The Revenge Origins of the Sherman Antitrust ActTags Cronyism and CorporatismProtectionism and Free TradeU.S. History
With new discussion of regulating and even possibly breaking up social media and tech giants like Facebook and Amazon, or blocking the proposed acquisition of Time Warner by AT&T, antitrust policy is back in current events. Coincidentally, revenge and spite motivations for politicians are also back in political news, given the aftermath of the contentious 2016 presidential election. It has become all too obvious that many Republicans and Democrats are refusing to work with, and even intentionally obstructing, President Donald Trump’s agenda simply because he personally attacked them (and continues to do so). In addition, his runner up and arch-nemesis Hillary Clinton continues to blame everyone except herself for losing the presidential race. It is all too fitting, then, that revenge and spite actually played a role in the origins of the first federal antitrust law, the 1890 Sherman Act.
Historians as well as economists have long analyzed the broader special interest motivations for the Sherman Act. The traditional narrative is that big business Republicans supported antitrust legislation because it would deflect attention away from the true source of many monopolies: the protective tariff. Dead letter and poorly enforced legislation would be of little threat to large businesses while also allowing the tariff to go untouched, and possibly even raised. In his new book titled The Progressive Era, edited by the present writer, Murray Rothbard supported this narrative.
“[W]e know that the Sherman Act was rarely used by any of the administrations, and that it sunk into innocuous desuetude by the time of the McKinley administration. That it was designed as a sop to public opinion and to take the heat off the tariff therefore seems likely.”1
But he also mentioned another, more personal motivation: the venerable Senator John Sherman of Ohio, who was an early supporter of antitrust legislation and who the act was named after, pushed for an antitrust law partially as a way of enacting revenge on his political rival, former Michigan Governor Russell Alger. The present writer built off of Rothbard’s insights and recently wrote a paper on this topic titled “Revenge: John Sherman, Russell Alger and the origins of the Sherman Act.”
The story is simple. All his life John Sherman wanted to be president and repeatedly tried to secure the Republican nomination. His last real chance due to his old age was in 1888 when he was the front runner for the nomination. However, once the balloting began at the June convention Sherman was unable to obtain a majority of delegates and eventually lost to dark horse candidate Benjamin Harrison of Indiana. Sherman was furious and much like Hillary Clinton, looked for people to blame besides himself. The main target of his vitriol was Russell Alger who he charged with bribing away southern delegates. After the convention was over Sherman made his accusations public and the controversy festered in the news for months.
Sherman maintained his conviction for years and wrote in his 1895 memoir that “I believe and had, as I thought, conclusive proof that the friends of General Alger substantially purchased the votes of many of the delegates from the southern states who had been instructed by their conventions to vote for me.” Much like Hillary Clinton’s bitter resentment at people who were supposed to vote for her but did not do so, Sherman’s blame game was apparent to his contemporaries. After Sherman’s memoir came out writer Joseph Bishop noted: “John Sherman’s conduct in defeat betrays less fortitude and self-restraint than that of any other candidate we have ever had. He is the first to charge his rivals . . .” and “These extraordinary charges, it should be borne in mind, are not made in the first heat of anger and disappointment, but are set down deliberately in a book and published fully seven years later.”
A major goal of Sherman for the rest of his career, now that he lost his last chance at the presidency, was to deprive the man who he felt denied him his deserved chance. Conveniently for Sherman, an opportunity shortly appeared. Alger had become embroiled in a legal case titled Richardson v. Buhl et al. that was decided by the Michigan Supreme Court on November 15th, 1889. Alger and a business partner loaned money to the Richardson Match Company which was later purchased by the Diamond Match Company, an organization whose purpose was to try and monopolize the friction match market. There was a dispute over payment, and so the interested parties went to court. The Michigan Supreme Court was stacked with rabid antimonopolists and considered it unable to help resolve contracts for any company whose goal was monopoly. After the justices charged Alger with a major role in the formation of the Diamond Match Company (who no doubt realized the political implications for the former Republican governor) they threw the case out of court. Only the minority opinion correctly realized that Alger had little to no involvement in the Diamond Match Company.
Sherman, who was previously interested in antitrust legislation, had seen his prior bills never get out of committee. After the verdict was handed down, at the beginning of the 51st Congress Sherman reintroduced his bill in early December and muscled it through the Senate Finance Committee so he could give a speech on the Senate floor. There, Sherman discussed the bill on March 21st, 1890, and described state court cases that dealt with the threat of various monopolies. He spent an enormous amount of time on a case he called David M. Richardson v. Russell A. Alger et al., quoting multiple paragraphs from the court case right up until the minority opinion. Sherman’s goal was clearly seen by his contemporaries: the antitrust bill was a way of getting payback on Alger because he gave Sherman a visible platform to publicly skewer his rival and sabotage his future presidential chances.
On March 25th, the August New York Times noted:
Of course it was with reluctance that Mr. Sherman directed the attention of the Senate and the country to Gen. Alger’s connection with this “unlawful” combination, and to the fact that the Supreme Court of Gen. Alger’s own State had denounced the organization so emphatically . . . [T]he case, as he said, was “quite a leading one” . . . [I]n 1892 Gen. Alger will scarcely look for support and comfort in those pages of the Congressional Record where this speech may be found.
Most newspapers did not recognize that Sherman lied by rearranging the name of the court case, not quoting the minority opinion, and repeatedly mentioning Alger’s name in his speech. Sherman subtly accused Alger of heavy involvement in the Diamond Match Company when Alger had very little influence. The scandal would hang heavy over Alger, and as a result of this and other issues he never got the Republican nomination. Sherman’s tactic worked.
As the importance of the Sherman Act increased during the Progressive Era the discussion of this motivation disappeared from the record. When it was investigated by modern historians they simply dismissed out of hand the revenge motive2. Hans Thorelli, author of the acclaimed The Federal Antitrust Policy (1955), snidely wrote “The present writer is unable to believe that such a personal matter would play a part of significance as a factor motivating Sherman with regard to the antitrust bill or, in fact, any other major legislative measure.” The reason? Just because. Instead, Thorelli spent his efforts searching for a loftier more public interested reason.
Today analysts continue to ascribe to politicians noble and public interest motivations for supporting particular pieces of legislation. But the origins of the Sherman Act provide an important reminder that politicians can be partly motivated by revenge, greed, hatred, jealously, and spite. In today’s day and age, when public confidence in their representatives is at an all-time low and people have little trust in government, this should come as no surprise.