BY JAMES P . PROUT
BOOK REVIEW
The Hour of Fate : Theodore Roosevelt , J . P . Morgan , and the Battle to Transform American Capitalism
By Susan Berfield
Bloomsbury Publishing , New York , 2020 393 pp . with appendices , notes , references and index $ 27.95
Big business is good for America : global scale and investment , long-term stability and growing employment . Big business is not good for America : stifled competition , predatory pricing , one-sided wage and employment power . This argument , in one form or another , has been going back and forth in the United States since before the ink dried on the Constitution .
Think Hamilton v . Jefferson on the national debt , or Jackson v . Biddle on a national bank . Bigger is better v . bigger is “ badder .” And this debate is no historical relic , as the CEOs from Facebook , Amazon , Alphabet and others are finding out . How does a democracy balance the needs and ideals of a decentralized polity with the tendency of business and finance to centralize and dominate ?
In her book , The Hour of Fate , financial journalist Susan Berfield has brought us the story of the Northern Securities trust , an attempt ( from 1901 to 1904 ) to create a railroad giant that extended from Chicago to the Pacific Coast . Berfield has chosen her topic wisely . It has a terrific cast . How can you beat having on one side J . P . Morgan , as the architect of the railroad trust plan ( cue deep , dark organ notes ), versus on the other side Theodore Roosevelt , the brash , “ Square Deal ” President , as Morgan ’ s nemesis ( cue Sousa march )? The forbidding finance giant from the 19 th century battles the first political hero of the 20 th century . It ’ s a UFC cage match , with the fighters ’ faces glaring from the dust jacket of the book . Let ’ s get ready to rumble .
After some preliminaries on McKinley ’ s 1901 assassination and Roosevelt ’ s ascendance to President , the author keys in on J . P . Morgan and his hatred of “ ruinous competition .” Railroads were the internet of their day — metal bands connecting and moving people , goods and ideas around the country . By the turn of the century , Morgan had had enough of railroads slashing prices and eating capital . He had already “ reformed ” several industries , and looking West , he saw an opportunity to bring three competing railroad lines — the Northern Pacific , the Burlington Northern and the Great Northern — into a single enterprise .
Morgan ’ s task was not easy . Berfield does an admirable job navigating the reader through Morgan ’ s personal , financial and legal maneuvering with E . H . Harriman , James J . Hill and J . M . Forbes to wrestle control of the three roads into the blandly named holding trust , Northern Securities Company . Morgan ignored warnings about the federal Sherman Antitrust Act of 1890 and incorporated the company in New Jersey in 1901 .
President Roosevelt had different ideas . He was a reformer from head to toe . Although 20 years younger than Morgan , and running in the same wealthy New York City social circles , he was completely unafraid of Morgan ’ s reputation and ballast . In his first message to Congress , he outlined his ideas on government ’ s role in business . Large business combinations , he wrote , were certainly entitled to generate great wealth and benefits . However , operating as they did within society and protected by our common institutions , they must not abuse their heft to stifle competition . Soon after , he commissioned Attorney General Philander Knox to sue to break up the Northern Securities trust .
In late 1903 , the US Supreme Court heard the case . The arguments were familiar . Morgan ’ s lawyers argued that corporate owners could do what they wished with their assets . In addition , they asserted that even though the three railroads ’ ownership were combined in a single trust , this would not deter competition . Attorney General Knox contended that such arguments were nonsense , and that the trust was designed to inhibit competition . It was a clear violation of the Sherman Antitrust Act . The outcome was close . In a 5 – 4 vote , the Supreme Court ruled that Northern Securities needed to be busted up . Morgan had lost . The momentum to reign in corporate power picked up . The Standard Oil case , which attacked the petroleum trust , was initiated six years later .
The pace and tone of the book reflects Berfield ’ s background in journalism — in a good way . We know how the story ends , but all along there are enough surprises to keep us reading . There is a side story on the coal strike which occurred during the same period — it feels shoehorned into the narrative . And I think the title is overheated , given that Northern Securities was but one important episode in this long and unfinished story .
“ Unfinished ” is the operative word here . For the first time in a long time , Washington seems to agree on at least one issue : big tech needs oversight . Accusations of stifled competition and market abuse are getting louder . Although railroad platforms are a long way from digital platforms , Northern Securities v . US is a saga worth reading about right now .
James P . Prout is a lawyer with more than 30 years of capital market experience . He now is a consultant to some of the world ’ s biggest corporations . He can be reached at jpprout @ gmail . com .
www . MoAF . org | Fall 2020 | FINANCIAL HISTORY 43