Another long reading, but the assigned reading is very short. Please read the material below. It will help you understand Progressivism and anti-trust legislation

"The Bosses of the Senate", a cartoon by Joseph Keppler depicting corporate interests–from steel, copper, oil, iron, sugar, tin, and coal to paper bags, envelopes, and salt–as giant money bags looming over the tiny senators at their desks in the Chamber of the United States Senate.^[2]

Although "trust" has a specific legal meaning (where one person holds property for the benefit of another), in the late 19th century the word was commonly used to denote big business, because that legal instrument was frequently used to effect a combination of companies.^[3] Large manufacturing conglomerates emerged in great numbers in the 1880s and 1890s, and were perceived to have excessive economic power.^[4] The Interstate Commerce Act of 1887 began a shift towards federal rather than state regulation of big business.^[5] It was followed by the Sherman Antitrust Act of 1890, the Clayton Antitrust Act of 1914 and the Federal Trade Commission Act of 1914, the Robinson-Patman Act of 1936, and the Celler-Kefauver Act of 1950.

Indeed, at this time hundreds of small short-line railroads were being bought up and consolidated into giant systems. (Separate laws and policies emerged regarding railroads and financial concerns such as banks and insurance companies.) Advocates of strong antitrust laws argued the American economy to be successful requires free competition and the opportunity for individual Americans to build their own businesses. As Senator John Sherman put it, "If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life." Congress passed the Sherman Antitrust Act almost unanimously in 1890, and it remains the core of antitrust policy. The Act prohibits agreements in restraint of trade and abuse of monopoly power. It gives the Justice Department the mandate to go to federal court for orders to stop illegal behavior or to impose remedies.^[6]

Public officials during the Progressive Era put passing and enforcing strong antitrust high on their agenda. President Theodore Roosevelt sued 45 companies under the Sherman Act, while William Howard Taft sued 75. In 1902, Roosevelt stopped the formation of the Northern Securities Company, which threatened to monopolize transportation in the Northwest (see Northern Securities Co. v. United States).



Standard Oil (Refinery No. 1 in Cleveland, Ohio, pictured) was a major company broken up under United States antitrust laws

One of the more well-known trusts was the Standard Oil Company; John D. Rockefeller in the 1870s and 1880s had used economic threats against competitors and secret rebate deals with railroads to build what was called a monopoly in the oil business, though some minor competitors remained in business. In 1911 the Supreme Court agreed that in recent years (1900–1904) Standard had violated the Sherman Act (see Standard Oil Co. of New Jersey v. United States). It broke the monopoly into three dozen separate companies that competed with one another, including Standard Oil of New Jersey (later known as Exxon and now ExxonMobil), Standard Oil of Indiana (Amoco), Standard Oil Company of New York (Mobil, again, later merged with Exxon to form ExxonMobil), of California (Chevron), and so on. In approving the breakup the Supreme Court added the "rule of reason": not all big companies, and not all monopolies, are evil; and the courts (not the executive branch) are to make that decision. To be harmful, a trust had to somehow damage the economic environment of its competitors. United States Steel Corporation, which was much larger than Standard Oil, won its antitrust suit in 1920 despite never having delivered the benefits to consumers that Standard Oil did. In fact, it lobbied for tariff protection that reduced competition, and so contending that it was one of the "good trusts" that benefited the economy is somewhat doubtful. Likewise International Harvester survived its court test, while other trusts were broken up in tobacco, meatpacking, and bathtub fixtures. Over the years hundreds of executives of competing companies who met together illegally to fix prices went to federal prison.

One problem some perceived with the Sherman Act was that it was not entirely clear what practices were prohibited, leading to businessmen not knowing what they were permitted to do, and government antitrust authorities not sure what business practices they could challenge. In the words of one critic, Isabel Paterson, "As freak legislation, the antitrust laws stand alone. Nobody knows what it is they forbid." In 1914 Congress passed the Clayton Act, which prohibited specific business actions (such as price discrimination and tying) if they substantially lessened competition. At the same time Congress established the Federal Trade Commission (FTC), whose legal and business experts could force business to agree to "consent decrees", which provided an alternative mechanism to police antitrust.

American hostility to big business began to decrease after the Progressive Era. For example, Ford Motor Company dominated auto manufacturing, built millions of cheap cars that put America on wheels, and at the same time lowered prices, raised wages, and promoted manufacturing efficiency. Ford became as much of a popular hero as Rockefeller had been a villain. Welfare capitalism made large companies an attractive place to work; new career paths opened up in middle management; local suppliers discovered that big corporations were big purchasers. Talk of trust busting faded away. Under the leadership of Herbert Hoover, the government in the 1920s promoted business cooperation, fostered the creation of self-policing trade associations, and made the FTC an ally of "respectable business".

During the New Deal, likewise, attempts were made to stop cutthroat competition, attempts that appeared very similar to cartelization, which would be illegal under antitrust laws if attempted by someone other than government. The National Industrial Recovery Act (NIRA) was a short-lived program in 1933–35 designed to strengthen trade associations, and raise prices, profits and wages at the same time. The Robinson-Patman Act of 1936 sought to protect local retailers against the onslaught of the more efficient chain stores, by making it illegal to discount prices. To control big business, the New Deal policymakers preferred federal and state regulation—controlling the rates and telephone services provided by American Telephone & Telegraph Company (AT&T), for example—and by building up countervailing power in the form of labor unions.

By the 1970s, fears of "cutthroat" competition had been displaced by confidence that a fully competitive marketplace produced fair returns to everyone. The fear was that monopoly made for higher prices, less production, inefficiency and less prosperity for all. As unions faded in strength, the government paid much more attention to the damages that unfair competition could cause to consumers, especially in terms of higher prices, poorer service, and restricted choice. In 1982 the Reagan administration used the Sherman Act to break up AT&T into one long-distance company and seven regional "Baby Bells", arguing that competition should replace monopoly for the benefit of consumers and the economy as a whole. The pace of business takeovers quickened in the 1990s, but whenever one large corporation sought to acquire another, it first had to obtain the approval of either the FTC or the Justice Department. Often the government demanded that certain subsidiaries be sold so that the new company would not monopolize a particular geographical market.

In 1999 a coalition of 19 states and the federal Justice Department sued Microsoft. A highly publicized trial found that Microsoft had strong-armed many companies in an attempt to prevent competition from the Netscape browser.^[7] In 2000, the trial court ordered Microsoft split in two prevent it from future misbehavior.^[8] The Court of Appeals affirmed in part and reversed in part. In addition, it removed the judge from the case for improperly discussing the case while it was still pending with the media.^[9] With the case in front of a new judge, Microsoft and the government settled, with the government dropping the case in return for Microsoft agreeing to cease many of the practices the government challenged.^[10] In his defense, CEO Bill Gates argued that Microsoft always worked on behalf of the consumer and that splitting the company would diminish efficiency and slow the pace of software development.
Read and Discuss:

Yerign, The Prize, pp. 208-250.

Blackford & Kerr, Business Enterprise, pp.195-225.
Week 12 (11/10-11/12)
11/10: Topic: Quiz 5 and Henry Ford, the Auto Age & Consumerism

Summary: An assembly line is a manufacturing process (most of the time called a progressive assembly) in which parts (usually interchangeable parts) are added as the semi-finished assembly moves from workstation to work station where the parts are added in sequence until the final assembly is produced. By mechanically moving the parts to the assembly work and moving the semi-finished assembly from work station to work station, a finished product can be assembled faster and with less labor than by having workers carry parts to a stationary piece for assembly.

Assembly lines are the common method of assembling complex items such as automobiles and other transportation equipment, household appliances and electronic goods.

Yerign, The Prize, pp. 250-302.

Blackford and Kerr, Business Enterprise, pp. 227-59.

Ford & Fordism Articles

Worldwide GDP fell by 15% from 1929 to 1932.^[3] In the 21st century, the Great Depression is commonly used as an example of how far the world's economy can decline.^[4] The depression originated in the United States, after the fall in stock prices that began around September 4, 1929, and became worldwide news with the stock market crash of October 29, 1929 (known as Black Tuesday).

The Great Depression had devastating effects in countries rich and poor. Personal income, tax revenue, profits and prices dropped, while international trade plunged by more than 50%. Unemployment in the U.S. rose to 25%, and in some countries rose as high as 33%.^[5]

Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming communities and rural areas suffered as crop prices fell by approximately 60%.^[6][7][8] Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as mining and logging suffered the most.^[9]

Some economies started to recover by the mid-1930s. In many countries, the negative effects of the Great Depression lasted until the beginning of World War II.^[10]

Blackford and Kerr, Business Enterprise, pp. 261-73

The New Deal represents the period when government began to play a larger and much more important part in regulating business excesses. Please read the material below. It will help you understand current business regulation.

The New Deal produced a political realignment, making the Democratic Party the majority (as well as the party that held the White House for seven out of nine Presidential terms from 1933 to 1969), with its base in liberal ideas, the white South, traditional Democrats, big city machines, and the newly empowered labor unions and ethnic minorities. The Republicans were split, with conservatives opposing the entire New Deal as an enemy of business and growth, and liberals accepting some of it and promising to make it more efficient. The realignment crystallized into the New Deal Coalition that dominated most presidential elections into the 1960s, while the opposition Conservative Coalition largely controlled Congress from 1937 to 1963. By 1936 the term "liberal" typically was used for supporters of the New Deal, and "conservative" for its opponents.^[2] From 1934 to 1938, Roosevelt was assisted in his endeavours by a "pro-spender" majority in Congress (drawn from two-party, competitive, non-machine, Progressive, and Left party districts). As noted by Alexander Hicks, "Roosevelt, backed by rare, non-Southern Democrat majorities—270 non-Southern Democrat representatives and 71 non-Southern Democrat senators—spelled Second New Deal reform."^[3] In the 1938 midterm elections, however, Roosevelt and his liberal supporters lost control of Congress to the bipartisan Conservative Coalition.^[4]

Many historians distinguish between a "First New Deal" (1933–34) and a "Second New Deal" (1935–38), with the second one more liberal and more controversial. The "First New Deal" (1933–34) dealt with the pressing banking crises through the Emergency Banking Act and the 1933 Banking Act. The Federal Emergency Relief Administration provided $500 million for relief operations by states and cities, while the short-lived CWA (Civil Works Administration) gave localities money to operate make-work projects in 1933–34.^[5] The Securities Act of 1933 was enacted to prevent a repeated stock market crash. The controversial work of the National Recovery Administration was also part of the First New Deal.

The "Second New Deal" in 1935–38 included the Wagner Act to promote labor unions, the Works Progress Administration (WPA) relief program (which made the federal government by far the largest single employer in the nation),^[6] the Social Security Act, and new programs to aid tenant farmers and migrant workers. The final major items of New Deal legislation were the creation of the United States Housing Authority and Farm Security Administration, both in 1937, and the Fair Labor Standards Act of 1938, which set maximum hours and minimum wages for most categories of workers.^[7]

The economic downturn of 1937–38, and the bitter split between the AFL and CIO labor unions led to major Republican gains in Congress in 1938. Conservative Republicans and Democrats in Congress joined in the informal Conservative Coalition. By 1942–43 they shut down relief programs such as the WPA and CCC and blocked major liberal proposals. Roosevelt himself turned his attention to the war effort, and won reelection in 1940 and 1944. The Supreme Court declared the National Recovery Administration (NRA) and the first version of the Agricultural Adjustment Act (AAA) unconstitutional, however the AAA was rewritten and then upheld. As the first Republican president elected after FDR, Dwight D. Eisenhower (1953–61) left the New Deal largely intact, even expanding it in some areas.^[8] In the 1960s, Lyndon B. Johnson's Great Society used the New Deal as inspiration for a dramatic expansion of liberal programs, which Republican Richard M. Nixon generally retained. After 1974, however, the call for deregulation of the economy gained bipartisan support.^[9] The New Deal regulation of banking (Glass–Steagall Act) was suspended in the 1990s.

Many New Deal programs remain active, with some still operating under the original names, including the Federal Deposit Insurance Corporation (FDIC), the Federal Crop Insurance Corporation (FCIC), the Federal Housing Administration (FHA), and the Tennessee Valley Authority (TVA). The largest programs still in existence today are the Social Security System and the Securities and Exchange Commission (SEC).

Yerign, The Prize, pp. 244-79.

Blackford & Kerr, Business Enterprise, pp.273-84.
Thanksgiving Break - 11/23-11/27

Week 14 (12/1-12/3)
12/1: Topic: Quiz 6 and The Arsenal for Democracy - American Business & the World Wars

Summary: The "Arsenal of Democracy" in World War II was a slogan used by U.S. President Franklin D. Roosevelt, in a radio broadcast delivered on December 29, 1940. Roosevelt promised to help the United Kingdom fight Nazi Germany by giving them military supplies while the United States stayed out of the actual fighting. The announcement was made a year before the Attack on Pearl Harbor, at a time when Germany had occupied much of Europe and threatened Britain.

Germany was allied with Italy and Japan (the Axis powers). At the time, Germany and the Soviet Union signed a non-aggression treaty under the Molotov-Ribbentrop Pact and had jointly invaded Poland in 1939, a deal that remained until the German invasion of the Soviet Union in 1941.

Roosevelt's address was "a call to arm and support" the Allies in Europe, and to a lesser extent China, in their all-out war against Germany and Japan. "The great arsenal of democracy" came to specifically reference America and its industrial machine, as the primary military supplier for the Allied war effort.

"Arsenal of democracy" does not refer to a single city, but to the collective efforts of American industry in supporting the Allies. These efforts tended to be concentrated in established industrial centers, including Chicago, Detroit, New York, Philadelphia, and Pittsburgh, but also many other cities across the nation.

Blackford and Kerr, Business Enterprise, pp. 221-25; 285-89.

Yerign, The Prize, pp. 305-408.

Conal Furay and Michael Salevouris, Methods and Skills of History: A Practical 3 Guide (Arlington Heights, IL: Harlan Davidson, (1988), p. 54.