From the late nineteenth through the early twentieth century, the United States came under the grip of a powerful political and economic movement whose influence spread across the world and persists today. Known in its time as the Trust Movement, it called for the reorganization of the American and world economy into a new form: the giant, monopoly corporation. It achieved that goal with leviathans like Standard Oil and AT&T in America, I.G. Farben in Germany, and with the domination of the Japanese imperial economy by the zaibatsu system. In its American form, the Trust Movement envisioned an economy with every sector run by a single, almighty monopoly, fashioned out of hundreds of smaller firms, unfettered by competitors or government restraint. In short: pure economic autocracy.
This monopolization movement proceeded with blinding speed in the United States. During just one decade, from 1895 to 1904, at least 2,274 manufacturing firms merged, leaving behind 157 corporations, most of which dominated their industries.* By the early 1900s, nearly every major industry in the United States was either already controlled by, or coming under the control of, a single monopolist. John D. Rockefeller’s Standard Oil remains the best-known monopoly of the era, but the greater economic impact came from the consolidation campaigns waged by men like banker John Pierpont Morgan, history’s greatest monopolizer. Morgan merged hundreds of steel firms into U.S. Steel, built railroad monopolies in the West and the Northeast, created an Atlantic shipping giant called the International Mercantile Marine Co., and served as the real force behind AT&T’s conquest of the telecommunications industry. His model also inspired other copycat financiers who created a tobacco trust, a cotton trust, a sugar trust, a rubber trust, a filmmakers trust, a trust that made matches, a nail trust, and so on.
To mention Morgan is to summon to mind the top hat, bulbous nose, giant yacht, and access to nearly unlimited capital. His was called the Gilded Age for a reason, for the creation of industry-spanning monopolies was the source of a new kind of wealth that left bankers like Morgan or magnates like Rockefeller with personal fortunes and economic influence previously unknown to the world. To take just one example: To create the U.S. Steel monopoly, and eliminate Andrew Carnegie as a competitor, Morgan agreed to pay him a sum that immediately made Carnegie the richest man in the world, and one of the richest in history. (Carnegie would soon thereafter be worth about $310 billion in current dollars measured by his share of the economy.) But even if the cash payouts of the Trust Movement provided much of the gusto, there was more to it than that. The new monopolists of the Gilded Age preferred to believe that they were not merely profiteering, but building a new and better society. They were bravely constructing a new order that discarded old ways and replaced them with an enlightened future characterized by rule by the strong, by a new kind of industrial Übermensch who transcended humanity’s limitations. The new monopolies were the natural successor to competition, just as man had evolved from the ape.
The Trust Movement’s arguments were, in part, economic: Men like Rockefeller and Morgan simply took the monopoly as a superior form of business organization that was saving the economy from ruin. The U.S. and world economy had undergone terrible shocks in the 1890s, and hundreds of firms were thrown into bankruptcy. Many blamed “ruinous competition” for driving prices too low. In the same way that Silicon Valley’s Peter Thiel today argues that monopoly “drives progress” and that “competition is for losers,” adherents to the Trust Movement thought Adam Smith’s fierce competition had no place in a modern, industrialized economy.
Monopolists liked to portray themselves as part of a progressive movement, striving toward a better age, and justified their work using the then-fashionable ideology of “Social Darwinism” and the writings of its English exponent, Herbert Spencer. Not well known in our times, except, perhaps, as crudely reflected in the writings of novelist Ayn Rand or the monopoly worship of Thiel and other Silicon Valley thinkers, Spencer provided a philosophy for the conquering tycoon, and, for some, even a personal religion.
Here was the faith. Led by the strongest and greatest of men, society was in the midst of an evolutionary transformation, whose goal was nothing less than the forging of a new world order. The weak, the small, and the old-fashioned were all being swept away, to be replaced by the new, the scientific, and above all, the strong. For some, this purge displaced not just old ways and inefficient businesses, but Christianity as well, with its regard for the disadvantaged and insistence on humility before God. Many Social Darwinists believed less in humanity’s sinful nature than man’s perfectibility, personified in the image of a man “looking to the sun,” aspiring to Godlike qualities. The meek were not going to inherit the earth but be eliminated, through the process of a survival of the fittest.
In politics, Social Darwinists embraced laissez-faire, opposing any interventions that might be thought to stop the strong from displacing the weak. Spencer opposed “poor laws” in Britain, believing the impoverished should be left to live or die on their own, so as “to clear the world of them, and make room for better.” To be fair, he and other Social Darwinists did lend support in one form of state intervention: eugenics campaigns meant to cull the physically and mentally disabled, and thereby help speed up the coming of the new age. John D. Rockefeller, Jr., would personally fund an initiative to sterilize some 15 million Americans, for, as Spencer put it, “The forces which are working out the great scheme of perfect happiness… exterminate such sections of mankind as stand in their way, with the same sternness that they exterminate beasts of prey and herds of useless ruminants.”
As between men, so would it be for business. Nothing—certainly not government—should try to stop the great monopolists in their conquest of the economy. For what was underway was a kind of industrial eugenics campaign that exterminated the weak and the unfit to make room for firms great and powerful. John D. Rockefeller, Jr. put it this way: “The American Beauty Rose can be produced in its splendor and fragrance only by sacrificing the early buds which grow up around it.”
Resistance, such as would be waged by Louis Brandeis and his like, was futile, for Morgan’s and Rockefeller’s campaigns were thought to be natural, unstoppable, and perhaps even ordained by God. “To stop co-operation of individuals and aggregation of capital would be to arrest the wheels of progress—to stay the march of civilization—to decree immobility of intellect and degradation of humanity,” explained Standard Oil’s counsel Samuel Dodd, inventor of the Trust form. “You might as well endeavor to stay the formation of the clouds, the falling of the rains, or the flowing of the streams.” Or, as Rockefeller himself put it, “Growth of a large business is merely a survival of the fittest … the working out of a law of nature, and a law of God.”
This was the Trust Movement’s underlying philosophy and vision of what an economy should be: centralized, run by great men, free from any government interference, and to promote survival of the fittest, largely indifferent to the plight or demise of the weak, the poor, and the unfit. It cannot be denied that some of the firms built during this era were impressive creations, and that the American economy, as a whole, experienced impressive if not wholly unprecedented growth. But the monopolization movement also marked a radical break from values once seen as foundational to the Republic, if not the more humanist traditions of Western civilization. As historian Richard Hofstadter put it, “Nothing less was at stake that the entire organization of American business and American politics, the very question of who was to control the country.”
For the American tradition had, to that point, been defined by resistance to centralized power and monopoly. The American Revolution itself was in large part sparked by the abuses of Crown monopolies. The original Boston Tea Party was, after all, really an anti-monopoly protest. As Hofstadter writes: “From its colonial beginnings through most of the nineteenth century, [America] was overwhelmingly a nation of farmers and small-town entrepreneurs—ambitious, mobile, optimistic, speculative, anti-authoritarian, egalitarian, and competitive. As time went on, Americans came to take it for granted that property would be widely diffused, that economic and political power would be decentralized.”
With the assertion that much of economic decision-making was beyond the government’s control, the question of who really ruled the country was suddenly unclear. Fortifying matters was the tendencies of great monopolists, like Standard Oil or the New Haven Railroad, to use bribes and other forms of influence to control political outcomes. As such, the movement posed a new challenge for a Constitution that was committed to limited and separate powers, and never contemplated the rise of private power as great as any of the branches of government, and able to corrupt governmental operations to suit its ends.
Perhaps most profound was the break with the ideal that the United States was a nation characterized by a relative sense of equality among its citizens. As Alexis De Tocqueville observed, “Among the novel objects that attracted my attention during my stay in the United States, nothing struck me more forcibly than the general equality of condition among the people.” But that was no longer true for small businesses, farmers, and especially workers. There was a new divide between the giant corporation and its workers, leading to strikes, violence, and a constant threat of class warfare. Looking back, the difference in incomes was so stark it makes today’s America look like Scandinavia; the wealthy might earn millions a year, while the average worker earned between one and two dollars a day.
In short, while the Trust Movement was powerful, lucrative, and had its true believers, it also engendered great popular resistance that threatened a new revolution. Overseas, socialist, communist, and anarchist forces were gaining strength and would in time overthrow many of Europe’s governments. In the United States, outrage was channeled into organized labor, the farmers’ “Granger movement,” the founding of an Anti-Monopoly Party, and the emergence of populist candidates like William Jennings Bryan, three-time Democratic nominee for President.
And it also led to the passage of the first antitrust law, the Sherman Act, enacted in 1890, during the first furious wave of reactions to the rise of the trusts. The law was named after its original sponsor, Senator John Sherman, an Ohio Republican who was the younger brother of the Civil War general William Tecumseh Sherman. While it was clear that the law was meant to address the “Trust Problem,” like many laws, the reasons stated for its passage were many and varied, reflecting a then-recent debate over tariff policy, as well as the interests of small producers, farmers, and others, as modified by the usual dealmaking and compromises. The language of the law is extremely broad. In section one it bans “every contract, combination in the form of trust or otherwise … in restraint of trade.” In section two it declares that “every person who shall monopolize, or attempt to monopolize … any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony.”
The language is so strong—its literal text bans so much—that the scholarly debate over the Sherman Act’s meaning and history may never end. But two things can be stated. It was clearly understood as a reaction to the rising power of the monopoly trusts, such as the Standard Oil company. And it was evident that the members of Congress had concerns that were diverse and disparate in nature. Consider, for example, the words of Senator Sherman on the floor of the Senate, who discussed the evils of monopoly pricing, but also proclaimed that no problem “is more threatening than the inequality of condition, of wealth, and opportunity” and also added that “if the concerted powers of this combination are entrusted to a single man, it is a kingly prerogative, inconsistent with our form of government.”
Let us not spend any more time on the impossible task of trying to find the true original meaning of the Sherman Act. Instead, we turn to the work of Louis Brandeis, whose philosophy of resistance to the Trust Movement and whose vision of the economy has had an enduring influence, and whose voice is needed for what we confront today.
*Economic historian Naomi Lamoreaux traced the market shares of ninety-three of the major consolidations during that era, and recognized that seventy-two of them were able to gain at least a 40 percent market share in their industry, and forty-two of them gained over 70 percent. The Great Merger Movement in American Business, 1895–1904 (1985).