Government Regulation of Big Business

Government Regulation of Big Business

Source

The Challenge for Government. American journalist Henry Demarest Lloyd, writing in the North American Review in 1884, expressed a sentiment that was growing increasingly popular when he warned: “Society is letting these combinations [railroads] become institutions without compelling them to adjust their charges to the cost of production, which used to be the universal rule of price. Our laws and commissions to regulate the railroads are but toddling steps in a path in which we need to walk like men.” Until the 1880s, individual states had taken care of business regulation. But as the scope of business grew national, the states lost control, and many began to look to the federal government to step into the economic arena. However, initial federal efforts were unsuccessful.

The Wabash Ruling. The first federal efforts focused on the railroads. Political support for effective regulation ran strong, because farmers and small-business people depended on railroads to transport their goods and felt helpless when shipping rates rose. By the late 1870s several states had tried to bring railroads under their regulation. Agricultural states had been especially aggressive, attempting to set rates in an effort to regulate the railroads’ monopoly. However, the U.S. Supreme Court struck down these efforts in 1886 in Wabash, St. Louis & Pacific Railway Company v. Illinois, a ruling that prohibited the states from regulating commerce that either originated or ended beyond state lines. The Wabash decision raised the political stakes on the question of federal regulation of the railroads. Bills proposing federal regulation had already appeared before Congress; in 1883 Sen. Shelby M. Cullom from Illinois had introduced a bill setting up a federal commission that would establish guidelines governing the railroads. In the wake of the Wabash ruling, support for Cullom’s proposal mounted rapidly and carried the bill through. In 1887 the Interstate Commerce Commission (ICC) was established—the federal government’ s first agency dedicated to the regulation of big business.

ICC. The ICC set a pattern that many later federal commissions would follow. The commission was made up of five members, appointed by the president and confirmed by the senate, serving for six-year terms. Thomas M. Cooley served as the first ICC chairman. The same act that established the ICC gave it a mandate by requiring that rates be “just and reasonable” and that railroads not favor some shippers over others. Nevertheless, after a promising beginning the ICC’s effective regulatory power dwindled. A series of Supreme Court rulings restricted its authority, and by the late 1890s it could do little more than collect data.

Sherman Anti-Trust Act. In 1890, three years after the creation of the ICC, with public anxiety over the size and power of big business stili running high, Congress took a further step into the regulatory arena, passing the She rman Anti-Trust Act. This law banned “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce.” Unlike the Interstate Commerce Act, however, the Sherman Act did not set up any new agency of enforcement; the government would rely on existing federal offices, notably the Department of Justice, to carry out its new policy. Over the next decade, amid sharp economic depression, attorneys general showed little stomach for battle with the largest trusts. Instead, the government took on loose cartels of small eompanies. A few more substantial cases went to court over the first twenty years, against railroad combinations and sugar, beef, oil, and meatpacking trusts. But rulings in these cases did not represent clear victories for the government. Confusion and indecision hovered over the legal meaning of such terms as “monopolization” and “restraint of trade.” As a result the federal government entered the twentieth century with only early, tentative instruments of business regulation.

STANDARD TIME

The new, railroad-driven economy brougàt many changes to everyday lift, but perhaps the most fundamental one had to do with the very fabric of time. On Sunday, 13 November 1883, the nation went on Standard” rime. Before this point, “noon” in any given locality had signified the moment when the sua stood highest in the sky, which meant that noon in Chicago was 11:50 A.M, in Saint Louis and 11:27 A.M. in Omaha; This arrangement suited the purposes of an earlier econ-omy and society, when most business was con-ducted within locai boundaries or on timetables that were necessarily flexible. However, railroads, which had to schedule complkated traffic along extended distances, needed a timekeeping system with fewer variations and clear precision. Thus the major railroad eompanies agreed to divide the country into four time sones and to $tt time within each to a standardked clock. In Chicago people moved their clocks back by nine minutes I and thirty-three seconds to join Central Standard Time. It was a small adjustment, but one that powerfully demonstrated the txttnt to which the new economy was binding locai communities more tightly together aerosa vast distances. The change gradually took hold across the country, despite the fact that standard time was not written into law until the 1910s.

Source: William Cronon,Natun’s Mtmpvlis: Chiwgo and tht Grmf West (New York: Norton, 1991).

Source

Thomas K. McCraw, Prophets of Regulation: Charles Francis Adams, Louis D. Brandeis, James M. Landis, Alfred E. Kuhn (Cambridge, I Mass.: Harvard University Press, 1984).