Roosevelt and the Trusts

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Theodore Roosevelt promoted a public relations image of being a trust buster.  He faced political pressure to act against the trusts. In fact, TR was not a trust buster.  Roosevelt held  a consistent position: there was a power larger than the power of even the biggest, wealthiest business organization.  That superior power was the power of the people, and of the public interest, as represented in the presidency in particular and the executive branch of the federal government in general.
Roosevelt believed there was a "public interest" that skilled leaders, such as himself, with the aid of expert advice, could ascertain and apply to the affairs of business.  In applying the "public interest" to "the trusts," TR was surprisingly consistent for a politician.

Roosevelt believed that when a business grew big it was not necessarily bad.   Bigness might mean simply that a firm had bested its rivals through superior efficiencies, prices, and service.  Having superior efficiencies, prices, and service might well require bigness, as in the case of a railroad providing service through an extensive system across a wide territory.

The point for Roosevelt was that the government should enforce a "rule of reason" on business.  If a firm grew through reasonable means, then the government should not attack it.  However, if a firm grew through unfair practices, then government should enforce its power in order to protect the innocent.  The Democrats accused Roosevelt of sparing the trusts to win campaign funds from big business.  These attitudes came to play during Roosevelt's administration, first in establishing the Bureau of Corporations and then in the Northern Securities case.

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Railroad regulation was an example of the sort of regulation that Roosevelt believed was required for business in general.  In 1886 Congress had created the Interstate Commerce Commission to regulate the railroads, but had not granted the ICC much power.   Under Roosevelt's leadership, Congress enlarged the power of the Commission.

  1. In 1903, the Elkins Anti-Rebate Act forbade the carriers from giving large and powerful shippers rebates from the published freight tariffs.  This law allowed the railroads, in effect, to administer their rates. The ICC enforced this statute.
  2. In 1906, the Hepburn Act granted the ICC the power to set maximum rates.  No longer could the railroads simply enforce rates without challenge.  Now shippers could challenge rates before the Interstate Commerce Commission and hope that, after careful investigation, they might be lowered.

Both these statutes proved popular. They also were something of a model for what Roosevelt thought was appropriate for all businesses.  He intended the Bureau of Corporations to provide a similar function for regulating all firms doing business across state lines.

Continue with pages on Roosevelt as a "trust buster"

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