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History of the United States by Charles A. Beard and Mary R. Beard

«·Political Reforms · CHAPTER XXII·»

Measures of Economic Reform

The Spirit of American Reform.—The purification of the ballot, the restriction of the spoils system, the enlargement of direct popular control over the organs of government were not the sole answers made by the reformers to the critics of American institutions. Nor were they the most important. In fact, they were regarded not as ends in themselves, but as means to serve a wider purpose. That purpose was the promotion of the “general welfare.” The concrete objects covered by that broad term were many and varied; but they included the prevention of extortion by railway and other corporations, the protection of public health, the extension of education, the improvement of living conditions in the cities, the elimination of undeserved poverty, the removal of gross inequalities in wealth, and more equality of opportunity.

All these things involved the use of the powers of government. Although a few clung to the ancient doctrine that the government should not interfere with private business at all, the American people at large rejected that theory as vigorously as they rejected the doctrines of an extreme socialism which exalts the state above the individual. Leaders representing every shade of opinion proclaimed the government an instrument of common welfare to be used in the public interest. “We must abandon definitely,” said Roosevelt, “the laissez-faire theory of political economy and fearlessly champion a system of increased governmental control, paying no attention to the cries of worthy people who denounce this as socialistic.” This view was shared by Mr. Taft, who observed: “Undoubtedly the government can wisely do much more … to relieve the oppressed, to create greater equality of opportunity, to make reasonable terms for labor in employment, and to furnish vocational education.” He was quick to add his caution that “there is a line beyond which the government cannot go with any good practical results in seeking to make men and society better.”

The Regulation of Railways.—The first attempts to use the government in a large way to control private enterprise in the public interest were made by the Northwestern states in the decade between 1870 and 1880. Charges were advanced by the farmers, particularly those organized into Granges, that the railways extorted the highest possible rates for freight and passengers, that favoritism was shown to large shippers, that fraudulent stocks and bonds were sold to the innocent public. It was claimed that railways were not like other enterprises, but were “quasi-public” concerns, like the roads and ferries, and thus subject to government control. Accordingly laws were enacted bringing the railroads under state supervision. In some cases the state legislature fixed the maximum rates to be charged by common carriers, and in other cases commissions were created with the power to establish the rates after an investigation. This legislation was at first denounced in the East as nothing less than the “confiscation” of the railways in the interest of the farmers. Attempts to have the Supreme Court of the United States declare it unconstitutional were made without avail; still a principle was finally laid down to the effect that in fixing rates state legislatures and commissions must permit railway companies to earn a “fair” return on the capital invested.

In a few years the Granger spirit appeared in Congress. An investigation revealed a long list of abuses committed by the railways against shippers and travelers. The result was the interstate commerce act of 1887, which created the Interstate Commerce Commission, forbade discriminations in rates, and prohibited other objectionable practices on the part of railways. This measure was loosely enforced and the abuses against which it was directed continued almost unabated. A demand for stricter control grew louder and louder. Congress was forced to heed. In 1903 it enacted the Elkins law, forbidding railways to charge rates other than those published, and laid penalties upon the officers and agents of companies, who granted secret favors to shippers, and upon shippers who accepted them. Three years later a still more drastic step was taken by the passage of the Hepburn act. The Interstate Commerce Commission was authorized, upon complaint of some party aggrieved, and after a public hearing, to determine whether just and reasonable rates had been charged by the companies. In effect, the right to fix freight and passenger rates was taken out of the hands of the owners of the railways engaged in interstate commerce and vested in the hands of the Interstate Commerce Commission. Thus private property to the value of $20,000,000,000 or more was declared to be a matter of public concern and subject to government regulation in the common interest.

Municipal Utilities.—Similar problems arose in connection with the street railways, electric light plants, and other utilities in the great cities. In the beginning the right to construct such undertakings was freely, and often corruptly, granted to private companies by city councils. Distressing abuses arose in connection with such practices. Many grants or franchises were made perpetual, or perhaps for a term of 999 years. The rates charged and services rendered were left largely to the will of the companies holding the franchises. Mergers or unions of companies were common and the public was deluged with stocks and bonds of doubtful value; bankruptcies were frequent. The connection between the utility companies and the politicians was, to say the least, not always in the public interest.

American ingenuity was quick to devise methods for eliminating such evils. Three lines of progress were laid out by the reformers. One group proposed that such utilities should be subject to municipal or state regulation, that the formation of utility companies should be under public control, and that the issue of stocks and bonds must be approved by public authority. In some cases state, and in other cases municipal, commissions were created to exercise this great power over “quasi-public corporations.” Wisconsin, by laws enacted in 1907, put all heat, light, water works, telephone, and street railway companies under the supervision of a single railway commission. Other states followed this example rapidly. By 1920 the principle of public control over municipal utilities was accepted in nearly every section of the union.

A second line of reform appeared in the “model franchise” for utility corporations. An illustration of this tendency was afforded by the Chicago street railway settlement of 1906. The total capital of the company was fixed at a definite sum, its earnings were agreed upon, and the city was given the right to buy and operate the system if it desired to do so. In many states, about the same time, it was provided that no franchises to utility companies could run more than twenty-five years.

A third group of reformers were satisfied with nothing short of municipal ownership. They proposed to drive private companies entirely out of the field and vest the ownership and management of municipal plants in the city itself. This idea was extensively applied to electric light and water works plants, but to street railways in only a few cities, including San Francisco and Seattle. In New York the subways are owned by the city but leased for operation.

An East Side Street in New York

Tenement House Control.—Among the other pressing problems of the cities was the overcrowding in houses unfit for habitation. An inquiry in New York City made under the authority of the state in 1902 revealed poverty, misery, slums, dirt, and disease almost beyond imagination. The immediate answer was the enactment of a tenement house law prescribing in great detail the size of the rooms, the air space, the light and the sanitary arrangement for all new buildings. An immense improvement followed and the idea was quickly taken up in other states having large industrial centers. In 1920 New York made a further invasion of the rights of landlords by assuring to the public “reasonable rents” for flats and apartments.

Workmen’s Compensation.—No small part of the poverty in cities was due to the injury of wage-earners while at their trade. Every year the number of men and women killed or wounded in industry mounted higher. Under the old law, the workman or his family had to bear the loss unless the employer had been guilty of some extraordinary negligence. Even in that case an expensive lawsuit was usually necessary to recover “damages.” In short, although employers insured their buildings and machinery against necessary risks from fire and storm, they allowed their employees to assume the heavy losses due to accidents. The injustice of this, though apparent enough now, was once not generally recognized. It was said to be unfair to make the employer pay for injuries for which he was not personally responsible; but the argument was overborne.

About 1910 there set in a decided movement in the direction of lifting the burden of accidents from the unfortunate victims. In the first place, laws were enacted requiring employers to pay damages in certain amounts according to the nature of the case, no matter how the accident occurred, as long as the injured person was not guilty of willful negligence. By 1914 more than one-half the states had such laws. In the second place, there developed schemes of industrial insurance in the form of automatic grants made by state commissions to persons injured in industries, the funds to be provided by the employers or the state or by both. By 1917 thirty-six states had legislation of this type.

Minimum Wages and Mothers’ Pensions.—Another source of poverty, especially among women and children, was found to be the low wages paid for their labor. Report after report showed this. In 1912 Massachusetts took a significant step in the direction of declaring the minimum wages which might be paid to women and children. Oregon, the following year, created a commission with power to prescribe minimum wages in certain industries, based on the cost of living, and to enforce the rates fixed. Within a short time one-third of the states had legislation of this character. To cut away some of the evils of poverty and enable widows to keep their homes intact and bring up their children, a device known as mothers’ pensions became popular during the second decade of the twentieth century. At the opening of 1913 two states, Colorado and Illinois, had laws authorizing the payment from public funds of definite sums to widows with children. Within four years, thirty-five states had similar legislation.

Taxation and Great Fortunes.—As a part of the campaign waged against poverty by reformers there came a demand for heavy taxes upon great fortunes, particularly taxes upon inheritances or estates passing to heirs on the decease of the owners. Roosevelt was an ardent champion of this type of taxation and dwelt upon it at length in his message to Congress in 1907. “Such a tax,” he said, “would help to preserve a measurable equality of opportunity for the people of the generations growing to manhood.... Our aim is to recognize what Lincoln pointed out: the fact that there are some respects in which men are obviously not equal; but also to insist that there should be equality of self-respect and of mutual respect, an equality of rights before the law, and at least an approximate equality in the conditions under which each man obtains the chance to show the stuff that is in him when compared with his fellows.”

The spirit of the new age was, therefore, one of reform, not of revolution. It called for no evolutionary or utopian experiments, but for the steady and progressive enactment of measures aimed at admitted abuses and designed to accomplish tangible results in the name of public welfare.

General References

J. Bryce, The American Commonwealth.

R.C. Brooks, Corruption in American Life.

E.A. Ross, Changing America.

P.L. Haworth, America in Ferment.

E.R.A. Seligman, The Income Tax.

W.Z. Ripley, Railroads: Rates and Regulation.

E.S. Bradford, Commission Government in American Cities.

H.R. Seager, A Program of Social Reform.

C. Zueblin, American Municipal Progress.

W.E. Walling, Progressivism and After.

The American Year Book (an annual publication which contains reviews of reform legislation).

Research Topics

“The Muckrakers.”—Paxson, The New Nation (Riverside Series), pp. 309-323.

Civil Service Reform.—Beard, American Government and Politics (3d ed.), pp. 222-230; Ogg, National Progress (American Nation Series), pp. 135-142.

Direct Government.—Beard, American Government, pp. 461-473; Ogg, pp. 160-166.

Popular Election of Senators.—Beard, American Government, pp. 241-244; Ogg, pp. 149-150.

Party Methods.—Beard, American Government, pp. 656-672.

Ballot Reform.—Beard, American Government, pp. 672-705.

Social and Economic Legislation.—Beard, American Government, pp. 721-752.


1. Who were some of the critics of abuses in American life?

2. What particular criticisms were advanced?

3. How did Elihu Root define “invisible government”?

4. Discuss the use of criticism as an aid to progress in a democracy.

5. Explain what is meant by the “merit system” in the civil service. Review the rise of the spoils system.

6. Why is the public service of increasing importance? Give some of its new problems.

7. Describe the Australian ballot and the abuses against which it is directed.

8. What are the elements of direct government? Sketch their progress in the United States.

9. Trace the history of popular election of Senators.

10. Explain the direct primary. Commission government. The city manager plan.

11. How does modern reform involve government action? On what theory is it justified?

12. Enumerate five lines of recent economic reform.

«·Political Reforms · CHAPTER XXII·»