Empires Apart

by Brian Landers

  Initially the major corporations were the playthings of the new class of oligarchs, the robber barons, who were deeply unpopular with those at the bottom of society who created the wealth so ostentatiously displayed by those at the top. (In another very tenuous link between Roosevelt and Churchill, an explosive book entitled Coniston stirred up public anger over the links between the oligarchs and corrupt officials. Its author was Winston Churchill, cousin and namesake of the British politician.)

  The unadulterated greed of the oligarchs eventually antagonised just about everyone, from the workers and customers they exploited right up to the most exalted in the land. Supreme Court Justice John Marshall Harlan, a conservative Republican, proclaimed that the country was in real danger from another form of slavery in which a few mighty capitalists controlled, exclusively for their own profit and advantage, the entire business of the country. In England the 1624 Statute of Monopolies had taken away the power of the crown to grant monopolies, but in the United States nothing stopped their development, which often took place – as with the railways – with the active encouragement of the government. State legislatures, especially in the west and south, passed laws to regulate business, but the trusts simply re-established themselves in friendly states like Delaware and New Jersey.

  By 1888 public discontent was so strong that both political parties put anti-trust planks into their presidential platforms. In the same year President Rutherford B. Hayes famously recorded in his diary, ‘This is a government of the people, by the people and for the people no longer. It is a government of corporations, by corporations, for corporations.’ Two years later Congress overwhelmingly passed the first federal trust-busting legislation, with just one vote against in the Senate and none at all in the House of Representatives. The Sherman Antitrust Act, named after Senator John Sherman, brother of the civil war general, declared illegal any contract, combination or conspiracy in restraint of interstate and foreign trade and authorised the federal government to institute proceedings against trusts in order to dissolve them. However, to get through Congress the Act had been made deliberately vague and the Supreme Court initially prevented federal authorities from using the act against their intended targets. Instead the American propensity for legality over justice was seen once again as an Act supposedly designed to curb the oligarchs was instead used to enhance their power. In 1894, in the case of US v. Debs, the Supreme Court ruled that the Act could be used to stop trade unions from interfering with commerce, and in the first ten years of the law’s existence many more actions were brought against trade unions than big business. Businesses like the Pullman Railcar Company argued that unions were conspiracies in restraint of trade, and gained legal authority to use state and federal militia to support their union-busting activities.

  But by 1904 public pressure became such that the court upheld, by five votes to four, Theodore Roosevelt’s dissolution of one of the huge railway monopolies, the Northern Securities Company, and trust-busting became a practical possibility. There were vehement expressions of outrage from the business community at the court’s overruling of its earlier decisions, but in 1911 President Taft used the Act against the American Tobacco Company and, most symbolically, against the Standard Oil Trust. Rockefeller’s company was broken into parts, including Standard Oil of New Jersey (later renamed Exxon), Standard Oil of New York (Mobil), Standard Oil of Ohio, Standard Oil of Indiana (Amoco) and Standard Oil of California (Chevron). (The companies started rebuilding Rockefeller’s old empire in the 1990s, when Exxon merged with Mobil and BP bought Amoco and Standard Oil of Ohio.)

  Despite the highly publicised actions taken against a few of the trusts, the character of the American economy had fundamentally changed. The critical point about the robber barons is that they were not aberrations. The transition from family enterprises with family values to modern corporations with modern values was not a seamless reinterpretation of traditional American values but a complete break with the past and an invention of something altogether new. For two generations American business worked in ways that today would be regarded as totally corrupt, and the morality that was re-established afterwards was very different from that which had gone before. For decades it seemed as if the values of Paine and Jefferson had simply vanished. Private greed was not surreptitiously substituted for the public good but actively promoted as the way to achieve the public good, in a proto-Thatcherite ideology which proclaimed that the unbridled forces of free enterprise would amass not just riches for those at the top but wealth for the whole of society. Monopolies and cartels were proclaimed as ways of serving the public by promoting the scaling-up of American industry, which in turn would generate the efficiencies of mass production. When the president of the Reading railroad appeared before the Pennsylvania legislature in 1875 to justify the collective decision of the large coal companies to reduce supply in order to drive up prices, he produced a list of fifty other industries where such practices were openly applied. Producers of schoolbooks, wallpaper and lumber, insurance companies, slaughterhouse owners – they all met in industry associations to fix prices. Large coal companies and railroads combined to ensure that when small mine owners tried to undercut their larger competitors they found it impossible to transport their coal from their mines. Retailers were ‘fined’ if they sold at prices lower than those fixed by their corporate suppliers.

  The interesting question is whether the rapacious capitalism that preceded Theodore Roosevelt helped or hindered the nation’s economic development. In the last quarter of the nineteenth century over 700 rail corporations responsible for more than half of the American rail network went bankrupt. Fortunes were made by corrupting government officials, destroying competition at home and preventing competition from overseas, emasculating the state and mercilessly exploiting those at the bottom of society, but the result was a transportation network that was the envy of the world, gas and electricity in municipalities across the country and modern factories with the economies of scale that gave the largest American corporations enormous competitive advantage against their global rivals.

  By 1909, 1 per cent of industrial firms produced 44 per cent of US manufactured goods. Between the civil war and the First World War the conditions were established that would enable America to create a commercial empire that, for much of the twentieth century, would dominate the world. It was not entrepreneurial zeal or technological know-how but the ruthless pursuit of profit, and above all sheer scale, that would crush foreign competition. The all-pervading goal of the American business model became size; increased profits came not from improving the business but from increasing its size. Mergers and acquisitions served the dual purpose of eliminating competition and enhancing economies of scale.

  The concept of ‘scale’ is crucial to understanding the American economic model, which would come to dominate the world. In classical economics the term ‘economies of scale’ meant that as businesses became larger they became more efficient: they could afford bigger and better machines, could employ workers in shifts to get the most out of those machines, could move their goods in larger wagons and so on. But what American monopolists realised after the civil war is that scale above all gave them power: they could pay their suppliers less because the suppliers had nowhere else to go, they could charge their customers more, they could drive smaller competitors out of business. They turned classical theory on its head: rather than growing in order to become more efficient, they realised that by growing they could thrive without having to become more efficient. As long as there were opportunities for growth efficiency was nice to have rather than essential – a philosophy that served US industry well until the rude awakening delivered by Japanese corporations over a century later.

  Corporate America was coming of age, and for its leaders the world appeared as a mass of new markets waiting to be conquered. Many Americans, however, still had an older concept of conquest. For them America’s territorial ambitions were still undimmed. As the older European e
mpires stumbled, America’s imperial destiny became ever more manifest. The Spanish-American War marked a watershed in American imperial history: before that time conquests and purchases had been intended to gain territory to populate; in winning possessions like Cuba and the Philippines, and in annexing Hawaii, America gained territory that was already populated, and populated to such an extent that ethnic cleansing was inconceivable. In any event the ending of slavery had changed both the politics and the economics of expansion. There was no imperative to find more states suitable for slavery to balance the northern expansion. To the victorious northerners the civil war had purified the nation not only from the stain of slavery but from the crude lust for other people’s land that had characterised southern imperialism. The value of the new colonies was not in their cheap land but in their cheap labour. There emerged the blend of imperial ambition and ideological sanctity that has since characterised American foreign policy. Now seeking to conquer new markets rather than new territories, it became necessary to cultivate friendly relations with other countries; but how could a nation dedicated to spreading universal democracy be ‘friends’ with regimes dedicated to the suppression of those very democratic ideals? One way was to consciously separate ideological theory from political reality, most clearly demonstrated in the twentieth century by Nixon-Kissinger realpolitik. Another way, more in tune with the global aspirations of American ideology, was to impute ideological purity to their allies and impurity to their foes. After the civil war it became routine for the United States to attribute their own ideology to whichever side they were supporting in any situation. The civil war was firmly believed, with the benefit of hindsight, to have been a struggle to impose liberal democracy on the despots of slavery. Now that idealism was transferred elsewhere. Even the smallest signs of democratic intent in potential allies were seized upon as indicators of ideological purity. Heavily influenced by its large German-American population, the US backed Prussia in its invasion of France, hailing Bismarck for purportedly implementing the American model of democracy. (The US minister in Berlin, an eminent historian, showed the dangers of historians trying to extrapolate into the future when he declared that Germany would soon be ‘the most liberal government in the continent of Europe’.)

  The ability to ‘see’ ideological purity in virulently anti-democratic regimes was to become an outstanding feature of American imperial policy in the next century. America’s focus on ideology meant that the actions of regimes around the world would be judged not on their inherent substance but on their political context. Thus when the United States transferred nuclear technology to Iran, Secretary of State Henry Kissinger declared that ‘introduction of nuclear power will both provide for the growing needs of Iran’s economy and free remaining oil reserves for export or conversion to petrochemicals’. When the shah fell and his Islamic successors continued the nuclear power programme, Kissinger complained that ‘for an oil producer such as Iran, nuclear energy is a wasteful use of resources’.

  At the same time that Bismarck’s Prussia was being upheld as a beacon of democracy, another nascent imperial power was also flexing its muscles across the world. Japan was lauded in the United States for its supposedly liberal and progressive government as it plunged into murderous wars with China and Russia. American support for Japan in its war with Russia reflected two aspects of American politics: the political power of the Jewish lobby and, at that time more important, the innate idealism of the American people. Russian despotism became a political issue in America long before the advent of communism. The anti-semitism of Alexanders II and III provoked massive anger in the United States, where the existing Jewish population, largely of German origin, already wielded considerable political power and was now swelled by hundreds of thousands of Russian Jews. In addition newspaper reports of the barbaric regime in Siberian prison camps caused outrage. Russia responded by condemning the racist treatment of former slaves in the United States. In the 1868 presidential campaign Ulysses Grant vehemently attacked Russian anti-semitism to overcome attacks on his own record of anti-semitism in the civil war. The American Society of Friends of Russian Freedom enjoyed celebrity support across the political spectrum from Mark Twain to Theodore Roosevelt. Russia’s obscure imperial adventures in Manchuria made headlines in America, and in an early demonstration of America’s bipolar approach to foreign policy despotic Japan’s attack on the Russian fleet in 1904 was widely supported. Just forty years after the citizens of New York had given a rapturous welcome to the Russian navy during the civil war they now enthusiastically cheered its destruction. In those forty years both nations had changed: Russia was growing in its traditional manner but America was starting to follow a different path.

  The seizure of the Philippines and Hawaii not only marked a turning point in American imperialism but also made the United States for the first time a significant player in the imperial politics of the Pacific. The carving up of Samoa with Germany had been of little interest to the rest of the world, but the occupation of the Philippines was different; it clearly demonstrated that the United States intended to take an active part in Asian affairs. For Japan, rapidly industrialising and modernising its military machine, this was a potential concern – a concern that just forty years later exploded into the attack on Pearl Harbor – but a far more pressing issue in Tokyo was the other imperial power advancing into the region: Russia. Russia’s last tsar, Nicholas II, had turned his eyes towards Asia in the perpetual Russian quest for new territories to conquer. The Trans-Siberian railway pushed on into Manchuria. When completed in 1905 it would be the world’s longest railway (5,772 miles), travelling a quarter of the way round the earth, across eight time zones and with nearly a thousand stations. It was built to carry Siberia’s mineral wealth to Moscow and the west, but it also allowed the rapid deployment of troops. There was still a gap around Lake Baikal, but when that was plugged Russian forces would be able to intervene quickly in regions that Japan perceived as being in its sphere of influence.

  In the middle of the nineteenth century Russia had started pushing south from Siberia, exploring the length of the Amur river which China had successfully protected against the first Cossack invaders two centuries before. Conditions in China were now very different, and Russian explorers found the Amur undefended. Nikolay Muravyev, the governor of eastern Siberia, led his troops into the Amur basin and, after repelling British and French attacks on the river’s mouth, forced the Chinese to sign the Treaty of Aigun, settling the border between Russian Siberia and Chinese Manchuria on the Amur. In 1860 the city of Vladivostok, destined to become the terminus of the Trans-Siberian railway and Russia’s major Pacific port, was founded on the Amur Bay.

  In the same year that America attacked the Philippines, Russia obtained its first warm water port on the Pacific by making China an offer it could not refuse for Port Arthur. This increased the tension with Japan, which had itself annexed Port Arthur four years earlier during the Sino-Japanese War. Germany’s seizure of nearby Shantung prompted a bizarre Russian demand for ‘compensation’, on the grounds that it should have been allowed to seize it first.

  Russia expanded to the border with Korea. The Hermit Kingdom had been ‘opened up’ by the US navy in 1871 and was now a free-for-all. Japanese forces there overwhelmed Chinese troops before being forced to withdraw by a ‘Triple Intervention’ of Russia, Germany and France. Apparently acting on his own authority, the Japanese minister to Korea launched a coup in which the Korean queen was murdered (just two years after the American minister in Hawaii had ousted the Hawaiian queen). The Korean king fled to the Russian legation before having his pro-Japanese ministers executed.

  Russia used the covert imperial tactics being pursued elsewhere by the United States, and by 1897 was in effective control of much of Korea: training Korean troops, controlling Korean Customs and establishing the Russo-Korean Bank. At precisely the same time on the other side of the world the United States was doing the same thing in the Dominican Republic.
In both cases the control proved precarious. In 1898, under the Rosen-Nissi Convention, Russia had to yield its dominant position in Korea to Japan, and the next year the American company responsible for the Dominican Republic’s Customs was expelled.

  Russia then followed another American model. At the time Hawaii was being annexed, as the culmination of secret plans drawn up largely by the former American minister to Hawaii, the Russian minister to Korea proposed something similar. An East Asiatic Company would be set up ostensibly to acquire commercial timber concessions along the Tumen and Yalu rivers, but really to act as the first step in a plan to annexe Korea to Russia. Whereas in Hawaii commercial pressures drove territorial aggrandisement, in Yalu the territorial imperative was driving commerce. The tsar supported the idea and put up the initial funds. Active consideration was given to attracting American investors into the project to deflect international concerns, but it was decided that Americans would be too impatient for profit. Russian timber concessions were obtained on the Manchurian side of the Yalu and soon extended into Korea, but these operations were fronts; most of the Russian workers were in fact soldiers, and the main objective of the Russian ‘businessmen’ was to survey the region and establish an infrastructure that could be used in future military campaigns. In 1903 Russian soldiers in civilian clothes entered the harbour at Yongampo and began to construct barracks and port facilities.

  Korea, and more importantly China, seemed ripe for foreign exploitation. America, in the throes of fighting a guerrilla war in the Philippines, had no wish to annexe territory on the Asian mainland, but it was determined to protect its own commercial interests. US Secretary of State Hay therefore announced an ‘open door policy’, under which the Chinese economy was to be open for grabs but further annexation of Chinese territory was forbidden. America’s growing military power in the region gave weight to Hay’s declaration, and when the antiforeigner Boxer Rebellion erupted in China in 1900 US marines played a key role in ensuring the victory of the Eight Nation Alliance of Britain, America, Russia, Germany, France, Austria-Hungary, Japan and Italy. Under cover of the rebellion Germany, quickly followed by Britain and France, moved to seize Chinese territory and Russia occupied all of Manchuria. Nicholas, however, faced bitter opposition from America, Britain and, especially, Japan, and was eventually forced to recognise Chinese sovereignty over Manchuria and agree to a phased troop withdrawal, which soon stalled.