dinner. Washington remained the most prominent African American in the country, although his position didn’t go unchallenged. Six years after his Atlanta exposition speech—by now commonly called his “Atlanta Compromise” speech—and five years after the Supreme Court’s Plessy decision, the rights of African Americans were under increasing attack. John Marshall Harlan’s prediction that segregated railcars would lead to segregated streetcars and courtrooms and public halls was coming true. Ever more were Southern blacks treated as a caste apart, with predictable effects on blacks in the rest of the country.

  Rival voices to Washington’s protested the trend; of these W. E. B. Du Bois’s carried the farthest. Massachusetts-born and Harvard-educated, Du Bois was as different from Booker Washington as a black man in America could be, and his comparatively privileged background informed his rejection of Washington’s accommodationist philosophy. In 1901 he was teaching at Atlanta University and writing his first book, The Souls of Black Folks, which devoted a whole chapter to Booker Washington and drew invidious comparisons between the schoolmaster of Tuskegee and the black rebels Denmark Vesey and Nat Turner. Washington placed too much emphasis on economics, Du Bois said, till his program became “a gospel of Work and Money.” And Washington put entirely too much faith in capitalists. “Through the pressure of the money-makers, the Negro is in danger of being reduced to semi-slavery, especially in the country districts.” Du Bois didn’t deny that Washington’s vision encompassed certain positive traits. “So far as Mr. Washington preaches Thrift, Patience, and Industrial Training for the masses, we must hold up his hands and strive with him, rejoicing in his honors and glorying in the strength of this Joshua called of God and of man to lead the headless host.” But his subordination of black democratic rights to the imperatives of the capitalist marketplace made his preaching ultimately pernicious.

  So far as Mr. Washington apologizes for injustice, North or South, does not rightly value the privilege and duty of voting, belittles the emasculating effects of caste distinctions, and opposes the higher training and ambition of our brighter minds—so far as he, the South, or the Nation, does this—we must unceasingly and firmly oppose them. By every civilized and peaceful method we must strive for the rights which the world accords to men, clinging unwaveringly to those great words which the sons of the Fathers would fain forget: “We hold these truths to be self-evident: That all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness.”13

  Yet even though Washington was losing the “talented tenth,” as Du Bois called the educated elite of African Americans, he remained a leading figure of Southern Republican politics, and for this reason his opinions mattered to politicians like Roosevelt. The then–vice president had planned a visit to Tuskegee for September 1901, but the shooting of McKinley canceled it. Roosevelt nonetheless still wanted to talk to Washington—about Republican patronage in the South and the election in 1904—and after becoming president he invited him to the White House for dinner.

  The meal was objectively innocuous. Roosevelt’s wife and four
of their children joined the president, Washington, and longtime Roosevelt friend and hunting partner Philip Stewart of Colorado. The table topics included politics and the affairs of the South generally. At evening’s end Roosevelt bade the guests good night, went to bed, and slept the sound Roosevelt sleep of moral self-assurance and physical exhaustion.

  He awoke the next morning to the self-righteous rage of the white South. That the president had dined with a Negro insulted almost every man, child, and especially woman on the white side of Jim Crow’s color line. “White men of the South, how do you like it?” spluttered the New Orleans Times-Democrat. “White women of the South, how do YOU like it?” The Richmond Times extrapolated from the dining room to the bedroom in interpreting Washington’s visit: “It means that the President is willing that negroes shall mingle freely with whites in the social circle—that white women may receive attentions from negro men; it means that there is no racial reason in his opinion why whites and blacks may not marry and intermarry, why the Anglo-Saxon may not mix negro blood with his blood.” The Raleigh Post put its outrage to rhyme:

  Booker Washington holds the boards—

  The President dines a nigger.

  Precedents are cast aside—

  Put aside with vigor.

  Black and white sit side by side,

  As Roosevelt dines a nigger.14

  Roosevelt hadn’t intended to spark a firestorm in Dixie. “No one could possibly be as astonished as I was,” he wrote a British friend. The very Southerners who were now excoriating him for breaking bread with Washington were the ones who had held Washington up as a model of racial common sense. Though Roosevelt’s mother was a Georgian, he had never spent much time in the South; but even if he had, the experience might not have prepared him for the current explosion. Southern attitudes were changing rapidly. As the color line carved more deeply into the Southern psyche, the consequences of crossing it grew more pronounced. Not even the president could avoid them. Roosevelt indignantly denounced his critics and pledged to ignore them. “The idiot or vicious Bourbon element of the South is crazy because I have had Booker T. Washington to dine,” he said. “I shall have him to dine just as often as I please.”15

  In practice, however, it pleased Roosevelt not to have Washington to dine again. The president didn’t know Washington personally; his interest in Washington was purely political. And when Washington proved a political liability, Roosevelt let him drop.

  Washington apparently understood. Politics was politics, and racial politics in America at the beginning of the twentieth century was as strange as politics got. Anyway, making it to the White House even once for dinner was quite an accomplishment for the slave boy from Virginia.

  AS THE BOOKER WASHINGTON flap faded, other troubles remained for Roosevelt. The most vexing involved the project of which Roosevelt had been most hopeful: imperialism. Almost coincident with the Senate ratification of the Philippine treaty with Spain, Filipino nationalists raised the flag of revolt against American rule. The nationalists had fought against the Spanish before the arrival of Dewey; they now directed their fire against the new imperialists. For several months the fighting proceeded more or less conventionally, with the nationalists, under Emilio Aguinaldo, challenging the Americans in pitched battles. But as more American troops arrived in the islands, the nationalists shifted to a guerrilla strategy. Aguinaldo dispersed his troops, who ambushed and otherwise harassed the Americans. Before long the Americans found themselves in much the same position the Spanish had occupied in Cuba, and they resorted to a chillingly similar strategy. Filipino peasants were herded into camps, where they fell victim to deprivation and disease. American soldiers and their Filipino collaborators, especially the notorious Macabebe Scouts, employed torture against captured nationalists. The most feared technique was the “water cure,” involving gallons of water forced down the throats of prisoners till their bellies burst or they talked. Yet the insurgency continued. General Jacob Smith—“Hell-roarin’ Jake”—grew exasperated at the ability of the insurgents to blend into the populace and ordered his men to make a “howling wilderness” of their sector. “I want no prisoners,” Smith said. “I wish you to kill and burn. The more you kill and burn the better you will please me. I want all persons killed who are capable of bearing arms in actual hostilities against the United States.” One of Smith’s subordinates asked if there was any lower age limit for this order. “Ten years,” Smith replied.16

  The American atrocities may or may not have contributed to the eventual defeat of the insurgents. Internal squabbling played a role as well. Roosevelt, by now president, declared victory on July 4, 1902. But the Philippine war had exacted a heavy toll. More than four thousand Americans died and thousands more were wounded—a substantially higher cost than the American war against Spain had entailed. The Filipino casualties were many times greater than the American.

  A different sort of casualty was Americans’ enthusiasm for empire. The reports of the atrocities stabbed the American democratic conscience, making unmistakable the contradiction between the self-government Americans demanded for themselves and the colonialism they were imposing upon the Filipinos. At the same time, the unexpected costs of the Philippine war persuasively rebutted the bottom-line arguments for empire that had appealed to the capitalist spirit in America. The result was a reversal of American attitudes that was almost as swift and stunning as the turn toward empire had been. The United States didn’t relinquish the Philippines for four more decades; as often happens in imperial relationships, getting out proved much more complicated than getting in. But never again would formal empire seriously tempt Americans; never again would they endorse a venture so blatantly at odds with the ideals of democracy.

  Roosevelt rarely admitted to second thoughts in himself, and he didn’t admit to any regarding the Philippines. Yet he reflected others’ rethinking when he said, “In the excitement of the Spanish War people wanted to take the islands. They had an idea they would be a valuable possession. Now they think they are of no value.” In fact they were of less than no value. Possession of the Philippines drew the United States into the imperial coils of Asia, prompting Roosevelt to lament, “The Philippines form our heel of Achilles.”17

  J. P. MORGAN died in 1913, and his friends thought they knew what did him in. Morgan had rescued the country once more in 1907, when another financial panic had threatened to recapitulate the destruction of 1873 and 1893. This time Roosevelt didn’t wait for Morgan to come to Washington; as soon as the Knickerbocker Trust Company—the 1907 equivalent of Jay Cooke & Company in 1873—failed, the president rushed his Treasury secretary to New York. Roosevelt still distrusted Morgan’s motives, but he couldn’t deny Morgan’s power, and he authorized George Cortelyou to give Morgan whatever he needed to keep the financial panic from engulfing the whole economy. Morgan added this democratic vote of confidence to the influence he already wielded among the capitalists and by promises, threats, and liquid cash held the situation together.

  His performance earned him no more gratitude than his comparable action in 1895 had. The political heights were increasingly occupied by progressives—democratic skeptics of capitalism—who took Morgan’s latest success as additional evidence of his irresponsible power. In 1912 Congress conducted investigations into what the progressives called the “money trust.” Democrat Arsène Pujo of Louisiana led the probe, which uncovered the tangle of interlocking directorates that provided J. P. Morgan & Company the financial intelligence that had long been the secret of Morgan’s power. Morgan himself took the witness stand, but despite a rigorous interrogation by the counsel for the investigative committee, he admitted to nothing improper.

  Yet the experience told on his health. Early the next year, on a Mediterranean holiday, he suddenly fell ill and died. (It was shortly after this that Andrew Carnegie commiserated with the heirs on Morgan’s comparative penury.)

  With Morgan gone the progressives moved to prevent anyone from taking his place
. Roosevelt had departed the White House in 1909 to hunt big game in Africa (“Let every lion do its duty,” Morgan was supposed to have said). Roosevelt left the presidency in what he thought were the reliably progressive hands of William Howard Taft. But Taft lacked the political flamboyance of Roosevelt, and such victories as he won for democracy over capitalism—including the final judgment against Rockefeller’s Standard Oil—failed to satisfy Roosevelt and most other progressives. Roosevelt challenged Taft for the 1912 Republican nomination; when he lost that, he bolted the GOP for the Progressive, or Bull Moose, party. Many Republicans followed him. The defection afforded the Democrats their first good chance to capture the White House since 1892, and Woodrow Wilson exploited the opportunity by pledging to dismantle the money trust. “The control of the system of banking and of issue”—of money—“which our new laws are to set up must be public, not private, must be vested in the Government itself, so that the banks may be the instruments, not the masters, of business and of individual enterprise and initiative,” Wilson declared.18

  As president Wilson delivered what he’d promised. The Federal Reserve Act of 1913 took effective control of the nation’s money supply away from capitalists like Morgan and bestowed it upon the presidentially nominated and senatorially approved Federal Reserve Board. No single reform ever shifted the balance between American capitalism and democracy more decisively. For the first time in its history, the United States had a central bank answerable to the country’s democratic institutions. The linkage was deliberately loose: once appointed, the Federal Reserve governors were essentially beyond recall. This freedom prudently insulated them from political pressure. Yet their responsibility was not to the shareholders of the member Reserve banks but to the people of the United States.