Step-by-step explanation:
In one of the defining books of the Progressive Era, The Promise of American Life, Herbert Croly argued that because “the corrupt politician has usurped too much of the power which should be exercised by the people,” the “millionaire and the trust have appropriated too many of the economic opportunities formerly enjoyed by the people.” Croly and other reformers believed that wealth inequality eroded democracy and reformers had to win back for the people the power usurped by the moneyed trusts. But what exactly were these “trusts,” and why did it suddenly seem so important to reform them?
In the late nineteenth and early twentieth centuries, a “trust” was a monopoly or cartel associated with the large corporations of the Gilded and Progressive Eras who entered into agreements—legal or otherwise—or consolidations to exercise exclusive control over a specific product or industry under the control of a single entity. Certain types of monopolies, specifically for intellectual property like copyrights, patents, trademarks and trade-secrets, are protected under the Constitution for the “to promote the progress of science and useful arts,” but for power entities to control entire national markets was something wholly new, and, for many Americans, wholly unsettling.
The rapid industrialization, technological advancement, and urban growth of the 1870s and 1880s triggered major changes in the way businesses structured themselves. The “second industrial revolution,” made possible by the available natural resources, growth in the labor supply through immigration, increasing capital, new legal economic entities, novel production strategies, and a growing national market, was commonly asserted to be the natural product of the federal government’s laissez faire, or “hands off,” economic policy. An unregulated business climate, the argument went, allowed for the growth of major trusts, most notably Andrew Carnegie’s Carnegie Steel (later consolidated with other producers as U.S. Steel) and John D. Rockefeller’s Standard Oil Company. Each displayed the vertical and horizontal integration strategies common to the new trusts: Carnegie first utilized vertical integration by controlling every phase of business (raw materials, transportation, manufacturing, distribution), and Rockefeller adhered to horizontal integration by buying out competing refineries. Once dominant in a market, critics alleged, the trusts could artificially inflate prices, bully rivals, and bribe politicians.
Between 1897 and 1904 over 4,000 companies were consolidated down into 257 corporate firms. As one historian wrote, “By 1904 a total of 318 trusts held 40% of US manufacturing assets and boasted a capitalization of $7 billion, seven times bigger than the US national debt.” With the 20thcentury came the age of monopoly. From such mergers and the aggressive business policies of wealthy men such as Carnegie and Rockefeller—controversial figures often referred to as “robber barons,” so named for the cutthroat stifling of economic competition and their mistreatment of their workers—and the widely accepted political corruption that facilitated it, opposition formed and pushed for regulations to reign the power of monopolies. The great corporations became a major target of reformers.
Big business, whether in meatpacking, railroads, telegraph lines, oil, or steel, posed new problems for the American legal system. Before the Civil War, most businesses operated in single state. They might ship goods across state lines or to other countries, but they typically had offices and factories in just one state. Individual states naturally regulated industry and commerce. But extensive railroad routes crossed several state lines and new mass-producing corporations operated across the nation, raising questions about where the authority to regulate such practices rested. During the 1870s, many states passed laws to check the growing power of vast new corporations. In the Midwest, so-called “Granger laws” (spurred by farmers who formed a network of organizations that were part political pressure group, part social club, and part mutual-aid society that became known as “the Grange”) regulated railroads and other new companies.
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