Speech 17
PROGRESS   MADE TOWARD   FEDERAL CONTROL OF CORPORATIONS

ADDRESS    DELIVERED     AT    A     BANQUET    IN     MILWAUKEE,   WISCONSIN,   APRIL   3,   1903

TODAY I wish to speak to you on the question of the control and regulation of those great corporations which are popularly, although rather vaguely, known as trusts; dealing mostly with what has actually been accomplished in the way of legislation and in the way of enforcement of legislation during the past eighteen months, the period covering the two sessions of the Fifty seventh Congress.  At the outset I shall ask you to remember that I do not approach the subject either from the standpoint of those who speak for themselves as anti-trust or anti-corporation people, nor yet from the standpoint of those who are fond of denying the existence of evils in the trusts, or who apparently proceed upon the assumption that if a corporation is large enough it can do no wrong.

I think I speak for the great majority of the American people when I say that we are not in the least against wealth as such, whether individual or corporate; that we merely desire to see any abuse of corporate or combined wealth corrected and remedied; that we do not desire the abolition or destruction of big corporations, but, on the contrary, recognize them as being in many cases efficient economic instruments, the results of an inevitable process of economic evolution, and only desire to see them regulated and controlled so far as may be necessary to subserve the public good.  We should be false to the historic principles of our government if we discriminated, either by legislation or administration, either for or against a man because of either his wealth or his poverty.  There is no proper place in our society either for the rich man who uses the power conferred by his riches to enable him to oppress and wrong his neighbors, nor yet for the demagogic agitator who, instead of attacking abuses as all abuses should be attacked wherever found, attacks property, attacks prosperity, attacks men of wealth, as such, whether they be good or bad, attacks corporations whether they do well or ill, and seeks, in a spirit of ignorant rancor, to overthrow the very foundations upon which rests our national well being.

In consequence of the extraordinary industrial changes of the last half century, and notably of the last two or three decades, changes due mainly to the rapidity and complexity of our industrial growth, we are confronted with problems which in their present shape were unknown to our forefathers.  Our great prosperity, with its accompanying concentration of population and of wealth, its extreme specialization of faculties, and its development of giant industrial leaders, has brought much good and some evil, and it is as foolish to ignore the good as willfully to blind ourselves to the evil.

The evil has been partly the inevitable accompaniment of the social changes, and where this is the case it can be cured neither by law nor by the administration of the law, the only remedy lying in the slow change of character and of economic environment.  But for a portion of the evil, at least, we think that remedies can be found.  We know well the danger of false remedies, and we are against all violent, radical, and unwise change.  But we believe that by proceeding slowly, yet resolutely, with good sense and moderation, and also with a firm determination not to be swerved from our course either by foolish clamor or by any base or sinister influence, we can accomplish much for the betterment of conditions.
Nearly two years ago, speaking at the State Fair in Minnesota, I said: " It is probably true that the large majority of the fortunes that now exist in this country have been amassed, not by injuring our people, but as an incident to the conferring of great benefits upon the community, and this no matter what may have been the conscious purpose of those amassing them.  There is but the scantiest justification for most of the outcry against the men of wealth as such; and it ought to be unnecessary to state that any appeal which directly or indirectly leads to suspicion and hatred among ourselves, which tends to limit opportunity, and therefore to shut the door of success against poor men of talent, and, finally, which entails the possibility of lawlessness and violence, is an attack upon the fundamental properties of American citizenship.  Our interests are at bottom common; in the long run we go up or go down together.  Yet more and more it is evident that the State, and if necessary the Nation, has got to possess the right of supervision and control as regards the great corporations which are its creatures; particularly as regards the: great business combinations which derive a portion of their importance from the existence of some monopolistic tendency.  The right should be exercised with caution and self restraint; but it should exist, so that it may be invoked if the need arises."

Last fall in speaking at Cincinnati, I said: " The necessary supervision and control, in which I firmly believe as the only method of eliminating the real evils of the trusts, must come through wisely and cautiously framed legislation, which shall aim in the first place to give definite control to some sovereign over the great corporations, and which shall be followed, when once this power has been conferred, by a system giving to the government the full knowledge which is the essential for satisfactory action.  Then, when this knowledge — one of the essential features of which is proper publicity — has been gained, what further steps of any kind are necessary can be taken with the confidence born of the possession of power to deal with the subject, and of a thorough knowledge of what should and can be done in the matter.  We need additional power, and we need knowledge.  .  .  .  Such legislation — whether obtainable now or obtainable only after a Constitutional amendment — should provide for a reasonable supervision, the most prominent feature of which at first should be publicity; that is, the making public, both to the government authorities and to the people at large, the essential facts in which the public is concerned.  This would give us exact knowledge of many points which are now not only in doubt but the subject of fierce controversy.  Moreover, the mere fact of the publication would cure some very grave evils, for the light of day is a deterrent to wrongdoing.  It would doubtless disclose other evils with which, for the time being, we could devise no way to grapple.  Finally, it would disclose others which could be grappled with and cured by further legislative action."

In my Message to Congress for 1901 I said: “In the interest of the whole people the Nation should, without interfering with the power of the States in the matter, itself also assume power of supervision and regulation over all corporations doing an interstate business."

The views thus expressed have now received effect by the wise, conservative, and yet far reaching legislation enacted by Congress at its last session.  In its wisdom Congress enacted the very important law providing a Department of Commerce and Labor, and further providing therein under the Secretary of Commerce and Labor for a Commissioner of Corporations, charged with the duty of supervision of and of making intelligent investigation into the organization and conduct of corporations engaged in interstate commerce.  His powers to expose illegal or hurtful practices and to obtain all information needful for the purposes of further intelligent legislation seem adequate; and the publicity justifiable and proper for public purposes is satisfactory guaranteed.  The law was passed at the very end of the session of Congress.  Owing to the lateness of its passage Congress was not able to provide proper equipment for the new Department; and the first few months must necessarily be spent in the work of organization, and the first investigations must necessarily be of a tentative character.  The satisfactory development of such a system requires time and great labor.  Those who are intrusted with the administration of the new law will assuredly administer it in a spirit of absolute fairness and justice and of entire fearlessness, with the firm purpose not to hurt any corporation doing a legitimate business — on the contrary to help it — and, on the other hand, not to spare any corporation which may be guilty of illegal practices, or the methods of which may make it a menace to the public welfare.  Some substantial good will be done in the immediate future; and as the Department gets fairly to work under the law an ever larger vista for good work will be opened along the lines indicated.  The enactment of this law is one of the most significant contributions which have been made in our time toward the proper solution of the problem of the relations to the people of the great corporations and corporate combinations.

But much though this is, it is only a part of what has been done in the effort to ascertain and correct improper trust or monopolistic practices.  Some eighteen months ago the Industrial Commission, an able and non-partisan body, reported to Congress the result of their investigation of trusts and industrial combinations.  One of the most important of their conclusions was that discriminations in freight rates and facilities were granted favored shippers by the railroads and that these discriminations clearly tended toward the control of production and prices in many fields of business by large combinations.  That this conclusion was justifiable was shown by the disclosures in the investigation of railroad methods pursued in the fall and winter of 1901-1902.  It was then shown that certain trunk lines had entered into unlawful agreements as to the transportation of food products from the West to the Atlantic seaboard, giving a few favored shippers rates much below the tariff charges imposed upon the smaller dealers and the general public.  These unjust practices had prevailed to such an extent and for so long a time that many of the smaller shippers had been driven out of business, until practically one buyer of grain on each railway system had been able by his illegal advantages to secure a monopoly on the line with which his secret compact was made; this monopoly enabling him to fix the price to both producer and consumer.  Many of the great packing house concerns were shown to be in combination with each other and with most of the great railway lines, whereby they enjoyed large secret concessions in rates and thus obtained a practical monopoly of the fresh and cured meat industry of the country.  These fusions, though violative of the statute, had prevailed unchecked for so many years that they had become intrenched in and interwoven with the commercial life of certain large distributing localities; although this was of course at the expense of the vast body of law abiding merchants, the general public, and particularly of unfavored localities.

Under those circumstances it was a serious problem to determine the wise course to follow in vitalizing a law which had in part become obsolete or proved incapable of enforcement.  Of what the Attorney General did in enforcing it I shall speak later.  The decisions of the courts upon the law had betrayed weaknesses and imperfections, some of them so serious as to render abortive efforts to apply any effective remedy for the existing evils.

It is clear that corporations created for quasi public purposes, clothed for that reason with the ultimate power of the State to take private property against the will of the owner, hold their corporate powers as carriers in trust for the fairly impartial service of all the public.  Favoritism in the use of such powers, unjustly enriching some and unjustly impoverishing others, discriminating in favor of some places and against others, is palpably violative of plain principles of justice.  Such a practice unchecked is hurtful in many ways.  Congress, having had its attention drawn to the matter, enacted a most important anti-rebate law, which greatly strengthens the interstate commerce law.  This new law prohibits under adequate penalties the giving and as well the demanding or receiving of such preferences, and provides the preventive remedy of injunction.  The vigorous administration of this law — and it will be enforced — will, it is hoped, afford a substantial remedy for certain trust evils which have attracted public attention and have created public unrest.

This law represents a noteworthy and important advance toward just and effective regulation of transportation.  Moreover, its passage has been supplemented by the enactment of a law to expedite the hearing of actions of public moment under the anti-trust act, known as the Sherman law, and under the act to regulate commerce, at the request of the Attorney General; and furthermore, additional funds have been appropriated to be expended under the direction of the Attorney General in the enforcement of these laws.

All of this represents a great and substantial advance in legislation.  But more important even than legislation is the administration of the law, and I ask your attention for a moment to the way in which the law has been administered by the profound jurist and fearless public servant who now occupies the position of Attorney General, Mr.  Knox.  The Constitution enjoins upon the President that he shall take care that the laws be faithfully executed, and under this provision the Attorney General formulated a policy which was in effect nothing but the rigid enforcement, by suits managed with consummate skill and ability, both of the anti-trust law and of the imperfect provisions of the act to regulate commerce.  The first step taken was the prosecution of fourteen suits against the principal railroads of the Middle West, restraining them by injunction from further violations of either of the laws in question.

About the same time the case against the Northern Securities Company was initiated.  This was a corporation organized under the laws of the State of New Jersey with a capital of four hundred million dollars, the alleged purpose being to control the Great Northern and the Northern Pacific railroad companies, two parallel and competing lines extending across the northern tier of States from the Mississippi River to the Pacific Ocean.  Whatever the purpose, its consummation would have resulted in the control of the two great railway systems — upon which the people of the Northwestern States were so largely dependent for their supplies and to get their products to market — being practically merged into the New Jersey Corporation.  The proposition that these independent systems of railroads should be merged under a single control alarmed the people of the States concerned, lest they be subjected to what they deemed a monopoly of interstate transportation and the suppression of competition.  The Governors of the States most deeply affected held a meeting to consider how to prevent the merger becoming effective and passed resolutions calling upon the National Government to enforce the anti-trust laws against the alleged combination.  When these resolutions were referred to the Attorney General for consideration and advice, he reported that in his opinion the Northern Securities Company and its control of the railroads mentioned was a combination in restraint of trade, and was attempting a monopoly in violation of the national anti-trust law.  Thereupon a suit in equity, which is now pending, was begun by the Government to test the validity of this transaction under the Sherman law.

At nearly the same time the disclosures respecting the secret rebates enjoyed by the great packing house companies, coupled with the very high price of meats, led the Attorney General to direct an investigation into the methods of the so called beef trust.  The result was that he filed bills for injunction against six of the principal packing house companies, and restrained them from combining and agreeing upon prices at which they would sell their products in States other than those in which their meats were prepared for market.  Writs of injunction were issued accordingly, and since then, after full argument, the United States Circuit Court has made the injunction perpetual.

The cotton interests of the South, including growers, buyers, and shippers, made complaint that they were suffering great injury in their business from the methods of the Southern railroads in the handling and transportation of cotton.  They alleged that these railroads by combined action under a pooling arrangement to support their rate schedules, had denied to the shippers the right to elect over what roads their commodities should be shipped, and that by dividing upon a fixed basis the cotton crop of the South all inducement to compete in rates for the transportation thereof was eliminated.  Proceedings were instituted by the Attorney General under the anti-trust law, which resulted in the destruction of the pool and in restoring to the growers and shippers of the South the right to ship their products over any road they elected, thus removing the restraint upon the freedom of commerce.

In November, 1902, the Attorney General directed that a bill for an injunction be filed in the United States Circuit Court at San Francisco against the Federal Salt Company — a corporation which had been organized under the laws of an Eastern State, but had its main office and principal place of business in California — and against a number of other companies and persons constituting what was known as the salt trust.  These injunctions were to restrain the execution of certain contracts between the Federal Salt Company and the other defendants, by which the latter agreed neither to import nor buy or sell salt, except from and to the Federal Salt Company, and not to engage or assist in the production of salt west of the Mississippi River during the continuance of such contracts.  As the result of these agreements the price of salt had been advanced about four hundred per cent.  A temporary injunction order was obtained, which the defendants asked the court to modify on the ground that the anti-trust law had no application to contracts for purchases and sales within a State.  The Circuit Court overruled this contention and sustained the Government's position.  This practically concluded the case, and it is understood that in consequence the Federal Salt Company is about to be dissolved and that no further contest will be made.

The above is a brief outline of the most important steps, legislative and administrative, taken during the past eighteen months in the direction of solving, so far as at present it seems practicable by national legislation or administration to solve, what we call the trust problem.  They represent a sum of very substantial achievement.  They represent a successful effort to devise and apply real remedies; an effort which so far succeeded because it was made not only with resolute purpose and determination, but also in a spirit of common sense and justice, as far removed as possible from rancor, hysteria, and unworthy demagogic appeal.  In the same spirit the laws will continue to be enforced.  Not only is the legislation recently enacted effective, but in my judgment it was impracticable to attempt more.  Nothing of value is to be expected from ceaseless agitation for radical and extreme legislation.  The people may wisely, and with confidence, await the results which are reasonably to be expected from the impartial enforcement of the laws which have recently been placed upon the statute books.  Legislation of a general and indiscriminate character would be sure to fail, either because it would involve all interests in a common ruin, or because it would not really reach any evil.  We have endeavored to provide a discriminating adaptation of the remedy to the real mischief.

Many of the alleged remedies advocated are of the unpleasantly drastic type which seeks to destroy the disease by killing the patient.  Others are so obviously futile that it is somewhat difficult to treat them seriously or as being advanced in good faith.  High among the latter I place the effort to reach the trust question by means of the tariff.  You can, of course, put an end to the prosperity of the trusts by putting an end to the prosperity of the Nation; but the price for such action seems high.  The alternative is to do exactly what has been done during the life of the Congress which has just closed — that is, to endeavor, not to destroy corporations, but to regulate them with a view of doing away with whatever is of evil in them and of making them subserve the public use.  The law is not to be administered in the interest of the poor man as such, nor yet in the interest of the rich man as such, but in the interest of the law abiding man, rich or poor.  We are no more against organizations of capital than against organizations of labor.  We welcome both, demanding only that each shall do right and shall remember its duty to the Republic.  Such a course we consider not merely a benefit to the poor man, but a benefit to the rich man.  We do no man an injustice when we require him to obey the law.  On the contrary, if he is a man whose safety and well being depend in a peculiar degree upon the existence of the spirit of law and order, we are rendering him the greatest service when we require him to be himself an exemplar of that spirit.