Why Nations Fail

particularly concerning the role of the state in the regulation
of monopoly. The first important piece of legislation was the
Interstate Commerce Act of 1887, which created the
Interstate Commerce Commission and initiated the
development of the federal regulation of industry. This was
quickly followed by the Sherman Antitrust Act of 1890. The
Sherman Act, which is still a major part of U.S. antitrust
regulation, would become the basis for attacks on the
Robber Barons’ trusts. Major action against the trusts came

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after the election of presidents committed to reform and to
limiting the power of the Robber Barons: Theodore
Roosevelt, 1901–1909; William Taft, 1909–1913; and
Woodrow Wilson, 1913–1921.
A key political force behind antitrust and the move to
impose federal regulation of industry was again the farm
vote. Early attempts by individual states in the 1870s to
regulate railroads came from farmers’ organizations.
Indeed, nearly all the fifty-nine petitions that concerned
trusts sent to Congress prior to the enactment of the
Sherman Act came from farming states and emanated
from organizations such as the Farmers’ Union, Farmers’
Alliance, Farmers’ Mutual Benefit Association, and Patrons
of Animal Husbandry. Farmers found a collective interest in
opposing the monopolistic practices of industry.
From the ashes of the Populists, who seriously declined
after throwing their weight behind the Democrats, came the
Progressives, 
a 
heterogeneous 
reform 
movement
concerned with many of the same issues. The Progressive
movement initially gelled around the figure of Teddy
Roosevelt, who was William McKinley’s vice president and
who assumed the presidency following McKinley’s
assassination in 1901. Prior to his rise to national office,
Roosevelt had been an uncompromising governor of New
York and had worked hard to eliminate political corruption
and “machine politics.” In his first address to Congress,
Roosevelt turned his attention to the trusts. He argued that
the prosperity of the United States was based on market
economy and the ingenuity of businessmen, but at the
same time,
there are real and grave evils … and
a … widespread conviction in the minds of
the American people that the great
corporations known as trusts are in certain of
their features and tendencies hurtful to the
general welfare. This springs from no spirit of
envy or un-charitableness, nor lack of pride in
the great industrial achievements that have
placed this country at the head of the nations
struggling for commercial supremacy. It does
not rest upon a lack of intelligent appreciation

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of the necessity of meeting changing and
changed conditions of trade with new
methods, nor upon ignorance of the fact that
combination of capital in the effort to
accomplish great things is necessary when
the world’s progress demands that great
things be done. It is based upon sincere
conviction 
that 
combination 
and
concentration should be, not prohibited, but
supervised and within reasonable limits
controlled; and in my judgment this conviction
is right.
He continued: “It should be as much the aim of those who
seek for social betterment to rid the business world of
crimes of cunning as to rid the entire body politic of crimes
of violence.” His conclusion was that
in the interest of the whole people, the nation
should, without interfering with the power of
the states in the matter itself, also assume
power of supervision and regulation over all
corporations doing an interstate business.
This is especially true where the corporation
derives a portion of its wealth from the
existence of some monopolistic element or
tendency in its business.
Roosevelt proposed that Congress establish a federal
agency with power to investigate the affairs of the great
corporations and that, if necessary, a constitutional
amendment could be used to create such an agency. By
1902 Roosevelt had used the Sherman Act to break up the
Northern Securities Company, affecting the interests of J.P.
Morgan, and subsequent suits had been brought against
Du Pont, the American Tobacco Company, and the
Standard Oil Company. Roosevelt strengthened the
Interstate Commerce Act with the Hepburn Act of 1906,
which increased the powers of the Interstate Commerce
Commission, particularly allowing it to inspect the financial
accounts of railways and extending its authority into new
spheres. Roosevelt’s successor, William Taft, prosecuted
trusts even more assiduously, the high point of this being

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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,