The Rising Tide of Big Business – Part 1

If you are anything like me, you may be curious how business and politics became so intertwined. Human greed and desire for power is as old as civilization itself. Some argue that greed is an essential part of “human nature”, and socialist sharing has proven to not work. Much like human nature, greed has a history that noticeably emerged with the onset of class divided society. Part of human nature and ultimate survival, is to produce enough resources to support your family. The use-value system originally limited most greed (measured in land, crops, cattle, etc.), because you can only consume so much corn or steak. With the development of abstract exchange value (money), greed began to quickly accelerate and come into how we know it today. Human desire to accumulate (business) and protect (law/politics) this newly formed wealth became an end in itself, which serves as a macro-level explanation for why business and politics are seemingly inseparable.

I find world American history fascinating for a multitude of reasons.  What I find even more fascinating is how we got to where we are today, particularly with regards to our political system.  Since the United States emerged from the Civil War, big business has significantly influenced American politics. Through the early twentieth-century, the federal government took a hands-off approach towards regulating businesses. Much of society believed that economic markets should operate freely without government intervention, which meant extensive corporate expansion and un-checked market monopolization. Leading up to the Civil War, Congress passed legislation, allowing private businesses to form corporations without developing a charter. This legislation allowed them to be ultimately free from federal oversight and regulation. This relaxed methodology ignited unrestrained competition throughout the economy, which was actually a good thing initially. Entrepreneurs consolidated their smaller businesses into trusts, or what we know today as mega corporations. These trusts integrated control of many companies, both horizontally by combining similar companies, and vertically by combining companies involved in all stages of production.

Some of the most famous examples of trusts included, John D. Rockefeller’s, Standard Oil Company (Exxon-Mobile), and J.P Morgan’s banking network (Chase Bank). These trusts dominated every aspect of their respective industries, solidifying control by managing their empire under one board of trustees. Companies in other industries caught on and quickly imitated this trust model. Unregulated market control allowed these corporations to force out competition and set prices for goods and services at whatever level they saw fit. By the turn of the twentieth-century, it became clear that these mega corporations were too powerful, and had operated unchecked for too long and the public was outraged. Consumers grew increasingly upset over high prices, while small business demanded government protection to ensure their own survival.

A perfect example of this are the railroad monopolies of the late nineteenth-century, run by such big names as Vanderbilt and Harriman. These ruthless businessmen are credited with helping to create the nations infrastructure, but were also heavily criticized for spreading untold political corruption to ensure continued business growth. The railroad monopolies were severely overcharging small customers, while giving massive rebates to politicians and favored clients. State and local legislatures attempted to limit this abuse by issuing maximum rate laws. These laws set a ceiling on the prices a railroad could charge. At the railroads request, Congress struck down these local laws claiming they were unconstitutional. As public anger grew over these unfair practices, the federal government had little choice but to slowly institute rules and regulations, but would do little to enforce them.

What are your thoughts and questions?


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s