15 September 2009

Convulsive Changes

This article is excerpted from the book Outline of the U.S. Economy, published by the Bureau of International Information Programs. View the entire book (PDF, 3.26 MB).

Convulsive changes caused by industrialization and urbanization shook the United States at the end of the 19th century. Labor movements began and vied for power, with immigrants helping to adapt European protest ideologies into American forms.

By the 1880s, manufacturing and commerce surpassed farm output in value. New industries and railroad lines proliferated with vital backing from European financiers. Major U.S. cities shot up in size, attracting immigrant families and migration from the farms. A devastating depression shook the country in the first half of the 1890s, forcing some 16,000 businesses to fail in 1893 alone. The following year, as many as 750,000 workers were on strike, and the unemployment rate reached 20 percent.

Farmers from the South and West, battered by tight credit and falling commodity prices, formed a third national political organization, the Populist Party, whose anger focused on the nation’s bankers, financiers, and railroad magnates. The Populist platform demanded easier credit and currency policies to help farmers. In the 1894 congressional elections, Populists took 11 percent of all votes cast.

But American politics historically has coalesced around two large parties—the Republican and Democratic parties have filled this role since the mid-1800s. Smaller groupings served mostly to inject their issues into either or both of the main contenders. This would be the fate of the 1890s Populists. By 1896, the new party had fused with the Democrats. But significant parts of the Populist agenda subsequently found their way into law by way of the trans-party Progressive movement of the 20th century’s first two decades. Among the innovations were direct popular election of senators and a progressive national income tax.

American Progressivism reflected a growing sense among many Americans that, in the words of historian Carl Degler, “the community and its inhabitants no longer controlled their own fate.” Progressives relied on trained experts in the social sciences and other fields to devise policies and regulations to reign in perceived excesses of powerful trusts and other business interests. Writing in 1909, Herbert Croly, author of the hugely influential The Promise of American Life and first editor of the New Republic magazine, expressed the Progressive’s credo in this way: “The national government must step in and discriminate, not on behalf of liberty and the special individual, but on behalf of equality and the average man.”

The influence of Progressive thought grew rapidly after the assassination of President William McKinley in 1901 thrust Vice President Theodore Roosevelt into the White House. Adventurer, naturalist, and scion of wealth, “Teddy” Roosevelt believed the most powerful corporate titans were strangling competition. Businesses’ worst excesses must be restrained lest the public turn against the American capitalist system, Roosevelt and his allies argued.

The New York World newspaper, owned by the influential publisher Joseph Pulitzer, editorialized that “the United States was probably never nearer to a social revolution than when Theodore Roosevelt became president.” Roosevelt responded with regulations and federal antitrust lawsuits to break up the greatest concentrations of industrial power. His administration’s antitrust suit against the nation’s largest railroad monopoly, Northern Securities Company, was a direct attack on the nation’s foremost financier, J.P. Morgan. “If we have done anything wrong,” Morgan told Roosevelt, “send your man to my man and they can fix it up.” Roosevelt responded, “That can’t be done.” The Supreme Court’s ultimate decision against Northern Securities was a beachhead in the government’s campaign to restrict the largest businesses’ power over the economy.