Cronyism

CHAPTER 9

FIGHTING OVER RAILROAD REGULATION

The growing corporatist state also enforced new cartelizing regulations in transportation. The railroads had already established their own trade commission in the 1880s, the Interstate Commerce Commission (ICC), and at the turn of the twentieth century they wanted to give it sharper teeth. Railroads affiliated with J. P. Morgan & Co. and other Wall Street bankers donned their armor for an intense lobbying battle to enhance the ICC’s power and eliminate secret rebating on the shipment of goods. As the years progressed, though, railroads had to combat increasingly powerful shipping and union interests that worked with intellectuals to acquire their own government-enforced cartels. Shippers sought lower rates for shipping goods, and unions sought higher wages: combined, these opposing interests pinched the railroads’ bottom lines. Control of the ICC and new legislation would rotate between the groups, leading to one end: a corporatist system, steered by the guiding hand of an empowered ICC bureaucracy, that insulated the railroads, shippers, and unions from competition. By the 1920s the big-business railroads reigned supreme again, though with concessions to unions and with their shipping customers flocking to motor carriers—a new low-cost transportation alternative.

Consolidating the Railroads

During the McKinley administration, railroads continued to worry about under-the-table rate cutting that lowered transportation costs, increased supplies of goods, and decreased prices paid by consumers. In December 1898, the Baltimore & Ohio (B&O) lobbied the ICC “to investigate complaints of illegal rate cutting, and to put a stop to all illegal practices” by the New York Central and Pennsylvania Railroads.The B&O was trying to get out of bankruptcy and wanted to stop its competitors from lowering rates.

Alexander Cassatt, the new president of the Pennsylvania Railroad and protégé of the former president, Thomas Scott, agreed that rebating posed a problem. But railroads could no longer try to combat rebating with rate associations since the Supreme Court declared them illegal in 1897. Instead, they decided to form communities of interest by purchasing the stocks of competitors. They were cartels in a disguised form, the main difference being that railroads, instead of collaborating as independent entities, merged informally. In 1899 Cassatt proposed that his railroad and the New York Central could reduce competition if the Pennsylvania Railroad bought stock in the B&O and the New York Central in the Erie Railroad.

J. P. Morgan, the omnipresent cartelist whose firm marketed the New York Central’s securities and comarketed the Pennsylvania’s, heartily agreed. In addition to assisting Cassatt, he worked feverishly to produce communities of interest in other regions. In New England, Morgan-backed Charles Mellen became president of the New Haven Railroad and heavily borrowed to buy out competitors. In the Southwest, Morgan reorganized the Atchison, Topeka & Santa Fe Railroad and encouraged it to borrow money to buy rivals. He faced greater difficulty in the Northwest because of his young-gun rival, Edward H. Harriman. This influential director of the Illinois Central Railroad was busy forming his own community, purchasing stock in the Union Pacific and the Southern Pacific. Harriman, working in concert with the bankers of Kuhn, Loeb & Co., angered Morgan and his Great Northern Railway ally, James J. Hill, by brashly trying to purchase the Northern Pacific in a bitter stock market fight that raised its stock to new heights. Harriman had to settle for slightly less than majority ownership. Morgan, having narrowly retained control, begrudgingly worked with him. They formed the gargantuan Northern Securities Company, a $400 million holding company that held stock in the Great Northern and the Northern Pacific, in November 1901.

The ICC sympathized with the communities of interest. The new chairman, Martin Knapp, supported pooling and declared the benefits from “railroad competition . . . to be greatly exaggerated.”Cassatt, however, recognized that simply forming communities of interest would not be enough: they required new legislation to reduce hidden rate slashing and make it easier for the communities to raise rates. He believed it was a “better policy to assist in passing a reasonable measure now than to have a more drastic and perhaps a seriously injurious one forced upon us.”Cassatt knew that shipping interests—particularly Edward P. Bacon, a Wisconsin grain merchant—were busily devising their own legislative plans. Bacon organized the Interstate Commerce Law Convention in 1900 as a lobbying arm for artificially low rates to benefit smaller shippers.

Taking the offensive in 1901, Cassatt instructed the Pennsylvania Railroad’s general counsel to write a prorailroad bill that sanctioned various pooling arrangements, increased the penalties for hidden rebating from publicly posted rates, and created a commerce court that railroads could use to block proshipper ICC rate rulings. Cassatt’s corporatism clearly favored railroad cartelization. Early the next year the bill landed on the desk of West Virginia senator Stephen Elkins, the new chairman of the Senate Interstate Commerce Committee and the co-owner of the West Virginia Central and Pittsburgh Railway (soon to be bought out by the B&O).

Matters had taken an unexpected turn the previous September when President William McKinley was assassinated. Theodore Roosevelt, or “His Accidency,” fixated on the 1904 election, worried by the fact that no vice president who succeeded a dead president ever won reelection.As one contemporary observed, “If you remark to him that God is Great, he asks naïvely at once how that will affect his election. He is . . . writing letters by the ream to catch half a dozen votes anywhere out West.”Roosevelt believed he could win popular support if he established himself as a trustbuster who broke up a railroad community with the moribund Sherman Antitrust Act. The president singled out Northern Securities. His choice was deliberate. He had mismanaged and squandered half of his $187,500 inheritance on a failed cattle ranch in the Dakota Territory—which the Northern Pacific ran through—and his action would please swing-vote farmers and cattle ranchers in the Northwest. As a result, in February 1902 Roosevelt’s attorney general filed a federal antitrust lawsuit. An astonished Morgan and other railroad leaders now worried about the very real possibility of the federal government using the antitrust mallet to break up their communities for the benefit of shippers and other opposing interests. The investment banker personally visited the White House. Though Roosevelt insisted on continuing the suit, Morgan received implicit protection for his other railroads.

As the Northern Securities lawsuit moved forward, railroads and shippers fought intensely over Cassatt and the Pennsylvania Railroad’s proposed Elkins bill. Railroad lobbyists, including the Atchison’s Paul Morton, persuaded Congress to pass the measure, but shippers succeeded in striking out the propooling provisions and the commerce court. The Elkins Anti-Rebating Act of February 1903, however, provided crony privileges to the railroads through rate publicity and secret rebate prohibitions. The published rate was mandated to be the legal rate, and railroads that granted secret rebates and the shippers that received them could be liable to prosecution. This was not in the public interest: fewer price discounts for shipping goods would mean higher freight costs, which reduced the supply of goods and raised the prices consumers paid. The railroads cheered the cartelizing law for this very reason, and the Railroad Gazette asked the ICC to “go ahead and catch every law-breaking rate-cutter in the country.”The upset Bacon, on the other hand, promised “vigorous efforts . . . at the next session of Congress” to obtain regulations that lowered rates for shippers.

It was the zenith of railroad influence. “The Elkins Act,” argues Albert Churella, “gave Cassatt precisely what he wanted and suggested that the railroads had captured the agencies that were supposed to regulate them.”Morgan even turned the Supreme Court’s dissolution ruling of March 1904 to his advantage. When dissolving Northern Securities, Morgan’s attorney, Francis Lynde Stetson, gave its owners stock in both the Great Northern and the Northern Pacific, regardless of which company they had originally invested in. This meant that Morgan’s hated enemy Harriman, who had been close to majority ownership in the Northern Pacific, now became a minority owner in both lines. He unsuccessfully sued Morgan, with the Supreme Court upholding Stetson’s action.

With the politically popular Northern Securities suit placating Roosevelt for the time being, major lines continued cartelizing under the umbrella of the government’s anti-rate-cutting regulations. However, as Jim Powell remarks, “The railroads were . . . playing with fire,” with the Elkins Act “help[ing] to establish the principle that the government ought to have power over prices.”Their political victory angered shipping and union interests and spurred them to lobby for their own corporatist legislation on the state and federal level that forced rates below market-clearing levels and raised railroad workers’ wages above them. This would squeeze railroad profit margins and decrease their quality of service. Railroads, previously on the political offense, steadily shifted to the defense. At first they succeeded in minimizing the damage from harmful regulations, but they couldn’t man the ramparts forever. Unlike Wall Street bankers and large corporations, the railroads neither developed lobbying organizations to combat those of shippers and unions nor hired intellectuals to dress up their cronyism in public-interest garb. Their strategic misfires became increasingly apparent over the next decade.

As the new century took hold, the environment in the states turned decisively negative toward railroads. Populist Republican governors such as Robert La Follette of Wisconsin and Albert Cummins of Iowa rode into office on antirailroad platforms and advocated taxes on railroads and proshipper rate regulation. Between 1902 and 1907, fifteen states created or remodeled railroad commissions, and nine established freight rates by statute to push down rates for local shippers. Technocratic economists in favor of planning assisted in devising and running the commissions: for instance, University of Wisconsin professor John Commons drafted the bill establishing Wisconsin’s regulatory commission and empowered it to directly set “reasonable rates.”This power pleased economist Balthasar Meyer, Commons’s University of Wisconsin colleague, who served on the new commission. According to Meyer, competition as “a protector against unreasonable or unjust rates has proven itself a failure.” It was through enlightened experts like himself, not through supply and demand, that “railway rates are made in a more scientific manner.”

The Big Four railroad unions of skilled engineers, conductors, firemen, and trainmen, who frequently complained about “the cheap negro labor and the cheap foreign labor,” secured state-level special favors as well.According to Churella, railroad unions “exploited public fears regarding railway accidents, inaccurately suggesting that the refusal of railroad executives to provide enough crewmen imperiled safety.”They lobbied states to enact full-crew laws that raised labor costs by requiring train crews to consist of an engineer, a fireman, a conductor, a brakeman, and a flagman. Safety was not the major motivation. In reality, the unions wanted additional make-work jobs and lobbied state officials to make sure only white union men qualified for positions in the full crews.

On the federal level, Bacon and the Interstate Commerce Law Convention declined in influence. Other shipping organizations, such as the National Wholesale Lumber Dealers Association, the National Live Stock Association, and the Southern California Citrus Fruit Exchange, picked up the slack. Shippers lobbied Congress to pass the Esch-Townsend bill, which proposed to grant the ICC rate-fixing powers and to pack it with proshipper regulators by increasing the number of commissioners from five to seven. Overall, the Esch-Townsend bill would divert transportation corporatism from its prorailroad path that raised rates to a proshipper dispensation that lowered them. After the House passed it in early 1905, representatives from the Great Northern, the Southern Pacific, the Baltimore & Ohio, and other lines testified before the Senate Interstate Commerce Committee in opposition to the measure. Their efforts convinced the Senate to not pass the bill, but the writing was on the wall.

The railroads continued to play with fire. The dreaded rebating lingered through clandestine competition: convenient typographical errors that covered up discounts, intentional misclassification of shipment into lower class rates, and underweighing of cargoes. Moreover, railroads still wanted the government to assist pooling arrangements. To this end, Pennsylvania Railroad president Cassatt lobbied Roosevelt in late 1905, arguing that instead of being empowered to determine rates, which was the goal of shippers, the ICC should be able to set maximum rates subject to judicial review. This could benefit the railroads if a friendly ICC set the rates high and prohibited rebating from that level. If the ICC set rates too low, the railroads could protest the rulings in the courts. Cassatt subsequently endorsed the Hepburn bill, an administration-drafted proposal that granted the ICC the power to set maximum rates.

Undoubtedly, Cassatt burned himself badly. The following January Populist Democrats in the House attacked the Pennsylvania Railroad’s community of interest on the grounds that it violated antitrust laws. Prodded by the lower chamber, the ICC commenced investigation of the railroad conglomerate and revealed that several Pennsylvania Railroad officials purportedly received bribes from companies for which they shipped coal. Morgan partner George Perkins privately worried that “Mr. Cassatt, as an individual, and the Pennsylvania Railroad as a holding company, so to speak, are going to be singled out for a pretty vigorous attack.”While the Pennsylvania’s president escaped indictment, the damage had been done. Stressed and exhausted, Cassatt died at the end of the year.

The Hepburn Act, passed in June 1906, did weaken competitive rate cutting by adding further penalties for rebates and requiring railroads to file rates publicly with the ICC that would take effect after thirty days. There were strings attached, though: The legislation prohibited railroads from transporting coal and other raw materials from companies they owned. The ICC’s new Bureau of Statistics and Accounts could standardize accounting practices, an ominous compliance cost if enforced by prying bureaucrats. The number of commissioners increased by two, thereby providing an opening for appointments favorable to shippers. Lastly, shippers could challenge rates, and after reviewing the claim the ICC could institute maximum rates; judicial review was limited. On net, notes Churella, “while the Hepburn Act benefited the railroads to some degree, it was not so friendly as the Elkins Act, nor was it the solution which Cassatt had envisioned.”

The Hepburn Act marked a milestone in the railroads’ prosperity. At the time of its passage seven railroad groups controlled two-thirds of the nation’s total mileage, and J. P. Morgan & Co. supervised four of these communities. From 1897 to 1906 railroad stocks soared 142 percent because fewer rate cuts brought increased revenue. The Pennsylvania Railroad’s average freight revenue per ton-mile, for instance, increased 26 percent between 1899 and 1906. Railroad leaders remained optimistic. Perkins believed that “while the treatment is mighty heroic, it is going to work out for the ultimate and great good of the railroads. There is no question but that rebating has been dealt a death blow.” Even with less-friendly regulation on the federal level and burdensome state commissions, the future still looked profitable for railroad corporatists.

Shippers and Unions Take Over

“Things could not have worked out more differently from what the railroad men expected,” explains Albro Martin.The 1910s were far worse than the 1870s. To their horror, over the next ten years adverse legislation, antitrust suits, and commission rulings overwhelmed the communities of interest. Railroads failed to respond quickly with lobbying organizations and intellectuals who fought the policies. The ICC shifted to deliver cronyism to shippers and unions, and compliance costs and new taxes created additional burdens. Regulation trapped the railroads in a merciless cost-price squeeze, and the vice tightened with each passing year.

It started with Harriman, who heard a rumor in late 1906 that the president was contemplating filing an antitrust suit to break up his Union Pacific and Southern Pacific community. Roosevelt had burned the tycoon not once, but twice before: first in the Northern Securities follow-up lawsuit when Harriman failed to get the Justice Department to intervene in the case, and then in the election of 1904 when the president broke his promise to make Harriman’s friend ambassador to France following a large campaign donation. Harriman understandably attributed his refusal to donate to the Republican Party coffers in the 1906 midterms to the antitrust threat that had emerged shortly after that election. When his attorney tried to negotiate with the president in early 1907, Roosevelt curtly replied, “Well, you don’t know what Morgan and some of these other people say about Harriman.”In early 1908, the Justice Department filed an antitrust suit against the Union Pacific for buying stock in the Southern Pacific, a major assault on Harriman’s community of interest.

Roosevelt’s latest antitrust assault was simply more bad news for the industry. The Panic of 1907 had crushed railroad stocks—they declined 28 percent from 1906 to 1907. Reduced demand sapped profits, and their average net income fell 14 percent from 1907 to 1909. Railroads suddenly entered a period of retrenchment.

The House of Morgan soon discovered that its special relationship with Roosevelt only went so far. In early 1908, George Perkins organized a cartel agreement between the New York Central and other railroads to jointly raise rates. To his dismay, the secret leaked out, and Roosevelt warned him that higher rates would hurt Taft in the upcoming election. He threatened to have the ICC investigate. Railroads had gotten rid of rebates all right, but price increases were much harder to achieve than they thought; Perkins and the railroad elites had failed to perceive Roosevelt and the commission’s increasing favoritism toward the shippers. In point of fact, the president had recently filled the two new slots on the ICC from the Hepburn Act and one vacancy with antirailroad men: California Democrat Franklin Lane, a staunch friend of his state’s shippers and a bitter foe of the Southern Pacific; James Harlan, son of a distinguished Supreme Court justice who had an antirailroad record; and union man Edgar Erastus Clark, the grand chief conductor in the Order of Railway Conductors.

Perkins’s attempted rate hike incensed Chicago businessmen so much that they organized the National Industrial Traffic League, yet another influential lobbying front. This shipper organization devised new legislation that allowed the ICC to suspend railroads’ proposed rate increases and establish rates. The newly elected president Taft welcomed their demands. Sensing the political winds, in early 1910 J. P. Morgan arranged a meeting between Taft and the heads of the New York Central, Pennsylvania, Union Pacific, New Haven, and other railroads. Though initially swayed to their cause of railroad pools, the president dispatched his attorney general to draft a bill with congressmen in league with the shippers. The railroads did not help their case, filing for rate increases while Congress debated the legislation. Taft, prodded by the Illinois Manufacturers’ Association, intimidated them into backing down by threatening to file an antitrust suit.

In Congress, few railroad leaders testified before the Senate Interstate Commerce Committee they had once controlled. The mortally sick Elkins could not fend off the administration’s bill, which was augmented by Senator Albert Cummins and others’ amendments that made it even more antirailroad. Triumphant, western Republicans and southern and western Democrats passed the Mann-Elkins Act in June 1910. The National Industrial Traffic League heartily supported it. This Populist measure shifted the burden of rate increases onto railroads by requiring them to prove to the ICC the reasonableness of their rates. As a consolation prize, railroads at least received something they had desired in the original Elkins bill: a Commerce Court where they could appeal ICC refusals to grant rate increases. The Mann-Elkins Act would have seriously deleterious consequences. As increases in demand pushed up overall prices in the economy, rate ceilings would starve railroads of adequate revenue and lead to shortages and reductions in service.

The railroads believed that even with the Mann-Elkins Act they could secure approval to raise rates; to them, a rate increase was reasonable because rates had not risen since before the panic, and operating costs were rising. Once Taft appointed Martin Knapp, still chair of the ICC, as its head, the Commerce Court promised to adhere to the railroads’ perspective. But Knapp’s shift to the court proved a double-edged sword. The railroads’ already declining influence in the ICC weakened further as Taft filled Knapp’s slot with the chair of the Wisconsin railroad commission, the aspiring philosopher-king Balthasar Meyer (Taft filled another vacancy with the chair of the Kentucky railroad commission). The new commissioner appointments put railroads in an incredibly precarious position later in the year when they filed for rate increases.

At the ICC hearings, the presidents of the New York Central, Pennsylvania, B&O, and Atchison railroads stood on one side. On the other side were the National Industrial Traffic League, the Illinois Manufacturers’ Association, and the Traffic Committee of the Commercial Organizations of the Atlantic Seaboard. In contrast to the railroads, the shippers hired a premier progressive intellectual to argue their case: Louis D. Brandeis of Boston, a millionaire who called himself the “people’s lawyer.” Previously, this Harvard Law graduate had defended a state’s ability to limit the working hours of women in Muller v. Oregon (1908), much to the delight of male-dominated unions that supported maximum-hour laws to make female competition less economical to hire. Now, Brandeis advanced the cause of shippers—which meant he advanced the cause of his family, for his father was a Louisville merchant who had regularly fought railroads, and his brother, Alfred, was one of Louisville’s major grain shippers. Brandeis skillfully argued that railroads did need money but could get it by lowering costs through the currently fashionable scientific management theories of Frederick Taylor and other intellectuals. Adopting such technocratic theories that meticulously routinized business operations, Brandeis argued, would save the railroads $1 million a day. Never mind that Brandeis completely fabricated the number and the techniques did not apply to companies without factory production—his theatrics and argumentative style stole the show. To the delight of shippers, in February 1911 the ICC blocked the rate increases.

The stunned railroad magnates awakened to the noose they had helped put around their necks. In their zeal to stop price-cutting, they had neglected to make sure the regulations wouldn’t prevent them from raising rates, particularly in a world where rising prices raised their costs. Concluding that they had fallen out of the commission’s graces, the railroads belatedly turned to hiring their own apologists and establishing prorailroad associations. The Pennsylvania hired noted journalist Ivy Lee to combat proshipper regulations, and the New Haven made Arthur Twining Hadley, a railroad economist and president of Yale who favored pooling, a director. Railroads also secured a favorable ICC appointment: Winthrop Daniels, economics professor at Princeton. To better argue their position, the heads of the New York Central, B&O, Atchison, and other railroads established the Bureau of Railway Economics, with Professor Frank Dixon of Dartmouth College in charge of its statistical collections. And the railroads finally created a major lobbying front, the Railroad Executives’ Advisory Committee. Frank Trumbull of the Chesapeake & Ohio Railway led this outfit.

The new manpower did not matter. Shippers convinced Congress to abolish the Commerce Court, and the Supreme Court ruled that the Union Pacific must divest ownership in the Southern Pacific. No community of interest seemed safe—the ICC began investigating the poorly run New Haven railroad, which Jack Morgan strained to save from bankruptcy. In early 1913 Congress passed the Valuation Act, which enabled the ICC to assess the value of railroads for rate-setting purposes. Senator La Follette, who wrote the bill with economist John Commons, insisted the assessment would cost only a few million dollars over a couple of years. But in the real world, government accountants, lawyers, and clerks spent nearly two decades sifting through records. By 1927, the law had turned into a financial albatross that cost taxpayers $30 million and railroads $90 million. In addition, the Clayton Antitrust Act of 1914 forbade bankers who issued a railroad’s securities from sitting on its board, weakening communities’ relationships with Wall Street investment banks J. P. Morgan & Co. and Kuhn, Loeb & Co. and making it harder for them to attract funds. State taxes increased, and the compliance costs for 166 railroads of adhering to state regulations totaled $28 million in 1914 alone. Railroad stocks experienced zero growth from 1907 to 1914, and the Commercial & Financial Chronicle considered railroad securities to be in “a desperate plight.”

When the railroads, led by President Daniel Willard of the B&O, pleaded with the ICC to grant rate increases from mid-1913 to early 1914, they were just trying to generate enough revenue to stay afloat. They employed the reliable monetary economist Charles Conant to explain to the commission how the dollar had depreciated over the past decade. But the ICC had already stacked the deck by paying Brandeis, who continued to trumpet scientific management theories, nearly $14,000 to serve as a special counsel. The ICC decided to give the railroads some crumbs, approving a couple of minor rate increases. This was not the kind of corporatism railroads had envisioned; shippers had captured the commission and used it to block rate increases.

But for the railroads, Murray Rothbard notes, “there was no turning back. They were strongly committed to federal government regulation.”In April 1913, New York Central president William Brown spoke in front of the Economic Club in New York City and declared that the ICC had originally benefited the railroads because it decreased competitive rebates. Although shippers now ran the show, Brown insisted there wasn’t “a railroad president in the United States today who . . . would repeal the Interstate Commerce Law.”Far from advocating deregulation, the railroads doubled down, favoring an ICC that encouraged pooling and furnished federal incorporation as a way to supersede state regulatory commissions. They sought to replicate the stalwart cronyism of the Federal Reserve System: Trumbull declared that “what the United States has done for its banking system it can and ought to do for its railroads.” President E. P. Ripley of the Atchison maintained similar sentiments and called for government rate regulation to guarantee profits and “do away with the enormous wastes of the competitive system.”The Railroad Executives’ Advisory Committee lobbied Congress and President Wilson to enact such proposals.

Drawing up new corporatist proposals was one thing; getting Congress on board was another because of the Big Four railroad unions, whose power grew with each passing year. The Big Four had gotten more astute in their wage campaigns, employing academic experts like University of Pennsylvania instructor Frank Warne and William Lauck, an economist trained at the University of Wisconsin. The Big Four had supported railroads’ campaigns for higher rates because the higher rates would finance larger labor expenditures. But by 1916 they decided to demand higher wages regardless of whether railroads had the revenue. In the summer they threatened to strike for an eight-hour day with no corresponding decrease in income. Wilson sided with the unions. When the railroads protested, the former professor lectured them with a story about when he told a student it was his own fault for failing a course. “If a strike comes,” the president admonished the businessmen, “the public will know where the responsibility rests. It will not be upon me.”The Adamson Act mandated an eight-hour day, and by the following year the annual compensation of the average railroad worker was 27 percent higher than that of the average manufacturing worker.

The railroads, now locked into fixed rates and soaring labor costs, lacked the funds to invest in and upgrade their facilities and careened toward bankruptcy. Adding insult to injury, the combination of artificially low rates to shippers and increased demand from transporting munitions exports due to the outbreak of war in Europe caused pervasive shortages. A somewhat sympathetic Senate Interstate Commerce Committee began hearings on whether railroads should be incorporated at the federal level, but US entry into the war in 1917 postponed further action. Willard of the B&O, the railroads’ premier spokesman, organized the Railroads’ War Board. It was a pooling attempt to cartelize transportation efforts and lobby the ICC for rate increases. Willard’s efforts were for naught. The Justice Department opposed the war board on the grounds that it violated antitrust laws, and western agricultural shippers and smaller oil producers persuaded the ICC to once again vote down rate increases. The situation was getting desperate: adjusted for overall price increases, railroads’ revenue per ton-mile and stock prices both collapsed by around 40 percent from 1915 to 1917.

Against Willard and other railroad leaders’ new pleas for subsidies and loans from federal credit facilities and a suspension of antitrust laws, shippers and unions recommended an old William Jennings Bryan proposal: nationalization. This was bad news for the public because nationalized companies are funded through taxpayer funds, which reduces their ability to follow profit-and-loss signals and efficiently produce goods and services. Regardless, in December 1917 Wilson, acting under the 1916 Army Appropriation Act that enabled the president to seize private property, brought the railroads under the government’s stewardship and mollified them by promising an adequate (taxpayer-financed) return. Congress retroactively codified the takeover in March 1918. It was official: Washington was going to centrally plan over 230,000 miles of railroad track worth more than $17.5 billion and the two million workers employed on them.

Robert Higgs concludes that railroads’ drive for a commission and antirebating legislation “gave birth to an unmanageable offspring. . . . like Dr. Frankenstein’s monster.”Railroads initially seized the offensive and secured additional privileges. Shippers and unions counterattacked and pushed for their own cartels through legislation and personnel changes at the ICC. Railroads shifted to defense and tried to recapture the ICC before becoming overwhelmed by the onslaught. They played a poor hand and failed to develop strategic lobbying fronts or hire intellectual apologists until it was too late. In little more than a decade their position shifted from one of strength to astonishing weakness. They would not secure a Benjamin Strong or an Edward Hurley at their regulatory commission. Instead, they desperately looked to government-managed operation as their salvation.

Extending the Regulatory Net

The next fifteen years saw continued intense fighting among the transportation interest groups. The main change was that the railroads, starting from a position of weakness, experienced a dramatic reversal of fortune in the early 1920s after lobbying for a new regulatory apparatus to encourage pools and institute minimum rates. Congress overhauled the ICC, enabling both railroads and unions to better cartelize markets. After this success, railroads shifted to demanding that Congress reduce new forms of transportation competition by bringing nonrailroad rivals into the ICC’s domain.

When Wilson announced the government takeover of the nation’s railroads in late 1917, their stocks advanced between 5 and 10 percent. Many investors hoped the momentous policy would stop the regulatory onslaught against the transportation giants. It was technically not nationalization but rather federalization: the government promised to temporarily operate the railroads in return for compensation based on the past three years of low earnings.

Wilson made his son-in-law, Treasury Secretary William McAdoo, the director general of the new Railroad Administration. The former head of the Hudson & Manhattan Railroad understood the railroads’ perspective. His top assistant, who in many respects ran the show, was Walker Hines, the chairman of the Atchison’s board and a bitter opponent of the Mann-Elkins and Adamson Acts. McAdoo recognized that if the government attempted to centrally plan the nation’s transportation system, then at least one special interest had to receive the short end of the stick.

McAdoo decided not to penalize the unions. The director general harbored presidential aspirations and expected he could build his candidacy around an industry that employed two million voters. Rising prices increasingly ate away at the unions’ recent gains, and at the end of 1917 the brotherhoods demanded a 40 percent wage increase. Workers from the Northern Pacific wrote a jingle that implored McAdoo to “give us the promised raise” and in return they would send him “to the Whitehouse as our next PRESIDENT.”Consequently, in May 1918 the Railroad Administration raised average compensation 41 percent and continued hiking for a total 81 percent increase from 1917 to 1920. These were quite munificent raises: in 1920, the average railroad worker’s compensation was one-third higher than that of manufacturing workers. Overall, the Railroad Administration provided a hearty sop to railroad unions and doubled their cartelized workers (from approximately four hundred thousand to eight hundred thousand), particularly in the weaker unions representing occupations such as way employees, telegraphers, and clerks.

It is true that the Railroad Administration instituted an equal pay order that reduced disparities between whites and blacks, the railroads having historically paid the latter less because of their relatively less experience. Not well understood, notes David Bernstein, is that this order “reduced the railroads’ incentive to employ African Americans” because it made blacks more costly to hire than their equally paid and more experienced white counterparts.The Big Four railroad unions had a record of supporting equal pay. In 1909, the Brotherhood of Locomotive Firemen and Enginemen struck against the Georgia Railroad. In response to union calls to eliminate all black employees, the railroad announced equal pay. Union men cheered the decision: “If this course is followed by the company, and the incentive for employing negroes thus removed, the strike will not have been in vain.”The Railroad Administration promoted the Big Four’s antipathy toward blacks in other ways: it instituted rules requiring applicants for various positions to pass written examinations, prohibited blacks from working as conductors and baggagemen, and made it harder for blacks to serve as porters and brakemen. Railroad unions codified their gains by lobbying for more discriminatory full-crew laws on the state level. The labor cartels still wanted to crack down on their competitors.

If the Railroad Administration was to hand out special privileges to unions, that left shippers and railroads on the chopping block. The jacking up of wages required new revenue—Congress had provided only $500 million for total expenses. The shippers were the most vulnerable since the Railroad Administration had convinced Congress to reduce the rate-setting authority of the ICC, which still remained in shippers’ hands. This allowed Hines to implement an across-the-board 28 percent increase in rates. Furthermore, the Railroad Administration eliminated locomotive and equipment diversity along with shippers’ choices over routes—all restrictions that reduced competitive services to shippers. Railroads no longer had to compete by tailoring their services to shippers’ desires; government-mandated uniformity prohibited it. While these rulings brought a reprieve to railroads and “ended the shipper-dominated Progressive phase of railroad regulation,” they only compensated for past denials of rate increases and did not match wartime price increases.As a result, railroad stocks continued to disappoint investors. In addition, in a manner all too typical of government-run enterprises, the rate increases did not cover costs, and the Railroad Administration racked up a $1.2 billion deficit. The taxpaying public would have to cover the difference and reduce their spending elsewhere, further funneling resources away from consumers’ wants for government’s needs. The shippers, the railroads, and the public all suffered at the hands of a now union-dominated corporatism.

When the war ended in November 1918, McAdoo advocated that Congress extend federal control through 1923. To his dismay, Congress refused to stretch his czarist powers into peacetime. Despite the railroad unions’ support McAdoo never became president—he failed to receive Wilson’s blessing in 1920 because his father-in-law contemplated running for a third term, and the Ku Klux Klan’s endorsement of him in 1924 alienated Catholics.

With the Railroad Administration on its way out, the Republican-controlled Congress commenced hearings on postwar regulation. Naturally, the special interests descended upon Washington with their corporatist proposals. This time, railroads would not be caught off guard: their new lobbying organization, the Association of Railway Executives (ARE), stood ready to represent their interests. Thomas Cuyler, a director of the Pennsylvania Railroad and chairman of the ARE, proposed supplanting the shipper-controlled ICC with a new department of transportation. Railroads would submit their rate proposals to its secretary, who would then get the ICC to rubber-stamp them. In addition, the department and the ICC could encourage pooling agreements, grant federal incorporation, and institute minimum rates. Lastly, the department would possess the power to outlaw strikes. In stark contrast, oil, grain, and livestock shippers, represented by attorney Clifford Thorne, advocated returning to the prewar status quo. Their experience with nationalization had turned them into bitter foes of government ownership, and they wanted to bring back the old shipper-dominated ICC. For their part, the unions, led by the general counsel of the Big Four, Glenn Plumb, argued that the government should outright purchase the railroads and administer them through a presidentially appointed council.

Into the legislative meat grinder each proposal went. Worries that unions fomented communism in America made the Plumb plan dead on arrival, and the blatantly prorailroad transportation department similarly stalled. While the shippers worked on their own legislative bill, the ARE shifted its support to the Cummins bill. It was named after Iowa senator Albert Cummins, the formerly Populist politician who increasingly fell under the influence of the Railroad Administration’s newly ascended director general, Walker Hines. The Cummins bill, written in consultation with Hines and B&O president Daniel Willard, called for a transportation board, mandatory consolidation of weaker lines into stronger lines, a profit guarantee with any excess going toward weaker lines, a labor board to arbitrate between railroads and unions, and the outlawing of strikes. Willard especially wanted the guaranteed profit clause to subsidize the B&O and other weaker lines. However, stronger railroads bitterly protested, and shipper groups and unions lobbied Congress to nix the transportation board and the strike prohibition.

The compromise Transportation Act passed in February 1920. Importantly, it stipulated that the ICC could enforce pooling agreements and institute minimum rates—the railroads had finally fulfilled their long-standing anticompetitive desires. The ICC would set rates to guarantee a 5.5 to 6 percent rate of return, though railroads needed to send excess profits to the ICC for redistribution to weaker railroads. The ICC did not possess the power to compel mandatory consolidation, but railroads had to receive approval for mergers and acquisitions. This requirement not only weakened railroads’ encroachment on each other’s territories but also protected against antitrust restrictions. Lastly, the law created a new Railroad Labor Board to handle worker disputes.

In sum, the Transportation Act significantly enhanced the powers of the ICC and augmented railroad corporatism. Railroads could form explicitly government-backed cartels and monopolies, shippers could still register complaints with the ICC, and unions possessed a peacetime agency to fight for wage hikes. The eleven-man commission oversaw the two thousand-odd civil-service bureaucrats manning the ramparts and supervised railroad administration, finance, rates, car service, cases and disputes, valuation, statistics, and safety. The federal government had created a massive regulatory apparatus that organized railroads, shippers, and unions into different cartel bodies to make pricing and production decisions outside the market process. However, whether the new system would furnish more crony privileges to railroad, shipper, or union interests remained an open question.

Although many of the ICC’s personnel remained neutral or hostile to the railroads, to big businesses’ delight, the new rules caused the agency to act “in a manner that greatly resembled the operation of a cartel being run in the interests of the railroads.” Unlike in the Federal Reserve System, the Federal Trade Commission, or the Department of Commerce, personnel did not exert as much impact in the new ICC. The Transportation Act created so much overlapping bureaucratic bloat that the ICC failed to effectively enforce its myriad regulations. This opened the door for railroads to capture the rules for their own ends, securing substantial rate increases, disobeying excess profits redistribution, and ignoring ICC guidelines regarding new communities of interest. During the 1920s railroads’ average rate of return rose from 3.7 percent to 5.7 percent and their stocks soared 118 percent, with the largest lines disproportionately accruing the profits.

The ICC’s pricing policies primarily benefited the railroads. It is true that the Railroad Labor Board quickly ordered wage increases. But the ICC raised rates by 25 to 40 percent, more than covering the higher labor costs. While the ICC did decrease rates soon after the Depression of 1920–1921, the commission did not sufficiently recognize that overall prices had fallen even further, which caused real revenue per ton-mile to increase 70 percent between 1920 and 1922. Despite farmers’ repeated calls for lower rates, the ICC, in the name of rate stability, froze rates during the decade. This stabilized nominal and real revenue per ton-mile for the rest of the decade but dealt a crippling blow to competitive rate cutting and flexible pricing. The ICC failed to devote enough time and resources to taking the excess profits their rate policies helped generate—of $300 million in recapturable profits railroads returned less than $10 million.

Railroads did not delay in exploiting the ICC’s consolidation provisions. In 1920 the ICC hired Harvard economist William Ripley to devise a voluntary consolidation plan. After a year and a half of research, Ripley and the ICC proposed reorganizing the nation’s railroads into nineteen regional combinations, which Commerce Secretary Herbert Hoover backed. Leading railroads balked at the consolidation scheme—they wanted to remain in the driver’s seat. Railroads instead repeatedly requested that the ICC approve interlocking directorates and stock purchases in competing lines to create their preferred monopoly systems. The agency, unable to institute its preferred consolidations, agreed and approved almost five thousand requests for individuals to sit on multiple boards and allowed combinations involving 51,000 miles of track (20 percent of the nation’s total mileage). The Pennsylvania Railroad, for example, replenished its community of interest by purchasing significant stakes in the Pittsburgh & West Virginia Railway and the New Haven. Commissioner Thomas Woodlock, an appointee of President Calvin Coolidge and a financial writer who had served as a director of the Pere Marquette Railroad in Michigan, approved many consolidation requests. Woodlock’s appointment, note Ari and Olive Hoogenboom, signaled an “ascending big-business influence” that reminded railroads of the good old days of the commission at the turn of the century.

Wall Street investment banks returned to their time-honored business. From 1920 to 1933 J. P. Morgan & Co. marketed nearly $2 billion of railroad securities. Most notably, the investment bank channeled over $150 million to Oris and Mantis Van Sweringen in Cleveland. The brothers set out to build a railroad empire centered around their New York, Chicago & St. Louis Railroad. Using borrowed money, the Van Sweringens established holding companies to bypass various ICC restrictions and purchased controlling interests in the Erie, the Chesapeake & Ohio, and other railroads. They moved in on Missouri Pacific Railroad stock; once consummated, the deal would enable the creation of a railroad conglomerate that stretched from the Atlantic to the Pacific. By 1929 their wealth surpassed $100 million, and they commanded the fifth largest railroad system in the United States. Their newly formed holding company, the Morgan-constructed Alleghany Corporation, listed Morgan partners Jack Morgan and Thomas Lamont; the president of National City Bank, Charles Mitchell; and the chairman of Chase National Bank, Albert Wiggin, as prominent owners. The Wall Street partnership with the railroads was alive and kicking.

Lest the railroad unions think that they would receive no new favors, Congress passed the corporatist Railway Labor Act in 1926. Two union attorneys connected to Glenn Plumb, with the help of the omnipresent labor cartelist Hoover, had drafted a bill that created new labor boards packed with union representatives. To defeat this prounion measure, the general counsel of the Association of Railway Executives, Alfred Thom, got Congress to pass a substitute measure. The Railway Labor Act created a multistep process of mediation and arbitration through presidentially appointed boards that replaced the older Railroad Labor Board. Both railroads and unions gained. Railroads received a law that prolonged and rigidified the wage-negotiating process, which weakened radical labor leaders and delayed strikes. Churella writes that “the negotiations seemed interminable, but that was precisely the point” from the railroads’ point of view.The labor cartels secured compulsory arbitration, which required the railroads to go to the negotiating table. Unions used the new legislation to reduce labor competition: by the end of the decade unions had reached new agreements with railroads that eliminated many blacks from train, shop, and rail employment. The railroads and unions might have been happy, but the major downside of this bureaucratization of the wage-setting process was that wage rates in the railroad industry became inflexible downward.

During the 1920s the railroads had finally achieved their cartelist goals through the Transportation Act. The ICC’s rules setting minimum rates, guaranteeing profits, and allowing consolidations restored railroad earnings, encouraged consolidations, and reduced competition from other railroads. Prohibitions on rate cutting and arbitration processes did not only reduce competitive pressures; like the industrial giants, railroads increasingly adopted rigid rates and wages. The rapid rate cutting and competition of the past had given way to administered pricing and regimented markets.

Yet railroads did not totally succeed in eliminating market pressures because transportation competition reappeared in another form. Into the railroads’ idyll crashed a new menace—truckers. Automobile firms had experienced meteoric growth over the previous two decades. The greater freedom to travel generated incredible benefits for the public, who rapidly purchased the new technology. The assets of Ford and General Motors (the latter taken over by the Morgans in the early 1920s) mushroomed nearly 2,000 percent, from a combined $94 million in 1913 to $1.94 billion in 1929 (as a reference, the Pennsylvania Railroad’s assets increased only 120 percent, from $940 million to $2.07 billion, over the same period). Enterprising firms in the industry constructed private roads to encourage the adoption and use of trucks and cars. Henry Ford gifted land and money to develop roads in Michigan, and Goodyear Tire & Rubber, smaller car manufacturers, and cement producers raised millions to help construct roads such as the Dixie Highway (Detroit to Florida) and the Lincoln Highway (New York to San Francisco).

By and large, though, markets would not get to decide how many resources to allocate to road construction. Being born into a corporatist state, auto interests quickly sprouted. The American Automobile Association, the National Brick Paving Manufacturers Association, the Rubber Association of the United States, the American Association of State Highway Officials, and others lobbied for federal and state cronyism that subsidized the construction of roads and highways at taxpayer expense. Congress agreed to their demands when it passed the Federal Aid Road Act of 1916 and granted $75 million to states for road construction over a five-year period. In the 1920s, federal, state, and local governments spent nearly $8 billion on highway projects. While 58.5 percent of the costs came from states’ gasoline taxes and vehicle fees, the rest fell to the general taxpayer, regardless of whether they were part of the motoring public. This meant that governments directed more factors of production to roadmaking than the market deemed economical.

With such government munificence, trucking and busing zoomed ahead, cutting into railroad profits from freight shipments and passenger travel. The technology provided many relative advantages, especially the ability of truckers to deliver door-to-door service. With few barriers to entry, 65 percent of trucks belonged to one-man firms, and the proliferation of such competition lowered shipping costs. Commissions regulated trucks on the state level, but the ICC, oblivious to the rapid innovation, did not touch motor vehicles.

The Pennsylvania, the Chicago, Burlington & Quincy, and other railroads complained about the competitive invasion. They vented at how governments subsidized truckers by building roads—conveniently forgetting their own government-bestowed land grants and loans decades ago. When the Supreme Court weakened state commissions in 1925 and 1926 by declaring interstate trucking regulation the federal government’s exclusive purview, the ICC held hearings on the subject and Congress started debating proposals. The railroads sprang into action.

The ARE maintained two regulatory aims. First, it advocated granting railroads the ability to branch into the trucking business. Railroads wanted their own truck fleets, a deregulation that independent truckers vigorously opposed. Second, general counsel Alfred Thom asked “that the terms of competition shall be fair.”This was code for extending the ICC’s anti-price-cutting and antientry regulations to truckers. The railroads denied truckers’ accusations that this was their intention, but the evidence is on the truckers’ side. For example, at ICC hearings in 1926, the vice president of the Union Pacific, H. M. Adams, testified that because new railroad construction and acquisitions required the permission of the ICC, “to protect the revenues of the railways . . . similar restrictions [should] be placed upon bus and truck lines.”In other words, railroad revenue needed to be protected by regulating automobile competition. Spotting the regulatory dragnet that awaited them, truckers defensively lobbied to remain on the outside. The ICC and Congress failed to reach a conclusion, and the railroads had to bide their time for a more propitious legislative environment.

By the end of the 1920s the corporatist state was thoroughly and completely embedded in the railroad industry. Railroads’ control of the ICC had varied considerably before then. Initial success at acquiring laws that fostered cartelization and reduced rebating provoked a hostile backlash from shippers and unions. These interests lobbied Congress to shift power away from the railroads until the transportation companies faced bankruptcy by the advent of World War I. The railroads desperately worked with the new Railroad Administration to bypass the ICC and minimize the power of shippers, though unions accrued most of the gains. It was not until the 1920s that the railroads achieved a satisfactory corporatism that explicitly fostered pools and protected profits. Changes in commissioners only partially explain this turnaround; the main reason lies in railroads’ capturing the legislative changes to the ICC’s powers that enabled it to set minimum rates and guarantee profits.

Thus, in developing and defending their preferred regulatory systems, the major elements of big business—banking, manufacturing, and railroads—had ushered in the Corporatist Era. The same could be said for the food and drug interests that had branched off from the nation’s manufacturing interests in the late nineteenth century. Meatpackers, food processors, and even doctors eagerly sought to restrict competition through commissions that enforced health and safety standards. Like the others, they would achieve cartelizing success.

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“Receivers of the Baltimore and Ohio Railroad to the Chairman of the Interstate Commerce Commission,” December 20, 1898, quoted in Albert J. Churella, The Pennsylvania Railroad, vol. 1, Building an Empire, 1846–1917 (Philadelphia: University of Pennsylvania Press, 2013), 644.

Vincent P. Carosso, The Morgans: Private International Bankers, 1854–1913 (Cambridge, MA: Harvard University Press, 1987), 386, 474–79, 499–500, 607–8; Alfred D. Chandler Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, MA: Harvard University Press, 1977), 172–74; Churella, Pennsylvania, 1:628, 644–49; Ari Hoogenboom and Olive Hoogenboom, A History of the ICC: From Panacea to Palliative (New York: W. W. Norton, 1976), 40–41; Jeremiah D. Lambert and Geoffrey S. Stewart, The Anointed: New York’s White-Shoe Law Firms (Guilford, CT: Lyons Press, 2021), 12, 49–50; and Lloyd J. Mercer, “Edward Henry Harriman,” in Encyclopedia of American Business History and Biography: Railroads in the Nineteenth Century, ed. Robert L. Frey (New York: Facts on File, 1988), 155, 159–61.

Martin Knapp and Paul Morton, Speeches before the National Association of Merchants and Travelers, August 7, 1899 (n.p., 1899), 7–8, quoted in Gabriel Kolko, Railroads and Regulation, 1877–1916 (Princeton, NJ: Princeton University Press, 1965), 87.

Alexander Cassatt to Theodore Roosevelt, April 1, 1901, quoted in Robert H. Wiebe, Businessmen and Reform: A Study of the Progressive Movement (Cambridge, MA: Harvard University Press, 1962), 52.

Churella, Pennsylvania, 1:665; Kolko, Railroads, 87, 90–94, 97–99, 117, 198–99; Murray N. Rothbard, The Progressive Era, ed. Patrick Newman (Auburn, AL: Mises Institute, 2017), 80–81; and Wiebe, Businessmen, 51–52.

William Allen White, “One Year of Roosevelt,” Saturday Evening Post, October 4, 1902, 3.

Henry Adams to Elizabeth Cameron, April 10, 1904, in The Letters of Henry Adams, 1892–1918, ed. Worthington Chauncey Ford (New York: Houghton Mifflin, 1938), 432.

Susan Berfield, The Hour of Fate: Theodore Roosevelt, J. P. Morgan, and the Battle to Transform American Capitalism (New York: Bloomsbury, 2020), 37, 40; Larry Haeg, Harriman vs. Hill: Wall Street’s Great Railroad War (Minneapolis: University of Minnesota Press, 2013), 244, 258, 264; and Gerard Helferich, An Unlikely Trust: Theodore Roosevelt, J. P. Morgan, and the Improbable Partnership that Remade American Business (Guilford, CT: Lyons Press, 2018), 16, 30, 37, 50–51.

Railroad Gazette, February 20, 1903, 134.

Edward P. Bacon, quoted in Wiebe, Businessmen, 53.

Oxford Research Encyclopedia of American History, s.v. “Railroads in US History,” by Albert J. Churella, last modified August 28, 2018, https://doi.org/10.1093/acrefore/9780199329175.013.515.

Berfield, Hour, 249–50; Churella, Pennsylvania, 1:662; Kolko, Railroads, 98–101; Lambert and Stewart, Anointed, 51–52; Rothbard, Progressive, 81–82, 223–24; and Wiebe, Businessmen, 52–53.

Jim Powell, Bully Boy: The Truth about Theodore Roosevelt’s Legacy (New York: Crown Forum, 2006), 142.

Wisconsin Laws of 1905, chapter 360, quoted in Lafayette G. Harter Jr., John R. Commons, His Assault on Laissez-Faire (Corvallis: Oregon State University Press, 1962), 92.

Balthasar Meyer, “Government Regulation of Railway Rates,” Publications of the American Economic Association 7, no. 1 (1906): 74, 77.

“Current Comment,” Locomotive Firemen’s Magazine, November 1899, 595.

Albert J. Churella, The Pennsylvania Railroad, vol. 2, The Age of Limits, 1917–1933 (Bloomington: Indiana University Press, 2023), 225.

Eric Arnesen, “‘Like Banquo’s Ghost, It Will Not Down’: The Race Question and the American Railroad Brotherhoods, 1880–1920,” American Historical Review 99, no. 5 (December 1994): 1609, 1614; David E. Bernstein, Only One Place of Redress: African Americans, Labor Regulations, and the Courts from Reconstruction to the New Deal (Durham, NC: Duke University Press, 2001), 48–51; Churella, Pennsylvania, 1:684, 2:225–26; and Nicola Giocoli, “No Place for Law and Economics: The Controversy over Railroad Regulation before the Hepburn Act,” Research in the History of Economic Thought and Methodology 34A (2016): 326, 328.

William Doezema, “Walker D. Hines,” in Encyclopedia of American Business History and Biography: Railroads in the Age of Regulation, 1900–1980, ed. Keith L. Bryant Jr. (New York: Facts on File, 1988), 205; Robert Fogel et al., Political Arithmetic: Simon Kuznets and the Empirical Tradition in Economics (Chicago: University of Chicago Press, 2013), 15–17; Hoogenboom and Hoogenboom, History, 47–48; Kolko, Railroads, 102–5, 117–18, 120; Horace Samuel Merrill and Marion Galbraith Merrill, The Republican Command, 1897–1913 (Lexington: University Press of Kentucky, 1971), 80–81, 83–87, 212; Rothbard, Progressive, 82; and Richard H. K. Vietor, “Businessmen and the Political Economy: The Railroad Rate Controversy of 1905,” Journal of American History 64, no. 1 (June 1977): 47, 49–50, 56–57, 60.

George Perkins to J. P. Morgan, June 25, 1906, 3, George W. Perkins Papers, Rare Book and Manuscript Library, Columbia University.

Churella, Pennsylvania, 1:675.

Perkins to Morgan, June 25, 1906, 3.

George H. Burgess and Miles C. Kennedy, Centennial History of the Pennsylvania Railroad Company, 1846–1946 (Philadelphia: Pennsylvania Railroad, 1949), 461; Churella, Pennsylvania, 1:662, 665–78, 688, 690, 696; Churella, “Railroads,” 15; Hoogenboom and Hoogenboom, History, 54, 57; Kolko, Railroads, 145; Albro Martin, James J. Hill and the Opening of the Northwest (Minneapolis: Minnesota Historical Society Press, 1991), 538, 541–42; Rothbard, Progressive, 83–86; Jean Strouse, Morgan: American Financier (New York: Harper Perennial, 2000), 563; and Richard Sutch and Susan B. Carter, eds., Historical Statistics of the United States, vol. 3, Economic Structure and Performance (New York: Cambridge University Press, 2006), 757.

Albro Martin, Enterprise Denied: Origins of the Decline of American Railroads, 1897–1917 (New York: Columbia University Press, 1971), 124.

“Statement by Maxwell Evarts,” 7–9, quoted in Maury Klein, The Life and Legend of E. H. Harriman (Chapel Hill: University of North Carolina Press, 2000), 396.

Berfield, Hour, 249–50; Klein, Harriman, 362–71, 392–93, 395–401, 404, 408–9; Martin, Enterprise, 85, 118, 120; and Rothbard, Progressive, 225.

Martin, Enterprise, 129, 133; and Sutch and Carter, Historical, 3:757.

Hoogenboom and Hoogenboom, History, 37, 48, 54–55, 58; Martin, Enterprise, 143–45, 178–80, 182; and Wiebe, Businessmen, 85.

Churella, Pennsylvania, 1:687–88; Kolko, Railroads, 188, 192–93, 198–99; Martin, Enterprise, 140, 146, 180–93; Elizabeth Sanders, Roots of Reform: Farmers, Workers, and the American State, 1877–1917 (Chicago: University of Chicago Press, 1999), 202–9; and Wiebe, Businessmen, 85–87.

Louis D. Brandeis, “The Opportunity in the Law,” May 1905, in Business—A Profession (Boston: Small, Maynard, 1914), 337.

Louis D. Brandeis, Before the Interstate Commerce Commission, Docket No. 3400 (Boston, 1911), 180; John Braeman, “‘The People’s Lawyer’ Revisited: Louis D. Brandeis versus the United Shoe Machinery Company,” American Journal of Legal History 50, no.3 (July 2008–10): 284; Churella, Pennsylvania, 1:697; Price Fishback, “The Progressive Era,” in Government and the American Economy: A New History, by Price Fishback et al. (Chicago: University of Chicago Press, 2007), 308; Hoogenboom and Hoogenboom, History, 62–66; Thomas C. Leonard, Illiberal Reformers: Race, Eugenics, and American Economics in the Progressive Era (Princeton, NJ: Princeton University Press, 2016), 170–84; Martin, Enterprise, 194–230; Thomas K. McCraw, Prophets of Regulation (Cambridge, MA: Harvard University Press, 1984), 82, 87–88, 91–93; and Wiebe, Businessmen, 87.

Churella, Pennsylvania, 1:642, 679–83, 698; Giocoli, “Place,” 308–10; Encyclopaedia Britannica, 12th ed. (1922), s.v. “Hadley, Arthur Twining”; Hoogenboom and Hoogenboom, History, 72; and Martin, Enterprise, 164, 256–57, 269.

“Retrospect of 1914,” Commercial & Financial Chronicle, January 9, 1915, 84. Vincent P. Carosso, Investment Banking in America: A History (Cambridge, MA: Harvard University Press, 1970), 220; Carosso, Morgans, 608–9, 612; Hoogenboom and Hoogenboom, History, 81; Maury Klein, Union Pacific, vol. 2, 1894–1969 (Minneapolis: University of Minnesota Press, 2006), 195–96, 206–7, 254, 281; Kolko, Railroads, 165, 218; Martin, Enterprise, 260; Rothbard, Progressive, 87; and Sutch and Carter, Historical, 3:757.

Hoogenboom and Hoogenboom, History, 71–75; and Martin, Enterprise, 267–94, 299–311.

Rothbard, Progressive, 87.

“Railroads to Ask for Better Rates,” New York Times, April 30, 1913, 2.

Frank Trumbull, quoted in Wiebe, Businessmen, 202.

Traffic World (October 31, 1914): 798, quoted in Rothbard, Progressive, 88.

K. Austin Kerr, American Railroad Politics, 1914–1920: Rates, Wages, and Efficiency (Pittsburgh: University of Pittsburgh Press, 1968), 22–23; Klein, Union, 2:204–5, 211; Martin, Enterprise, 265; and Rothbard, Progressive, 88–90.

Quoted in Klein, Union, 2:215.

Kerr, American, 33–36; Klein, Union, 2:212–18; John F. Stover, American Railroads, 2nd ed. (Chicago: University of Chicago Press, 1997), 177; and Paul Michel Taillon, Good, Reliable, White Men: Railroad Brotherhoods, 1877–1917 (Chicago: University of Illinois Press, 2009), 159–60.

Churella, Pennsylvania, 2:36–37; Robert Higgs, Crisis and Leviathan: Critical Episodes in the Growth of American Government (Oakland, CA: Independent Institute, 2012), 129; Hoogenboom and Hoogenboom, History, 77–83, 86; Kerr, American, 46, 50–52, 57–68; Merrill and Merrill, Republican, 231; Anthony Patrick O’Brien, “The ICC, Freight Rates, and the Great Depression,” Explorations in Economic History 26, no. 1 (January 1989): 75; Murray N. Rothbard, “War Collectivism in World War I,” in Rothbard, Progressive, 379–80; John F. Stover, “Daniel Willard,” in Bryant Jr., Encyclopedia, 482; and Sutch and Carter, Historical, 3:158, 758.

Robert Higgs, “Regulatory Harmonization: A Sweet-Sounding, Dangerous Development,” in Against Leviathan: Government Power and a Free Society (Oakland, CA: Independent Institute, 2004), 76.

Churella, Pennsylvania, 2:36–37, 44; Douglas B. Craig, “‘Don’t You Hear All the Railroad Men Squeak?’: William G. McAdoo, the United States Railroad Administration, and the Democratic Presidential Nomination of 1924,” Journal of American Studies 48, no. 3 (August 2014): 789–81; Kerr, American, 72–80, 83–84; and Wallace P. Mullin, “Railroad Revisionists Revisited: Stock Market Evidence from the Progressive Era,” Journal of Regulatory Economics 17, no. 1 (February 2000): 39.

Clerks of the Northern Pacific Head of the Bay Freight Office to William G. McAdoo, May 11, 1918, quoted in Craig, “McAdoo,” 784.

Bernstein, Redress, 52.

“The Georgia Railroad Strike,” Brotherhood of Locomotive Firemen and Enginemen’s Magazine 47, no. 2 (August 1909): 255.

Bernstein, Redress, 50–53; Churella, Pennsylvania, 2:82, 228–32; Craig, “McAdoo,” 782–84; Sterling D. Spero and Abram L. Harris, The Black Worker (New York: Columbia University Press, 1931), 289–91; Stover, American, 176–77; Walter E. Williams, South Africa’s War against Capitalism (New York: Praeger, 1989), 74; and Leo Wolman, The Growth of American Trade Unions, 1880–1923 (New York: National Bureau of Economic Research, 1924), 53–55, 116–17.

Hoogenboom and Hoogenboom, History, 85.

Higgs, Crisis, 146–47; Hoogenboom and Hoogenboom, History, 86–88; Kerr, American, 84–87, 113–14; Rothbard, “Collectivism,” 381–82; and Sutch and Carter, Historical, 3:158, 758.

Craig, “McAdoo,” 785–95; and Linda Gordon, The Second Coming of the KKK: The Ku Klux Klan of the 1920s and the American Political Tradition (New York: Liveright, 2017), 166–71.

Churella, Pennsylvania, 2:54–58, 513; Robert F. Holzweiss, “Politics, Profits, and the Public Interest: Government, Railroads, and Interest Groups, 1827–1976,” PhD diss., Texas A&M (2001), 63–65; Hoogenboom and Hoogenboom, History, 91–99, 109; Kerr, American, 149–55, 206, 215, 218; Klein, Union, 2:231–38; Rothbard, “Collectivism,” 395–96; and Richard Sutch and Susan B. Carter, Historical Statistics of the United States, vol. 5, Governance and International Relations, ed. (New York: Cambridge University Press, 2006), 201.

O’Brien, “ICC,” 74.

Robert A. Emery, “Middle-Aged Agility: The ICC and Unregulated Trucking in the 1920’s and 1930’s,” Journal of Transportation Law, Logistics, and Policy 75, no. 1 (Winter 2008): 37; Hoogenboom and Hoogenboom, History, 99–105; O’Brien, “ICC,” 75; and Sutch and Carter, Historical, 3:758.

Hoogenboom and Hoogenboom, History, 111. Churella, Pennsylvania, 2:508, 514–24, 564–68, 791; Holzweiss, “Politics,” 92; Hoogenboom and Hoogenboom, History, 105–11; Mark H. Rose, Bruce E. Seely, and Paul F. Barrett, The Best Transportation System in the World: Railroads, Trucks, Airlines, and American Public Policy in the Twentieth Century (Philadelphia: University of Pennsylvania Press, 2006), 22–25; and Stover, American, 205.

Carosso, Investment, 256; Ron Chernow, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance (New York: Simon and Schuster, 1990), 257, 308–10; Churella, Pennsylvania, 2:524–52; Harold van B. Cleveland and Thomas F. Huertas, Citibank, 1812–1970 (Cambridge, MA: Harvard University Press, 1985), 311; James Grant, The Forgotten Depression, 1921: The Crash That Cured Itself (New York: Simon and Schuster, 2014), 109; Edward M. Lamont, The Ambassador from Wall Street: The Story of Thomas W. Lamont, J. P. Morgan’s Chief Executive (Lanham, MD: Madison Books, 1994), 225, 253–54; and Rose, Seely, and Barrett, Transportation, 25–26.

Churella, Pennsylvania, 2:178.

Bernstein, Redress, 57–58; Churella, Pennsylvania, 2:174–82; Murray N. Rothbard, America’s Great Depression (Auburn, AL: Ludwig von Mises Institute, 2008), 203–4; and Murray N. Rothbard, “Herbert Hoover and the Myth of Laissez-Faire,” in Rothbard, Progressive, 519–20.

James T. Bennett, Highway Heist: America’s Crumbling Infrastructure and the Way Forward (Oakland, CA: Independent Institute, 2022), 106–09; Philip H. Burch Jr., Elites in American History, vol. 2, The Civil War to the New Deal (New York: Holmes and Meier, 1981), 132, 202; Philip H. Burch Jr., Elites in American History, vol. 3, The New Deal to the Carter Administration (New York: Holmes and Meier, 1981), 14–15; Chernow, Morgan, 223–24; and Burton W. Folsom Jr., Empire Builders: How Michigan Entrepreneurs Helped Make America Great (Traverse City, MI: Rhodes and Easton, 1998), 153.

Bennett, Highway, 76, 91–92, 99–100; William R. Childs, Trucking and the Public Interest: The Emergence of Federal Regulation, 1914–1940 (Knoxville: University of Tennessee Press, 1985), 15, 31–39; and Rose, Seely, and Barrett, Transportation, 42, 44–45.

Alfred P. Thom, “The Railroads and the Public,” Railway Age, October 23, 1926, 785.

“Motor Transport Hearings Ended,” Railway Age, October 30, 1926, 839.

Childs, Trucking, 53, 70–73; Klein, Union, 2:264–68; “Motor,” 839–40; Dorothy Robyn, Braking the Special Interests: Trucking Deregulation and the Politics of Policy Reform (Chicago: University of Chicago Press, 1987), 13; and Rose, Seely, and Barrett, Transportation, 31–32, 46–47, 52–53.