Theodore Rex - Edmund Morris [18]
The party of the second part will pay and allow to the party of the first part … rebates … and on all oil transported for others, drawbacks.
Those simple words introduced a new concept—un-American to some—of privilege in commerce, bestowing rewards upon the large at the expense of the small. Both parties excused the contract by saying it would prevent “loss or injury by competition.” If they thus blasphemed against the gospel of free enterprise, Standard Oil, at least, was unrepentant. What, John D. Rockefeller wanted to know, was so holy about competition? Did it not lead to unrealistic rate-cutting, cycles of overproduction and depression, and needless duplication of services? What interdependent industries needed was less competition, and more “cooperation.”
Rockefeller’s rebate privilege had been too flagrant to survive under law. But it was followed, over the years, by sophisticated arrangements to the same effect. Standard Oil had engulfed its smaller rivals, while the Pennsylvania Railroad made similar deals with other industries, and became one of the richest transport systems in the country.
Presidents Cleveland, Harrison, and McKinley paid little attention to the phenomenon of Combination. To them, it seemed a natural economic trend. If industries produced vital supplies, if railroads functioned as semipublic utilities, why restrict their profitable development? Only slowly, and locally, had ordinary Americans—workers, consumers, and small businessmen—begun to feel the “dark power” growing. For Combination’s irresistible tendency was toward Monopoly; and whatever corporate executives might say about increased efficiency and reduced waste, the historic inclination of Monopoly was to raise prices and lower wages.
Standard Oil had taken early steps to protect itself against common-law suits—and, in doing so, had perverted one of the most sacred words in the legal vocabulary. It reorganized its component corporations into a “trust,” whereby all stocks were delivered to an independent board, which then operated the entire combination in unison. Congress had no power to quash this move. Within nine years, John D. Rockefeller had “entrusted” himself with 90 percent of the oil-refining business of the United States.
His profits were so fabulous that other industrial giants had rushed to organize interstate “trusts” of their own. Congress, responding to public concern, had passed the Sherman Antitrust Law of 1890. It declared illegal “every contract, combination in the form of trust, or conspiracy in restraint of trade or commerce among the several States.” But the Law was too comprehensive to be particular. Corporate lawyers (Elihu Root prominent among them) elaborated the trust concept into that of a “holding-company” chartered in one hospitable state, yet monopolizing related corporations throughout the nation. Holding-company directors concerned themselves with questions of finance, so the lawyers argued they were unengaged in “trade or commerce.” The Supreme Court had agreed reluctantly with this argument, and had ruled in U.S. v. E. C. Knight Co. (1895) that a trust controlling 98 percent of the nation’s sugar-refining business was legal, since refining was not itself an interstate activity.
The depression of the mid-nineties had cramped trust growth. But combination, aided by the spread of the telephone-telegraph web, resumed with a vengeance after the war with Spain. In 1898, there had been twenty multimillion-dollar industrial trusts; now, there were one hundred and eighty-five. The proliferation evoked an image, in many minds, of a constrictive organism stretching out to every extremity of American civilization. Hence the title of Frank Norris’s new antitrust novel: The Octopus.
These trackside mourners of Olean Valley, staring blindly at Roosevelt as he whizzed by—how enmeshed were they? The oil trust paid their wages. Other trusts carpeted their houses, papered their walls, piped their water, sluiced away their sewage. Trust ice cooled them in summer,