Department of Commerce and Labor

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Department of Commerce and Labor

United States 1903

Synopsis

The rise of labor unions after the U.S. Civil War led labor activists to seek government protection from business owners. In 1884 the federal government established the Bureau of Labor Statistics to gather data on labor, and four years later made it an independent agency. Businessmen, on the other hand, resented the hodgepodge of state and the federal regulatory bodies and laws and wanted the government to establish an agency to aid commerce. They also wanted the government to help them control or even break labor unions.

Timeline

1883: Foundation of the League of Struggle for the Emancipation of Labor by Marxist political philosopher Georgi Valentinovich Plekhanov marks the formal start of Russia's labor movement. Change still lies far in the future for Russia, however: tellingly, Plekhanov launches the movement in Switzerland.
1893: Henry Ford builds his first automobile.
1899: The Second Anglo-Boer War, often known simply as the Boer War, begins.
1903: Anti-Jewish pogroms break out in Russia.
1903: Henry Ford establishes the Ford Motor Company.
1903: Russia's Social Democratic Party splits into two factions: the moderate Mensheviks and the hard-line Bolsheviks. Despite their names, which in Russian mean "minority" and "majority," respectively, Mensheviks actually outnumber Bolsheviks.
1903: Polish-born French chemist Marie Curie becomes the first woman to be awarded the Nobel Prize.
1903: One of the earliest motion pictures, The Great Train Robbery, premieres.
1903: United States assumes control over the Panama Canal Zone, which it will retain until 1979.
1903: Wright brothers make their first flight at Kitty Hawk, North Carolina. Though balloons date back to the eighteenth century and gliders to the nineteenth, Orville Wright's twelve seconds aloft on 17 December marks the birth of practical human flight.
1906: The British Labour Party is established.
1913: Two incidents illustrate the increasingly controversial nature of the arts in the new century. Visitors to the 17 February Armory Show in New York City are scandalized by such works as Marcel Duchamp's cubist Nude Descending a Staircase, which elicits vehement criticism, and theatergoers at the 29 May debut of Igor Stravinksy's ballet Le Sacré du Printemps (The Rite of Spring) are so horrified by the new work that a riot ensues.

Event and Its Context

In 1903 President Theodore Roosevelt, with the support of conservative Republicans in Congress and prominent businessmen, established the Department of Commerce and Labor to investigate business practices, assure fair trade, address labor issues, and aid commerce. The new department absorbed the independent Department of Labor over the protests of labor leaders. The move set back by another 10 years labor's efforts to gain its own cabinet-level representation in government.

Predecessors to the Department

Banking, industry, railroads, and manufacturing grew at phenomenal rates after the Civil War. The gross national product (the measure of the total value of all goods and services produced in the United States in one year) rose from less than $5 billion in 1850 to $88 billion in 1900. The majority of workers, however, did not share in this wealth. Child labor, long work-days and workweeks, low wages, and hazardous conditions led to labor agitation and the creation of unions in the 1860s and 1870s. After failing to get help from the federal government, unions led by the Knights of Labor turned to state governments to help protect them from growing abuses by corporations.

In 1869 the state of Massachusetts formed a bureau of labor statistics. When its first two commissioners went beyond its mandate of collecting data and began pursuing reform to remedy labor problems, employers protested the bureau's lack of objectivity. Carroll Wright, who had no experience with either statistics or labor problems, took over the bureau. He returned the bureau to impartially gathering statistics and refused to advocate for labor. His work, though, proved so successful that 12 other states formed similar bureaus by 1883. In 1884 Congress established the Bureau of Labor Statistics in the Department of Interior to compile data on national employment levels, wage scales, work hours, and industrial accidents. After rejecting Terence Powderly of the Knights of Labor as being too radical for the post, President Chester A. Arthur appointed Wright as commissioner. Wright carried out his work along the same lines as he had in Massachusetts.

In 1888, after further agitation from labor interests, Congress established an independent Department of Labor but did not give it cabinet-level status. Powderly was offered the position of commissioner but turned it down; Wright continued as commissioner. The department expanded its investigations into railroad labor, industrial education, working women, compulsory life insurance for factory workers, and housing for working people. Through the 1890s, as labor unions continually lost strikes and support among the general public or in state legislatures, paradoxically, the push for federal representation declined, too. Wright opposed a situation in which the head of a Department of Labor would change with every administration, which further hampered efforts by labor to get a voice in the cabinet.

Business Interests Overtake Labor's Needs

The efforts of labor unions since the 1860s to gain cabinet-level representation in the federal government received an inadvertent boost from businessmen. The establishment of the Department of Commerce and Labor was a direct result of the wave of corporate mergers that began in the 1890s and culminated with the creation of the Northern Securities Company in 1902. Overall, between 1898 and 1902, more than 2600 firms were absorbed into other companies as a result of mergers. The railroad mergers that occurred during the 1890s and 1900s left 32 railroad companies controlling 80 percent of the railroad mileage in America by 1910.

The mergers came at the expense of labor. As the companies grew in economic power, in one violent confrontation after another, they sought the destruction of labor unions in order to keep labor costs down. One newspaper warned that the increasing antagonism between trusts and labor might "lead to one of the greatest social and political upheavals that has been witnessed in modern history." The mergers also renewed fears that trusts and holding companies might stifle economic opportunity for the middle class, and that their overvaluation might destabilize the stock market. Similar concerns in the 1870s and 1880s led to the passage of the Interstate Commerce Act in 1887 and the Sherman Antitrust Act in 1890 to fight restraint of trade practiced by the trusts. (Ironically, businesses used the Sherman Act to break strikes on the grounds that unions were in restraint of trade.) The laws proved largely ineffective against businesses, and the public and press clamored for something to be done. President Theodore Roosevelt agreed and began searching for a solution that would be acceptable to both business leaders and the public.

Like many Republicans, Roosevelt did not oppose trusts in general. Instead, he distinguished between "good" trusts, which were deemed socially useful, and "bad" trusts, which injured the public welfare. All but the most radical believed it wrong to break up large corporations. As an alternative, Roosevelt, like many of his party's members, favored publicizing corporate affairs. If the public was informed about corporate activities, citizens could then make appropriate decisions about investment and policy. Possible remedies would reveal themselves after business practices were exposed. In fact, the Republican platform in 1900 had called for a department of commerce, in part to publicize corporate behavior. Roosevelt's predecessor, William McKinley, supported this view and had been contemplating some antitrust actions before he was killed in 1901. Roosevelt differed from McKinley only in how he wanted to handle informing the public, which was by having the president manage the information.

Roosevelt's position, therefore, was not radical at all, but was in line with the conservative wing of the Republican Party. What worried businessmen about Roosevelt was his assertion that national interest was more important than any individual private economic interest. In other words, he believed that the federal government reserved the right to regulate corporations, notwithstanding the Supreme Court ruling in United States v. E. C. Knight (1895) that the Sherman Act did not outlaw monopolies of manufacturing. Roosevelt understood the political ramifications of inaction. Not doing anything about corporations would give the Democrats a potent weapon.

Roosevelt consulted with George W. Perkins, who represented business tycoon J. P. Morgan, about corporate regulation before issuing his 1901 "Message to Congress." In the message, Roosevelt pointed out that state laws had not halted the trusts, nor could state action provide adequate regulation of interstate corporations. Consequently, Roosevelt said, the federal government should "assume power of supervision and regulation over all corporations doing an interstate business." Banks were already subject to federal regulation, he noted. Roosevelt argued that a federal law similar to the Interstate Commerce Law could be passed, if Congress was willing to try. If they were not, then he called for a constitutional amendment to confer the power.

Roosevelt also called for a cabinet-level department and secretary of commerce and industries, with jurisdiction over industrial, labor, and merchant-marine matters. This would be one phase of "a comprehensive and far-reaching scheme of constructive statesmanship," in Roosevelt's words, to broaden markets, protect business interests, and solidify the nation's international economic standing. These proposals, he declared, would achieve those goals while "scrupulously safeguarding the rights of wage worker and capitalist, of investor and private citizen, so as to secure equity" between all men in the country. His willingness to equate the rights of laborers to those of businessmen was a clear indication that the challenges facing labor were not understood and would remain subservient to business in the eyes of the government.

Despite the unwillingness of Congress to pass legislation along the lines the president had suggested in 1901, Roosevelt remained undeterred on the issue of trusts. In his next annual message, he declared that corporations "should be managed under public regulation." He spoke out "against misconduct, not against wealth." He repeated his previous call for stronger legislation and a department of commerce. This time Congress responded.

What had transpired between the two messages that Congress would heed this latest message, which did not fundamentally differ from the first? Two events: the Anthracite Coal Strike of 1902 and the Northern Securities antitrust suit. In the autumn of 1902, President Roosevelt had intervened to settle the coal strike fairly through arbitration between the United Mine Workers and the coal mine operators. The strike revealed the economic and political strength of labor unions and the need for cooperation between labor and owners. In the wake of that settlement, the time seemed right for giving both sides representation in the cabinet. The president and many Republicans, however, considered business and commerce to be more important than labor. The cabinet-level department created by Congress reflected those biases.

The unresponsiveness of Congress to the 1901 message prompted the administration to pursue an alternate course of action. U.S. Attorney General Philander Knox filed an antitrust suit against the Northern Securities Company in February 1902 in an effort to assert federal power over trusts. Northern Securities was the result of James J. Hill, E. H. Harriman, and J. P.Morgan combining their separate railroads to control the railroads in the Northwest. When Knox realized that the various state antitrust lawsuits might not make it to the Supreme Court, he informed Roosevelt that the merger was illegal under the Sherman Act and filed in federal court. After announcing the suit, Morgan met privately with Roosevelt and asked whether they could have their representatives "fix it up." Roosevelt told him that it could not be done. Morgan inquired whether the administration intended to attack his other interests. In keeping with his belief of there being good and bad trusts, Roosevelt informed him he did not, unless it was found they, too, had done something illegal.

Knox had several obstacles to overcome if the suit were to succeed. In 1901 the Justice Department had no permanent office space; its employees worked out of hotel rooms and scattered office spaces near the White House. There existed no antitrust division with appropriately trained legal hands, nor did the department have much control over its own financial resources. Knox served as lead counsel on the case and assembled a team of lawyers to aid him. Roosevelt believed the lawsuit provided the crucial first step in establishing the government's authority.

While the Northern Securities case wound its way through the court system, Knox defined the administration's objectives for dealing with trusts. In a January 1903 letter to the Senate Judiciary Committee, Knox suggested that Congress make it illegal for railroads to give or receive rebates, a practice about which small shippers had long complained and that railroads also wished to eliminate. Knox next asked for the creation of a commission to investigate the operations and conduct of all corporations engaged in interstate and foreign commerce. Third, he encouraged the passage of an antitrust law "aimed at what we certainly know to be unreasonable practices directly restrictive of freedom of commerce." His last recommendation was for a measure to expedite antitrust cases in the court system.

Knox also needed increased appropriations for his department and more personnel to enforce antitrust laws. Congress responded quickly to this with a half a million dollars, and the antitrust division of the Justice Department was established. The bill outlawing rebates faced little opposition, in part because the railroads supported it because they stood to benefit greatly from it. Gathering support for a department of commerce took more effort. Roosevelt's recruitment of George W. Perkins of Morgan's firm to exercise influence on Capitol Hill did not bode well for labor. The president's secretary, George B. Cortelyou, also courted key Republicans.

Creating the Department

In January 1903 the Senate passed the bill that created the Department of Commerce and Labor. The bill contained no language regarding any kind of agency or bureau to investigate and publicize corporations, which had been the reason that Roosevelt had supported creating the department. The House version, however, contained that language and was passed. The conference committee attached an amendment that had been written by Knox that authorized the new commissioner of the bureau of corporations to assemble data that would allow the president to make recommendations to Congress, and make the data public, if he so desired. After the media revealed some embarrassing revelations about executives from Standard Oil encouraging some senators to kill the amendment, the Senate quickly passed the bill. The president signed Department of Commerce and Labor in February 1903.

The department immediately became one of the largest and most complex organizations in the government. Several of the oldest activities that had been overseen by the federal government were gathered together in one place to aid commerce. Labor, however, took a backseat. Over the protests of labor supporters, the Department of Labor was absorbed into the new department and made subordinate. Carroll Wright resigned his position rather than accept the inferior position offered him. The bureau collected information on hours of labor, earnings, and means of promoting the material and social well-being of workers. Constant disagreements between the labor and commerce factions, however, limited the effectiveness of the new department. Much of the debate was over the issue of immigration. Labor supporters called for restrictions on immigration, so as to reduce competition for jobs, whereas business interests opposed the restrictions because immigrant labor helped keep labor costs and wages down.

The department also included:

The Bureau of Corporations, designed to monitor trusts under the Sherman Act, which prohibited the restraint of trade through the use of unfair methods of competition such as rebates and price-fixing
The Bureau of Immigration, which enforced the immigration laws
The Bureau of Navigation, which monitored merchant vessels
The Lighthouse Board, which maintained lighthouses to facilitate safe navigation
The Steamboat Inspection Service, which inspected steamships to ensure safe waterborne commerce
The Bureau of Statistics, which compiled and published statistics on domestic and foreign commerce
The Coast and Geodetic Survey, which determined the size and shape of the states and coastal areas
The Bureau of Standards, which ensured the accuracy of measurements
The Bureau of the Census, which counted the population every 10 years
The Bureau of the Fisheries, which supervised fisheries and the Alaskan seal-fur trade

George B. Cortelyou, the first secretary of the new Department of Commerce and Labor, was the first of four secretaries, all of whom were either businessmen or financiers, in a 10-year period. Labor unions were unsatisfied with the focus and composition of the department and again began to push for a cabinet-level department to represent only labor. Ten more years of lobbying passed before a Democrat-controlled Congress created a separate Department of Labor in 1913.

After more than 30 years of seeking a cabinet-level department to aid labor in its efforts to combat business, labor supporters had their request granted, and had a seat in the president's cabinet. Ironically, it was the misbehavior of corporations, and not the rise of unions, that led to the department's creation. The Department of Commerce and Labor, however, was established for the benefit of business, was run by businessmen for its first 10 years and served as a poor advocate for the needs of labor.

Key Players

Cortelyou, George B. (1862-1940): Cortelyou was appointed stenographer for President Grover Cleveland in 1895 and then served as personal secretary to McKinley and Roosevelt. In that era, the president's secretary functioned as the modern chief of staff does. As secretary, Cortelyou helped shape the modern presidency. After one year as secretary of commerce and labor (1903-1904), he served as postmaster general (1905-1907), and secretary of the treasury (1907-1909).

Knox, Philander Chase (1853-1921): A corporate lawyer before becoming attorney general (1901-1904), Knox proved important in the implementation of Roosevelt's antitrust policy. He served one term as a U.S. senator (1904-1909) and then became secretary of state (1909-1913). He later returned to the Senate for a second term (1917-1921).

Perkins, George W. (1862-1920): Perkins made New York Life Insurance Company a dominant company before joining J. P. Morgan's firm in March 1901. In addition to managing public relations, he brokered merger deals and cooperated with the Bureau of Corporations, including the deal on behalf of U.S. Steel to avoid an antitrust suit. A firm believer in federal regulation of corporations, Perkins became a major supporter of Roosevelt and was a major financial backer of Roosevelt's 1912 bid for the White House.

Roosevelt, Theodore (1858-1919): A lifelong public servant, war hero, and author, Roosevelt became president upon William McKinley's assassination in 1901. The first president willing to prosecute trusts, he earned the nickname "The Trustbuster," even though Roosevelt's successor filed more suits in four years than Roosevelt did in eight. He ran for a third term of office in 1912 on the Progressive Party ticket but lost.

Wright, Carroll D. (1840-1909): Wright's varied experience included a term (1872-1873) in the Massachusetts senate before his appointment as state commissioner of labor. As U.S. commissioner of labor, he organized the Bureau of Labor Statistics and stimulated objective research on labor problems. From 1902 until his death, he was president of Clark College at Worcester, Massachusetts. His books include The Industrial Evolution of the United States (1887) and Battles of Labor (1906).

See also: Anthracite Coal Strike; Department of Labor; Knights of Labor; Sherman Antitrust Act.

Bibliography

Books

Cutrona, Cheryl. The Department of Labor. Broomall, PA:Chelsea House Publishers, 1988.

Gould, Lewis L. The Presidency of Theodore Roosevelt.Lawrence: The University Press of Kansas, 1991.

Griffin, Robert J., Jr. The Department of Commerce.Broomall, PA: Chelsea House Publishers, 1991.

Kolko, Gabriel. The Triumph of Conservatism: A Reinterpretation of American History, 1900-1916. New York: The Free Press, 1963.

Morris, Edmund. Theodore Rex. New York: Random House,2001.

Other

Grossman, Jonathan. "The Origin of the U.S. Department of Labor." Original publication, Monthly Labor Review (March 1973). Available in a modified version [cited 28 August 2002] from U.S. Department of Labor Web site. <http://www.dol.gov/asp/programs/history/dolorigabridge.htm>.