The 1900s Business and the Economy: Topics in the News

ANTHRACITE COAL STRIKE OF 1902

America's transformation from an agricultural to an industrial economy was marked by great tensions between business owners and their employees. One of the most significant of these disputes was the Anthracite Coal Strike, which nearly crippled the American economic system. Led by John Mitchell (1870–1919), president of the United Mine Workers (UMW) , 150,000 miners began their strike on May 12, 1902, to demand better wages, a shorter workday, and union recognition. The strike dragged on for nearly a year as the two sides failed to reach an agreement and the nation's coal supply dwindled to dangerously low levels. The effects of the work stoppage were felt beyond the mines as the price of coal, which was five dollars per ton when the strike began, spiraled upward to reach thirty dollars per ton by the strike's end. As the price of coal rose, businesses and schools closed to conserve fuel, and raids on railroad cars carrying the precious cargo began to occur.

President Theodore Roosevelt (1858–1919) tried to intervene in the strike and bring about a settlement that would be acceptable to both the mine owners and their workers. In September 1902, Roosevelt called for government representatives to meet with both labor and management and reach an agreement. The president's plan was to offer both sides an equal voice in resolving the matter. He was concerned that coal shortages during the winter would be harmful to the nation's citizens and economy. In an address to both sides he stated, "I appeal to your patriotism, to the spirit that sinks personal consideration and makes individual sacrifices for the general good."

John Mitchell of the UMW agreed with the president's words and asked him to appoint a commission to settle the strike. Mitchell further said that the union would accept the commission's decision if the owners would. The owners, however, refused to negotiate. They called the union-ists "anarchists" (people in favor of political disorder) and suggested that Roosevelt direct the military to end the strike. The conference led Roosevelt to believe that the mine operators might be at fault in the strike, and the public echoed this sentiment when news of the conference hit the press. The American people were sympathetic toward the miners. A week after the conference, Roosevelt announced his intentions to threaten the mine operators into a settlement by having the mines run by the army, which would, in effect, remove the owners from their own businesses.

In October, Roosevelt announced the creation of a special commission comprised of members from various professions, and the strike was called off. Mediation began in November and continued for five months. During the trial-like proceedings, more than 558 witnesses were called on the part of labor, nonunion labor, the operators, and the commission. The owners argued it was their right to do as they pleased with their businesses. Representing the UMW was famed attorney Clarence Darrow (1857–1938), who questioned the operators' "God-given right to hire the cheapest man they can get." The mediation ended in March 1903, with the union accepting a 10 percent pay increase and a nine-hour day. President Roosevelt was given much credit for his role in ending the strike, and his intervention became one of the most celebrated actions of his presidency.

The "Divine Right" Letter

George F. Baer, president of the Reading (pronounced RED-ing) Railroad and spokesman for mine operators, best expressed the attitude of the mine owners toward their employees. In response to a letter asking the Holy Spirit to send "reason to [Baer's] heart," Baer revealed the operators' scorn and contempt for the miners in what has come to be known as the "divine right letter":

My dear Mr. Clark:

I have your letter of the 16th instant.

I do not know who you are. I see that you are a religious man, but you are evidently biased in favor of the right of the working man to control a business in which he has no other interest than to secure fair wages for the work he does.

I beg you not to be discouraged. The right and interests of the laboring man will be protected and cared for—not by labor agitators, but by the Christian men to whom God in his infinite wisdom has given the control of the property interests of the country, and upon the successful Management of which so much depends.

Do not be discouraged. Pray earnestly that right may triumph, always remembering that the Lord God Omnipotent still reigns, and that His reign is one of law and order, and not of violence and crime.

THE FINANCIAL PANIC OF 1907

The relatively prosperous first years of the 1900s came to an end in 1907. Drains on the U.S. money supply revealed a weak national financial structure of banking and credit, causing an economic crisis that lasted for nearly a year. The low money supply was partially caused by a lack of cash flow from farmers due to a late growing season. It was further drained by overly speculative investing in copper, money diverted to fund the Russo-Japanese War of 1905, the costly rebuilding of San Francisco after the devastating 1906 earthquake, and the national railroad expansion program. In March, the stock market fell dramatically, and soon thereafter prices soared, wages dropped, unemployment rose, and many banks and businesses failed. The first financial institution to fall into trouble was Mercantile National Bank. Because there was no central banking system to aid troubled financial institutions, the bank sought assistance from the Clearing House Association, a banking agency that cleared checks. When the Clearing House Association investigated the bank, they declared it to be solvent, or financially sound, but the panic had already begun.

J. P. Morgan, a leader of America's financial community, was concerned the panic surrounding Mercantile National might affect the already weakening American economy. He soon directed that a team of trusted financial advisors be assembled to work toward a solution. Among those on the team were Thomas W. Joyce of the House of Morgan, Richard Trimble of the United States Steel Corporation, Henry P. Davidson of First National Bank, and Benjamin Strong of Bankers Trust Company. Much of the financial team's concern focused on the Knickerbocker Trust Company of New York, the third largest bank in New York City. Depositors had begun a "run" on the bank, demanding all their funds be removed from the bank. Financial ruin loomed for Knickerbocker when it was revealed that only 5 percent of the bank's deposits were held in reserve (available for immediate withdrawal by depositors). The bank president, who was forced to resign, suffered a nervous breakdown and committed suicide within weeks. Soon, the panic spread throughout the city.

Morgan's financial interventions with other capitalists and an infusion of funds from the U.S. Treasury eventually eased the panic. Confidence was ultimately restored, though it took several weeks before the crisis was ended. Despite some failures, in the end twelve financial institutions that had been on the verge of collapse were saved. Fortunately, no large banks failed.

The financial crisis of 1907 was so severe, however, that changes in the national economic structure were designed to prevent future panics. Congress passed laws that regulated how banks could issues bonds (a certificate of debt that pays interest), such as the Aldrich-Vreeland Act of 1908. The National Monetary Commission was also established in 1908. It served as a forerunner to the Federal Reserve Bank, which effectively centralized the banking industry in 1913. The economic restructuring that resulted from the Panic of 1907 was crucial to solidifying American's economic foundation so that it could emerge as a world financial power in the coming years.

THE WOBBLIES

The Industrial Workers of the World (IWW), a national industrial union, was established in Chicago in 1905. Union leaders from across the country hoped to accomplish on a national scale what the Western Federation of Miners (WFM) had done for mining labor. The IWW advocated "syndicalism," a revolutionary worker-controlled society. It recruited workers regardless of job skill, race, or gender. The goal of "one big union" for all industrial workers was the primary aim of the IWW. At its peak in 1912, the IWW had 60,000 members, with its most active participants involved in mining, construction, lumber, textiles, and migratory agriculture. The IWW declined due to competing factions within its membership. The IWW promoted the idea that capitalists were the enemy of the working class.

Spindletop

America's dependence upon coal was eased with the discovery of the Spindletop oil gusher in Beaumont, Texas, in 1901. The gusher established the petroleum industry in Texas, where 491 oil companies were operating by the next year. The company formed around the find was initially called Guffey Oil after Colonel J. M. Guffey, one of its financiers. The name was change to Gulf Oil in 1907 after Guffey was implicated in a financial scandal. The gusher was international news, and the well eventually produced more than 100,000 gallons of oil per day.

THE LABOR TRIAL OF THE CENTURY

One of the most infamous court cases of the early twentieth century was the trial of William "Big Bill" D. Haywood for the murder of former Idaho governor Frank Steunenberg. The former governor was killed on December 30, 1905, by a bomb that had been rigged to the gate in front of his home. There were no witnesses to the crime. The state and Steunenberg's family offered a reward of $15,000 for the murderer's capture. James McPharlan, chief of the famed Pinkerton Security firm, an established strikebreaking organization, headed up the investigation.

Governor Steunenberg had originally been a pro-union politician. He was condemned by union members when, however, he called for federal troops to face down the Western Federation of Miners (WFM) after an uprising at a mine in 1899. Union members were imprisoned for months and remained bitter toward Steunenberg. Soon a man named Harry Orchard appeared and announced his knowledge of vital information regarding the crime. He was arrested on January 1, 1906, and reportedly endured ten days of intense grilling by McPharlan before he confessed to the killing. Orchard said members of the WFM's "inner circle" paid him $250 to kill Steunenberg. In reality, Orchard was a spy working for the mine operators. He falsely accused William "Big Bill" D. Haywood, secretary of the WFM; Charles Moyer, president of the WFM; and George Pettibone, a blacklisted miner of the murder. Together Orchard and McPharlan created the false details of the crime as they worked to discredit the union. The accused men were jailed for months in the death house of an Idaho prison.

The trial was a national sensation. Ironically, public sympathy for the accused unionists grew after President Theodore Roosevelt called the three WFM members "undesirable citizens."

Soon, thousands of union supporters wore placards that read "I am an undesirable citizen." Boise came to be known as "Murdertown" because of the local industry that sprung up around the trial.

Haywood's defense was aided when his noted attorney, Clarence Darrow, got Orchard to confess that he had lied in previous trials and had in the past confessed to crimes that he never committed. After a three-month trial, Haywood was found not guilty. Moyer and Pettibone were also later cleared of the charges. The trial's most significant result was that many other crimes blamed on union members were revealed to be ploys by operators to discredit the union. Though he had committed other crimes for the Mine Owners' Association, killing Frank Steunenberg was Orchard's own idea. The mine owners' willingness to take part in Orchard's lies left them disgraced. The public was shocked at the revelations and gave the unions much-needed support in their efforts to improve labor conditions.

LIMITING BUSINESS

During the post-Civil War period, the federal government's legislative and judicial branches allowed the business community's actions to remain unregulated. At the turn of the century, however, the government began to

dramatically reverse its "hands off" policy. The years 1900 to 1909 witnessed many landmark pieces of congressional legislation and Supreme Court rulings, which more strongly controlled the nation's business and economic interests. Congress enacted laws to correct the abuses that had occurred in such areas as fiscal policy, labor unrest, the quality of consumer goods, and the unregulated power of large corporate trusts. Congress' goal during the 1900s was to restore the public's confidence in the economy and the goods and services traded within it. Nine of the most important legislative acts of the period are described below.

Congress passed the Gold Standard Act (1900) in order to establish national banks in rural communities with populations fewer than 3,000 people. These banks were designed to support agricultural growth. Furthermore, the act created a stable national currency, which was vital to the United States in expanding its role in international commerce.

The Elkins Act (1903) prohibited railroads from changing their published rates. Many of the country's products were transported by rail, and this piece of legislation regulated interstate commerce.

The Expedition Act (1903) was strongly promoted by President Theodore Roosevelt as an important piece of antitrust legislation. It allowed antitrust lawsuits to move more quickly through the judicial system.

The Heyburn Bill (1906) is considered the nation's first consumer protection law. The bill regulated the United States's food supply by requiring product labeling and outlawing the sale of diseased, decomposing, or contaminated meats and other foodstuffs.

Roosevelt's "Square Deal"

President Theodore Roosevelt attempted to provide all sectors of the economy—business, labor, and the public—a voice in the nation's financial matters. The "Square Deal" platform from his 1904 presidential campaign called for an even-handed, fair approach to all parties involved in business-related matters. Its great flaw was that it promised only an abstract notion of fairness.

The Hepburn Act (1906), also known as the Railway Rate Regulation Act, overhauled the Interstate Commerce Act of 1887. The Hepburn Act gave the Interstate Commerce Commission (ICC) greater powers to investigate the railroad trusts, which were infamous for their questionable business practices. Its most powerful effect was allowing the ICC to regulate railroad rates.

The Meat Inspection Act (1906) was designed to improve the horrible conditions of the meatpacking industry. It dictated that there must be regular federal inspections of all meat products traded through interstate and foreign commerce.

The Pure Food and Drug Act (1906) made it illegal to mislabel or tamper with foods involved in interstate or foreign commerce. This law and The Meat Inspection Act combined to become the strongest regulations ever imposed upon the food industry.

Teddy Roosevelt and the Teddy Bear

During a 1902 hunting trip in Mississippi, President Theodore Roosevelt failed to shoot any game. Several of his supporters did not wish to see the president disappointed, and they arranged to have a bear cub placed on Roosevelt's path so he could kill it. However, Roosevelt refused to shoot an animal in such an unsportsmanlike manner. The press reported the incident and the president's encounter with the cub made national headlines. Clifford K. Berryman depicted Roosevelt's actions in an editorial cartoon in The Washington Post on November 16, 1902. The cartoon was titled "Drawing the Line in Mississippi" and had a double meaning. Not only did it comment on Roosevelt's drawing the line on sportsmanship but it also referred to his settlement of a boundary dispute between Louisiana and Mississippi while on the trip. Soon, Morris and Rose Mitchom of Brooklyn, New York, who ran a candy store, obtained permission from the president to use his nickname "Teddy" on a brown bear with movable body parts. The original toy was hand-stitched by Rose and called "Teddy's Bear." Later, the name was shortened to "Teddy Bear." Within a year a teddy bear craze had gripped the nation. The teddy bear remained a popular childhood toy through the century.

The Aldrich-Vreeland Act (1908) corrected problems in the nation's banking system. It allowed banks to issue bonds based on the securities of other bonds, but imposed a 10 percent tax on those notes.

The Payne-Aldrich Tariff Act (1909) lowered tariffs (taxes imposed on imported or exported goods) for some specific sectors of the economy, such as the shoe production industry. This law caused great controversy because some industries, like iron and steel, were angered that their tariffs were not lowered while others, like those in the silk and cotton industries, actually were raised.

At the beginning of the twentieth century large business monopolies, or trusts, had become powerful economic forces as they concentrated their fiscal power and squeezed out their small business rivals. Trusts did have some positive qualities, such as creating higher production capacity and reducing the duplication of effort. However, these economic savings were not always passed on to the stockholder, laborers, or the consumer. With Theodore Roosevelt's rise to the presidency the antitrust movement gained momentum. To Roosevelt, "good trusts" benefited the public by bringing new capital and products into the economy. "Bad trusts" consisted of greedy financiers interested only in earning profits at the public's expense. Roosevelt led the charge to prosecute and break up bad trusts.

Congress and the President were aided in their regulatory efforts by the Supreme Court, which decided many cases affecting business through the decade. Some of the high court's most important cases heard during the first decade of the twentieth century are described below.

Atkin v. Kansas (1903). The Court ruled that a Kansas law establishing an eight-hour workday for construction workers involved in public works was not a violation of "freedom of contract" as provided for in the Constitution.

Northern Securities v. United States (1904) held that the merger of the Northern Pacific, Great Northern, and Burlington Railroads violated the Sherman Antitrust Act. This decision was vital to strengthening President Roosevelt's trust-busting policies.

The Roosevelt administration's antitrust policies were especially helped by the case of Halev. Henkel (1906), which ruled that employees called as witnesses in antitrust cases can be forced to testify and provide evidence against their employers.

CHANGING THE WAY AMERICANS BUILT PRODUCTS

New methods of manufacture revolutionized several industries during the decade. When Henry Ford (1863–1947) introduced the Model T automobile (nicknamed the "Tin Lizzie"), he said it was a "motor car for the great multitudes." Ford was correct, and the success of the Model T ushered the United States into the automobile age. The Model T's greatest innovation was not the car itself, but instead the way it was manufactured. Using ideas developed by Frederick Taylor (1856–1915), Ford developed the use of the assembly line. In previous decades, factory workers moved from product to product in order to perform their duties. At Ford factories, the workers did not move from car to car. Instead, the parts to be assembled into an automobile were placed on a conveyor belt, which moved as the workers stood in their places. The moving assembly line revolutionized car production and was soon transplanted to other manufacturing businesses. Ford's use of the moving assembly line is hailed as one of the major accomplishments of the Industrial Revolution. The mass production of the Model T allowed the car to be sold at a price that was affordable to many Americans who had never before been able to purchase a car. Within only a few years, American culture was transformed as people became more mobile.

Another manufacturing innovation relied on the research of Frederick Taylor. Named for its creator, Taylorism attempted to make a science out of work-related tasks by defining the one best way to do any given job. Taylor used scientific methods of observation and recording to determine the most efficient ways to accomplish a task. Among his recommendations were to scientifically select and train workers, monitor their work progress, and give greater responsibilities to management. The result of Taylor's philosophy was that workers were obligated to match the speed of the machinery they used. Taylorism was seen by many business leaders as

a positive force for it often increased production quotas by as much as 200 percent.

Businesses that followed Taylor's principles saw their profits increase enormously, and the United States came to be seen as nation with some of the world's most efficient production methods. However, Taylorism was also strongly criticized for having a dehumanizing effect on labor, as workers were thought of as little more than cogs in a machine. It resulted in a great division of the workforce: Management became the "thinkers" in a corporation and had absolute control over their employees; workers became the "doers" whose jobs required little intellectual skill as they performed routine exercises over and over.

ADVERTISING AND THE RISE OF POPULAR AMERICAN BRANDS

Advertising grew increasingly important during the 1900s as companies sought ways to attract consumers' attention. One of the most successful

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and long-lasting advertising campaigns in American history emerged in 1904 when the Campbell's Soup Company introduced the cute Campbell's Kids on their packaging. Created by artist Grace Widerseim to appeal to women, the chubby cartoon boy and girl were modified only slightly in later decades. Product spin-offs featuring the adorable duo have included dozens of novelty toys and household items. Campbell was one of the first corporations to understand that creating a likable image or character to represent a product is an effective way to attract consumers.

Another consumer product that became established in the 1900s was Pepsi-Cola. Developed by drugstore owner Caleb D. Bradham in 1898, the original soda was designed to compete with the many popular kola nut drinks on the market, especially Coca-Cola. Initially called "Brad's Drink" by Bradham's friends, it was renamed "Pepsi-Cola" for its alleged pharmaceutical properties. Bradham claimed the soda relieved dyspepsia, today called indigestion. Early ads for the soda promoted its supposed healthful benefits: "Pepsi-Cola: At Soda Fountains. Exhilarating. Invigorating. Aids Digestion."