📜History of American Business Unit 8 – Progressive Era: Business Regulation

Key Events and Timeline

• Late 19th century saw rise of large corporations and trusts (Standard Oil, U.S. Steel) led to concerns about monopolistic practices and lack of competition
• 1890 Sherman Antitrust Act passed as first federal law to prohibit monopolies and restraints of trade
  • Enforcement was initially limited and inconsistent
• 1901 Theodore Roosevelt became president after assassination of William McKinley marked beginning of more active trust-busting efforts
• 1902 Roosevelt filed antitrust suit against Northern Securities Company (railroad holding company) under Sherman Act resulting in its dissolution
• 1906 Hepburn Act gave Interstate Commerce Commission power to set maximum railroad rates and examine companies' financial records
• 1906 Pure Food and Drug Act and Meat Inspection Act passed in response to public outcry over unsanitary conditions and mislabeling exposed by muckraking journalists (Upton Sinclair's The Jungle)
• 1914 Federal Trade Commission Act and Clayton Antitrust Act passed under Woodrow Wilson strengthening antitrust enforcement and prohibiting specific anticompetitive practices (price discrimination, tying contracts)

Major Business Practices and Issues

• Formation of trusts and holding companies allowed consolidation of industries under control of small number of powerful firms reducing competition
• Predatory pricing, price-fixing, and division of markets among competitors stifled competition and hurt consumers
• Interlocking directorates where same individuals served on boards of multiple corporations in an industry facilitated collusion
• Overcapitalization and stock watering deceived investors about true value of companies
• Unfair treatment of labor including low wages, long hours, child labor, and dangerous working conditions
  • Violent suppression of unions and strikes by company-hired strikebreakers and government forces (Homestead Strike, Pullman Strike)
• Political corruption and influence-buying by big business to gain favorable legislation and avoid regulation
• Concentration of wealth and economic power in hands of small elite (Robber Barons) led to growing inequality and social tensions

Key Figures and Reformers

• Theodore Roosevelt known as "trust-buster" for aggressive antitrust enforcement and efforts to regulate big business in public interest
  • Believed in "Square Deal" balancing interests of business, labor, and consumers
• Woodrow Wilson continued and expanded progressive reforms with creation of Federal Trade Commission and Clayton Antitrust Act
• Upton Sinclair muckraking journalist whose novel The Jungle exposed unsanitary conditions in meatpacking industry leading to passage of Meat Inspection Act
• Ida Tarbell investigative journalist who wrote exposé of Standard Oil's monopolistic practices in History of the Standard Oil Company
• Louis Brandeis lawyer and Supreme Court justice who advocated for stronger antitrust laws and coined term "curse of bigness" to describe dangers of concentrated economic power
• Robert La Follette progressive politician who fought against railroad monopolies and corrupt business influence in politics as governor of Wisconsin and U.S. Senator
• Florence Kelley social reformer who campaigned against child labor and for minimum wage, eight-hour workday, and other labor protections as head of National Consumers League

Legislative and Regulatory Measures

• Sherman Antitrust Act (1890) first federal law to ban trusts and monopolies in restraint of trade
  • Used to break up Northern Securities Company and Standard Oil but enforcement was initially limited
• Elkins Act (1903) prohibited railroads from granting rebates to favored shippers
• Hepburn Act (1906) expanded powers of Interstate Commerce Commission to set maximum railroad rates and investigate companies' financial practices
• Pure Food and Drug Act (1906) prohibited mislabeling and adulteration of food and drugs
• Meat Inspection Act (1906) required federal inspection of meat products and improved sanitary standards in meatpacking plants
• Federal Trade Commission Act (1914) created FTC to investigate and prohibit unfair methods of competition
• Clayton Antitrust Act (1914) strengthened Sherman Act by prohibiting specific anticompetitive practices like price discrimination and tying contracts
  • Exempted labor unions from antitrust laws allowing collective bargaining
• Keating-Owen Child Labor Act (1916) prohibited sale of products made with child labor in interstate commerce (later struck down by Supreme Court)

Impact on Different Industries

• Railroads were a major target of early progressive era regulations due to their importance to the economy and history of monopolistic abuses
  • Elkins Act, Hepburn Act, and creation of ICC brought greater federal oversight and rate regulation
• Meatpacking and food processing industries saw increased regulation and inspection under Pure Food and Drug Act and Meat Inspection Act
  • Improved food safety and quality but also raised costs for producers
• Oil and steel industries dominated by Standard Oil and U.S. Steel were broken up through antitrust actions
  • Led to somewhat more competitive markets but did not eliminate all anticompetitive practices
• Retailing transformed by rise of chain stores and mail-order houses (A&P, Sears) which used economies of scale to offer lower prices than small independent merchants
  • Progressive era saw some efforts to protect small businesses through resale price maintenance laws and other measures
• Banking and finance regulated through Federal Reserve Act which created central banking system to provide stability and oversight
  • Progressive reformers also sought to curb speculative abuses and fraudulent practices in stock market and securities industry

Public Opinion and Social Movements

• Widespread public concern over power of big business and abuses of monopolies, trusts, and concentrated wealth
  • Reflected in popularity of muckraking journalism exposing corporate wrongdoing and corruption
• Growing labor unrest and militancy in response to low wages, long hours, and poor working conditions
  • Violent strikes like Pullman and Homestead raised fears of class warfare and radicalism
• Agrarian populist movement demanded greater regulation of railroads, banks, and other big businesses that farmers depended on
  • Progressives built on populist ideas but appealed to broader middle-class constituency
• Women's organizations like National Consumers League played important role in campaigns for food safety, child labor laws, and other consumer protections
  • Reflected growing political influence and activism of women in Progressive Era
• Socialist Party and other left-wing groups advocated for more radical solutions like public ownership of key industries and redistribution of wealth
  • While socialists never gained mass following, their ideas influenced progressive agenda

Economic Consequences

• Antitrust actions and regulatory measures helped to restore some competition and curb worst abuses of big business
  • But did not fundamentally alter corporate dominance of economy or concentration of wealth
• Efficiency and economies of scale of large corporations allowed them to continue to grow and dominate many industries
  • Small businesses and independent producers struggled to compete
• Higher regulatory compliance costs were often passed on to consumers in form of higher prices
  • But progressive reforms also brought benefits like safer food and drugs, fairer railroad rates, and more stable financial system
• Breakup of trusts and holding companies sometimes led to decentralization and regionalization of industries
  • Created opportunities for smaller firms to enter markets and for local economic development
• Progressive policies helped to stabilize and legitimize corporate capitalism by addressing some of its worst excesses and inequities
  • But did not challenge fundamental premises of private ownership and profit motive

Legacy and Long-term Effects

• Progressive Era established important precedents for federal regulation of business in the public interest
  • Laid groundwork for later expansion of government role in economy during New Deal and beyond
• Antitrust laws and enforcement agencies like FTC became enduring features of American economic policy
  • Though effectiveness and stringency of enforcement has varied over time
• Food safety and consumer protection regulations pioneered in Progressive Era have been expanded and strengthened in subsequent decades
  • Reflected in creation of agencies like FDA and CPSC
• Progressive reforms helped to create more stable and sustainable corporate capitalism by curbing abuses and addressing public concerns
  • But also arguably helped to legitimize and entrench corporate power in the long run
• Legacy of Progressive Era includes greater public expectation of government responsibility for economic regulation and social welfare
  • Reflected in later reforms like Social Security, minimum wage laws, and environmental protections
• Critique of concentrated economic power and inequality that animated progressive movement has continued to resonate in American politics
  • Reflected in later antitrust actions, trust-busting rhetoric, and calls for corporate accountability and reform