the breakup of the Standard Oil Company in 1911. Taft
also promoted other important reforms, such as the
introduction of a federal income tax, which came with the
ratification of the Sixteenth Amendment in 1913.
The apogee of Progressive reforms came with the
election of Woodrow Wilson in 1912. Wilson noted in his
1913 book, The New Freedom , “If monopoly persists,
monopoly will always sit at the helm of government. I do not
expect to see monopoly restrain itself. If there are men in
this country big enough to own the government of the United
States, they are going to own it.”
Wilson worked to pass the Clayton Antitrust Act in 1914,
strengthening the Sherman Act, and he created the Federal
Trade Commission, which enforced the Clayton Act. In
addition, under the impetus of the investigation of the Pujo
Committee, led by Louisiana congressman Arsene Pujo,
into the “money trust,” the spread of monopoly into the
financial industry, Wilson moved to increase regulation of
the financial sector. In 1913 he created the Federal
Reserve Board, which would regulate monopolistic
activities in the financial sector.
The rise of Robber Barons and their monopoly trusts in
the late nineteenth and early twentieth centuries
underscores that, as we already emphasized in chapter 3,
the presence of markets is not by itself a guarantee of
inclusive institutions. Markets can be dominated by a few
firms, charging exorbitant prices and blocking the entry of
more efficient rivals and new technologies. Markets, left to
their own devices, can cease to be inclusive, becoming
increasingly dominated by the economically and politically
powerful. Inclusive economic institutions require not just
markets, but inclusive markets that create a level playing
field and economic opportunities for the majority of the
people. Widespread monopoly, backed by the political
power of the elite, contradicts this. But the reaction to the
monopoly trusts also illustrates that when political
institutions are inclusive, they create a countervailing force
against movements away from inclusive markets. This is
the virtuous circle in action. Inclusive economic institutions
provide foundations upon which inclusive political
institutions can flourish, while inclusive political institutions
restrict deviations away from inclusive economic