The Hour of Fate: Theodore Roosevelt, J.P. Morgan, and the Battle to Transform American Capitalism

"The word ‘antitrust’ comes from the late 1800s. The trusts were companies that got together to create holding companies. They acted together. The banker who organized a lot of these trusts was called John Pierpont Morgan. Morgan hated chaos and disorder, and a dynamic, capitalist economy is extremely chaotic. This was the beginning of the railroads, and everybody was setting up railroads. You might have two cities with three or four different railroads going between them. They were all competing, and nobody was making any money. But you don’t need four railroads, you just need one. J.P. Morgan merged a lot of the railroads but why stop at that? He also created US Steel as a merger of all the steel companies. Carnegie and Mellon got involved in that too. Meanwhile, Rockefeller merged the oil companies: at one point he controlled 90% of oil in America. J.P. Morgan created larger and larger holding companies. He was trying to monopolize; he was trying to make money for his shareholders. You may have heard of Warren Buffett , who is known around the world because he has been so good at selecting companies to invest in. He dislikes competitive markets because they don’t make a lot of money. He’s very explicit about it: he wants companies that have a strong moat around them. Then they can really be profitable. Now, there is market power relative to the buyer of the goods, but there’s also market power with respect to people who work for you or labor. The trusts exploited labor. The tenements, the horrible social conditions, you can read all about that in the book by Susan Berfield. The people working in the coal mines were treated horribly. They were working 12 hours a day, six days a week, there was child labor, horrible accidents taking place. Whatever money they made, they frequently had to spend at the company store, and got ripped off again. These terrible conditions really started to get noticed by people. Who was doing this? It was the trusts who were doing it. So one of the points to make is that we don’t really have these horrible social conditions at the moment. We’re all dependent on the big tech companies. They control my information, they use it, and it’s going all over the place. But there’s not enough anger at them yet. There’s a bit of anger at Facebook. The Republicans say they’re a bunch of liberals and are always lying about poor Mr. Trump. The Democrats are saying that Facebook brought Trump in by having the Russians troll and provide misinformation about poor Hillary Clinton. So there’s a bit of anger at big tech, but it’s more by politicians than people on the ground. Get the weekly Five Books newsletter But people do see things. Tim Cook at Apple got paid $600 million a couple of years ago. The numbers are out there. While we can barely afford groceries, couldn’t he do the job for $60 million, or for $6 million? The Trump vote is a recognition that there is anger out there. It’s not that easy for people to say where it’s coming from, but there is a general principle that people do recognize: if things go wrong, it is people with the most power and the most money at whose desk the dollar stops. They must be responsible because they’re benefiting from it. It’s either the government who’s responsible, but who really has power in this country? It’s the big corporates, the big banks. They are responsible for this. They’ll say, ‘It’s not my fault’ but they’re benefiting the most from the system. And what a lot of these books, these economists, are arguing is that it is their fault. Maybe not intentionally, maybe Amazon is a good company that provides these fantastic services. But at some point, power corrupts. That shows up in every book about reality. You’re the good guy, you provide this fantastic service, but you become bigger and bigger and bigger and suddenly you can do what you want. Then you start becoming abusive. The way that Amazon, for example, is trying very hard to prevent unionization of its warehouses. Now, finally, we have a union in Staten Island in New York, the first one to get there, even as the second drive failed. People are seeing Amazon as a bit of an enemy of labor, even though we depend upon it. So Susan Berfield’s book highlights the importance of popular anger about what large corporations are doing. At the moment, large corporations are aware of that. There is a movement that started about two years ago, with large American corporates pledging that the purpose of a company is not purely to maximize profits, but to support all stakeholders: customers, workers, suppliers, the community. With power comes responsibility and if companies do not take responsibility—if we’re not seen to be part of the solution on income inequality, on growth, on climate—we’ll be seen as the reason all that is going wrong. So that is a lesson that companies today are learning. Teddy Roosevelt did not go out and say, ‘I’m going to be cutting back on these companies.’ But he recognized that’s where the power was, and that the big corporates were purely trying to maximize their profits. J.P. Morgan and Rockefeller were the face of that. Without that ugly face of capitalism of large companies, we might not have seen that big antitrust movement."