by Jean Strouse
Roosevelt feared the democratic “mob” even more than he disliked “corrupt wealth.” His speeches against Bryan and other radical extremists had come from the heart, as had his early opposition to organized labor. He believed in the rights of property owners, but in 1902 the coal barons’ “wooden-headed obstinacy and stupidity [TR’s terms],” the threat of social upheaval, and the rising price of coal as cold weather and the midterm election approached, induced him to intervene.
He invited the mine owners and Mitchell to meet at the White House on October 3. Mitchell agreed to accept arbitration by an independent commission, but Baer refused to “waste time negotiating with the fomenters of this anarchy,” and demanded that the President use the army to end the strike. Roosevelt, who already had ten thousand troops in the coalfields, considered using them to take over the mines instead. News of the owners’ inflexibility increased public support for the miners, who voted on October 8 not to end the strike.
It was at this point that the administration turned to Morgan. On October 11, Secretary of War Elihu Root took a train to New York, and on board Corsair that afternoon he and Morgan drafted a statement for the coal-road presidents to sign. Morgan negotiated with these men all the next day—they insisted on several changes (probably adding bombast about labor’s “reign of terror” and protests about their own small profits and fair practices), but ultimately adopted the proposal, which Morgan delivered to Roosevelt in person on October 13. The presidents agreed to arbitration by an independent commission, but not to negotiations with the union. They named five categories of men to arbitrate the dispute—an engineer, a judge, an “eminent” sociologist, a military officer, and a mining expert. Mitchell the next day objected to their rhetoric and attempt to pack the commission, but agreed to arbitration if Roosevelt would add two more mediators—a priest (most of the miners were recent immigrants and Catholic) and a union man.
Root telephoned Morgan with this news. On October 15, George Perkins and Bob Bacon, just back from his recuperation in Europe, went to Washington to say that Morgan could not get the owners to accept the two extra men. “A most comic incident ensued,” wrote Roosevelt a few days later. “For two hours I talked with Bacon and Perkins, both of whom were nearly frenzied.” While agreeing with the President on the imminent dangers of “anarchy and war,” they insisted that the owners would never admit a labor representative to the board. Finally, Bacon said nobody would care who the arbitrators were as long as they came under the categories named—and Roosevelt realized that the mine owners’ “mighty brains … had formulated the theory that they would rather have anarchy than tweedledum, but that if I would use the word tweedledee they would hail it as meaning peace. In other words … they had not the slightest objection to my appointing a labor man as ‘an eminent sociologist.’ ” He proposed exactly that, and “to my intense relief this utter absurdity was received with delight by Bacon and Perkins, who said they were sure the operators would agree to it!” The President promptly named a commission that was accepted by both sides.
“My dear Morgan,” he wrote the next day: “… it really does begin to look as if there was light ahead. And now, my dear sir, let me thank you for the service you have rendered the whole people. If it had not been for your going into the matter I do not see how the strike could have been settled at this time, and the consequences that might have followed upon its being unsettled when cold weather set in are in fact dreadful to contemplate. I thank you and congratulate you with all my heart.” By October 23 the miners were back at work.a
Morgan had waited until the government asked for his help—perhaps because it gave him a stronger hand with the “unruly” presidents—but he was accused of forcing the owners to the table simply to protect his “personal” interests. John Mitchell came to his defense. “To my personal knowledge,” Mitchell told a reporter, “Mr. Morgan has been trying to settle the coal strike ever since he came back from Europe two months ago. If others had been as fair as Mr. Morgan was, this strike would have been settled a long time ago.… Mr. Morgan could not very well have been forced to do something which he had been trying to achieve for several weeks.”
Morgan’s interest in ending the strike had to do not with personal profits but with averting a national fuel shortage and containing the conflict the owners’ egregious behavior provoked. Richard Hofstadter has noted the irony that it was Morgan and Hanna, “paramount symbols of the bloated plutocracy,” who helped Roosevelt end this crisis. Where previous Presidents had intervened on the side of management—Hayes in the railroad strikes of 1877, Cleveland in the 1894 Pullman Strike—Roosevelt in 1902 made labor a full party to the settlement, and his action underlined the new status of the federal government as objective authority, broker of the “square deal.” Hofstadter could not “refrain from adding that it ill accorded with the stereotypes of Progressive thinking that ‘Dollar Mark’ Hanna and J. P. Morgan should have attended as midwives at the birth of the neutral state.”
Articulating the fears of a nation in dramatic flux, Roosevelt was the first chief executive to address the complex problems created by a modern industrial economy, and the first to pose old federalist questions about the relations between government and business in this new context. That the United States by 1902 had become the leading industrial nation in the world was due more to private enterprise than to government policy. Could Washington begin to exercise a measure of control over the stupendously powerful “interests” and still maintain the country’s economic momentum? How did private property rights weigh against public responsibilities in the operation of vast transportation systems and industrial enterprises? Could the government define and protect the interests of “the common man”? Could it effectively impose public accountability and regulatory restraints on the trusts? Roosevelt actually had no quarrel with Morgan’s objectives of industrial consolidation, economic stability, and U.S. dominion in world markets; he wanted chiefly to check abuses of financial power and end government subservience to Wall Street. Although the Northern Securities prosecution established his reputation as a trustbuster, neither he nor Knox meant to stop industrial combinations. They were trying to work out a “right” balance between competition and consolidation, with government as the judge of what was right.b
The President appreciated Morgan’s assistance in settling the coal strike, and over the next few years he often worked closely with the bankers at 23 Wall Street. In 1903 George Perkins from the heart of trust country helped set up government agencies to regulate private industry—a Department of Commerce and Labor, with a fact-finding branch called the Bureau of Corporations. Judicious railroad executives had for years seen federal regulation as likely to help stop rate declines and cutthroat competition, as well as to override restrictive local measures, and they greeted the 1903 Elkins Act, which finally made the granting of rebates to big shippers such as Standard Oil and Carnegie Steel illegal, with relief. In December 1904 The Wall Street Journal found it “noteworthy” that, contrary to expectations, the “financial interests in control of the railroads and the industrial corporations” favored regulatory laws that would, “if carried into effect, deprive them of so much of their present power.… [T]his is of vast significance.… [S]ome of the foremost railroad men of the country are at this time at work in harmony with the President for the enactment of a law providing for federal regulation of rates which shall be equitable both to the railroads and the public.”
Roosevelt had made his symbolic move against Northern Securities. As the case made its way through the courts, he did not even shake a regulatory stick at Morgan’s combinations for the remainder of his time in the White House.
Far more problematic for Morgan than TR early in the new century was a profound national shudder of revulsion against big business—the widespread clamor for reform that came to be known as progressivism. Encompassing a range of impulses and ideologies, this latest wave of antipathy to the “money power” had a broader, less radical, m
ore urban, middle-class base than the agrarian and silver movements, and stronger moral and intellectual leadership.
Some progressives, hoping to restore the moral cohesion of earlier times, looked back in what Roosevelt called “sincere rural toryism” to the small-scale antebellum economy with its relatively free markets and individualistic values. At the same time, urban reformers tackled the social consequences of industrialization head-on. Lay and clerical activists made national issues of child labor laws, industrial safety, workmen’s compensation, public housing, and public health. Moral hygienists tried to outlaw alcohol and prostitution. Political theorists who believed with Roosevelt that the United States could have the benefits of an advanced industrial economy and a humane society raised searching questions about the public interest and the nature of democracy in a modern corporate state. To the left of the mainstream, Socialist Eugene V. Debs won 3 percent of the vote in 1904, 2.8 percent in 1908, and 6 percent in 1912.
Dramatic economic changes contributed to the national sense of unease. Americans accustomed to declining prices and a steady increase in the purchasing power of the dollar during the long period of post–Civil War deflation suddenly found prices going up. The increase in gold production after 1897 had led to monetary expansion and price inflation in all the gold standard countries, including the United States, and the cost of living for American families rose about 35 percent between 1897 and 1913. Cheaper dollars made life easier for farmers and other borrowers, but people on fixed incomes were able to buy less, the value of dollar-based assets declined, and wages for skilled labor did not rise nearly as quickly as costs. AFL membership went from 548,000 in 1900 to more than 1.5 million by 1910.
A newly aggressive cultural realism gave urgent force to the pressure for reform, as did a talented group of investigative journalists who focused national attention on the disparity between what America promised and what it had become. With the success of mass-circulation magazines in the late nineteenth century, information had become big business, and editors competing for readers simultaneously created and fed the public’s appetite for human interest stories, moral crusades, and political exposés.
The literature of exposure had its unofficial inauguration in McClure’s magazine at the beginning of 1903. Samuel S. McClure, whom Morgan had invited to take over Harper’s in 1899, had continued his own publishing ventures, and his stable of skillful, meticulous writers was making journalism glamorous. McClure announced in his editorial for the January 1903 issue of the magazine that three of its articles, revealing a contempt for law at all levels of society, amounted to such an “arraignment of the American character as should make every one of us stop and think.” At once enunciating the era’s challenge to corrupt authority and appealing to its new ethos of personal responsibility, McClure concluded: “There is no one left; none but all of us.”
Lincoln Steffens led off with “The Shame of Minneapolis,” an exposé of municipal corruption that chronicled flagrant collusion between politicians, criminals, and the police—including photographs of a ledger listing specific bribes. A piece on the 1902 anthracite coal strike by Ray Stannard Baker, called “The Right to Work,” indicted the UMW for its treatment of the seven thousand workers who did not join the walkout. And Ida M. Tarbell, the leading female journalist in the country, published an installment of her carefully researched, devastating portrait of Rockefeller’s Standard Oil.
Appearing in book form in 1904, Miss Tarbell’s History of Standard Oil proved to be one of the most influential accounts of business ever published in America. Tarbell had grown up in the Pennsylvania oil regions, where her father, an independent oil producer, had been ruined by the Rockefeller trust. When Franklin Tarbell learned what his daughter was undertaking, he warned her, “Don’t do it, Ida. They will ruin the magazine.” She did it anyway, bringing to her task both special knowledge and an obvious bias. She gained access to company officials and their archives, studied affidavits, legislative records, and judicial proceedings, interviewed people all over the country who had dealt with Standard Oil. What she found, and serialized in riveting detail month after month in McClure’s, was “as nearly a perfect machine, both in efficiency and monopolistic power, as ever has been devised”—and a shocking record of bribery, espionage, special privilege, ruthless tactics, and industrial deceit. “Mr. Rockefeller has systematically played with loaded dice,” Miss Tarbell concluded, “and it is doubtful if there has ever been a time since 1872 when he has run a race with a competitor and started fair.”
Her exhaustive indictment briefly made her the most famous woman in America. It made Rockefeller, for considerably longer, the most hated man. Most reviewers praised her documentation and dispassion, although The Nation issued a notable dissent. Still the voice of high-minded reform, the magazine criticized her for recklessly stirring up “popular hatred,” for using insinuation rather than proof, for painting her villain too black and her victims (the independent producers) too white: “We need reforms badly enough, but we shall not get them until we have an electorate able to control its passions, to reserve its condemnation, to deliberate before it acts. When that time comes, a railing accusation will not be accepted as history.”
Rockefeller never responded directly to Tarbell’s charges. A neighbor described his attitude as “that of a game fighter who expects to be whacked on the head once in a while. He is not the least disturbed by any blows he may receive. He maintains that the Standard has done more good than harm.”
The Tarbell study eventually led to local and federal prosecutions of Standard Oil, and to an increase in Rockefeller’s philanthropy. In its wake came a flood of further exposés, some painstaking and serious, others inaccurate and sensationalistic—of the insurance industry, meatpacking, railroads, child labor, racial discrimination, slum housing, patent medicines, high finance, and the Senate. Novels by Theodore Dreiser, Frank Norris, Jack London, and Upton Sinclair added to the graphic picture of a nation ravaged by predatory capital, as did the speeches of Robert La Follette, paintings by members of New York’s urban-realist Ashcan School, and the photographs of Jacob Riis. When Sinclair’s best-selling 1906 novel about conditions in the Chicago stockyards, The Jungle, led to passage of the country’s first serious consumer-protection measure, the Pure Food and Drug Act, the author complained: “I aimed at the public’s heart, and by accident I hit it in the stomach.”
Investigative journalists documented abuses of power at all levels of American society, but the paramount villain in the popular imagination was Big Business and its apotheosis, the Trust. Ray Stannard Baker’s articles on the coal strike and U.S. Steel did not vilify Morgan, but later pieces by other writers and cartoonists did. Morgan left no response to his critics, and paid little attention to the country’s striking shift in sensibility. He probably would not have changed course even if he had been more in touch with the progressive national mood, since he did not think he was doing anything wrong.
* J. P. Morgan & Co., acting as agent for the Bank of England, had taken $12 million in subscriptions to a British loan for the Boer War in March 1900. Two months later the firm joined Drexel & Co., Kidder, Peabody, and Baring, Magoun in New York to handle a $30 million Exchequer loan, and in 1901 the Bank of England authorized this same group plus Rothschilds to take subscriptions for another $300 million. The British government was worried about turning to the United States for help (just as Grover Cleveland had worried about relying on Britain and Wall Street in 1895), but ultimately decided it had no choice. Morgan shared in a last issue of £32 million in April 1902, just a month before the end of the Boer War.
† An influential Philadelphia Republican who had been Garfield’s Attorney General and represented the Pennsylvania Railroad in the West Shore deal, Wayne MacVeagh was the father of Stetson’s partner, Charles, and a close friend of Henry Adams. Called “one of the knightliest figures in the courtroom,” he joined Bangs Stetson Tracy & MacVeagh for three years in the eighties, and later was �
��of counsel” to the firm.
‡ In April 1902 the syndicate agreed to offer shareholders the right to trade preferred stock for bonds, and to buy (also with stock) whatever bonds the shareholders did not take. It guaranteed subscriptions to $100 million of the bonds, with $80 million payable in preferred shares and $20 million in cash. Syndicate members put up the $80 million of preferred shares in the spring of 1902, promising to hold them until October 1903, then effect the exchange: J. P. Morgan & Co. and John D. Rockefeller started things off by each depositing $10 million worth of shares in a joint account. Syndicate earnings were set at 4 percent on the aggregate amount of bonds sold or delivered; Perkins thought it would not be a “particularly profitable” contract.
§ In the end, only about $170 million of the proposed $250 million in bonds were issued in exchange for stock and cash. Of that total, the syndicate subscribed for roughly $125 million—$114 million in the stock conversion, $11 million bought with cash. J. P. Morgan & Co., acting for the syndicate, delivered approximately $7 million in cash in 1903, and another $4 million early in 1904—slightly over half of its $20 million cash commitment. Gary’s second annual report, in March 1904, said the corporation could call for the remaining $9 million at any time, but that “in order to avoid the unnecessary burden of interest upon bonds issued for money not immediately needed,” it would not call the remainder “except when and as the cash shall be needed by the Corporation.”
There is no accurate record of the syndicate’s profit or loss on this transaction, nor can there be, in part because it is impossible to say what the members would have done with the preferred shares had they not pledged them to the conversion. When the plan was set up, the bonds were selling at about 95 and preferred shares at 94. By March of 1903, when the plan went into effect, the bond price had fallen to 88, the preferred to 85, and the gap continued to widen: by November the bonds were trading as low as 65, the preferred under 50. As a result, the syndicate had to exchange shares it had furnished at 94 for bonds worth far less (in November 1903 the paper loss would have been $29 per share, or a total of $23.2 million on the $80 million pledged in preferred stock). Still, that loss was smaller than what the members would have sustained had they held the preferred as its value declined from 94 to 50—a loss on paper of $44 per share, or a total of $35.2 million.