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THE OTHER SHERMAN’S MARCH  
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Richard R. John
October 22, 2024
History News Network
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_ How the younger brother of the famous general set out to destroy
the scourge of monopoly power. _

John Sherman, c. 1880. , Library of Congress

 

The U.S. Justice Department recently hauled Google into court for
violating an 1890 federal law designed to forestall the unjust
consolidation of economic power. Known today as the Sherman Act, this
law was proposed by Ohio lawmaker John Sherman to prevent sprawling
financial combines like Standard Oil from using their formidable
command over the production, distribution, and sale of a good or
service to bankrupt their rivals and block new entrants from the
market. Though the Sherman Act is now over 100 years old, it remains a
hammer in the toolkit of U S. industrial policy that at several key
junctures in U.S. history has transformed the rules of the game. 

Like most lawmakers of his time, Sherman took it for granted that
monopolies were “inconsistent with our form of government”: “If
we will not endure a king as a political power, we should not endure a
king over the production, transportation, and sale of any of the
necessaries of life. If we would not submit to an emperor, we should
not submit to an autocrat of trade.” If today’s Justice Department
prevails in its lawsuit against Google by breaking up the tech
giant’s monopoly over the online search business, this will burnish
the legacy not only of Sherman’s lawmaking, but also of the
anti-monopoly vision that shaped U.S. law in the epoch that witnessed
the country’s debut as the world’s leading economic power.

Sherman is little remembered today, overshadowed in historical memory
by his older brother, the Civil War general William Tecumseh Sherman.
Yet at the time of his death in 1900, John remained so well known that
a colleague averred the two brothers were destined to “go down
inseparably in the memory of remote generations.” 

It did not quite work out that way, at least for John. Stolid,
uncharismatic, and utterly lacking in the attributes that make for
good newspaper copy — journalists dubbed him the “Ohio icicle”
— he left little imprint on posterity. If his name had not become
attached to the 1890 anti-monopoly law that would come to define the
playing field for U. S. business large and small, he might today be
altogether forgotten. 

Yet in the late 19th century John Sherman was one of the country’s
best-known and most influential statesmen. His long and distinguished
public career began in 1854, when he won a seat in Congress as an
antislavery representative from Ohio. As a U.S. senator during the
Civil War, he developed an enviable mastery of the arcana of public
finance, leading to his appointment as secretary of the treasury under
President Rutherford B. Hayes. In the 1880s, Sherman sponsored
legislation to encourage the monetization of silver, the
cryptocurrency of his day. By 1889, he was back in the Senate, eager
to mount a campaign for the White House. Though Sherman won a solid
bloc of votes at the 1888 Republican national convention, he fell
short of the nomination. Sherman’s presidential bid had been
derailed, so he believed, by a dirty trick played on him at the
convention by a political rival who Sherman accused of bribing
delegates to switch their votes. The trickster was the president of
the Diamond Match Company, a leading manufacturer, then and now, of a
popular brand of wooden matches. Diamond Match had recently bought up
several of its rivals, enhancing its market power. It was a betrayal
Sherman never forgot. Along with Standard Oil, Diamond Match was one
of the financial combines that Sherman would single out for public
condemnation in making the case for his anti-monopoly bill. 

he Sherman Act today is often regarded as an “anti-trust” law.
This can be confusing, since the word “trust” had, and has,
multiple meanings. When lawmakers like Sherman referred in 1890 to
trusts, they did not have in mind the venerable contracts drawn up by
estate planners to help wealthy families lower their tax bill and
consolidate their assets. And they had no quarrel with the presumption
that individuals should be truthful in their personal relationships
— a common meaning of the word today. Instead, their target was the
sprawling financial combines that lawyers cobbled together to limit
competition between once-rival business units. Standard Oil had by
1890 been folded into a trust to circumvent state anti-monopoly laws,
as had the dominant U.S. based sugar refiners and whiskey distillers.
By throttling once-independent businesses, financial combines limited
competition and increased wealth inequality. The crux of the issue was
not bigness per se, but rather the propensity for legislative
corruption and commercial extortion spawned by raw economic power. 

In 1890, the “trustification” of the U.S. economy had just begun.
Not until 1895 — five years _after_ the Sherman Act had gone into
effect — would what historians today call the “great merger
movement” truly get underway. In the 10-year period between 1895 and
1904, an average of 300 firms would be merged every year into their
one-time rivals; in 1899 alone, over 1,000 firms disappeared in this
way. Among the catalysts for economic consolidation were
overproduction, deflation, and the economic uncertainty that followed
the Panic of 1893. Among its legacies was the emergence of U.S. big
business as a powerful actor on the global stage.

Given the momentous influence that the Sherman Act has come to exert
in U.S. business, it may come as a surprise that the law itself was
relatively brief. From start to finish, it contains fewer than 1,000
words. Sherman’s name appeared neither in the law itself, nor in its
official header, which declared as its rationale the protection
of “trade and commerce against unlawful restraints and
monopolies.” Only in the 20th century would it become conventional
to associate Sherman with the law. In Sherman’s 1900 _New York
Times_ obituary
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which was longer than the Sherman Act, there is no mention whatsoever
of his connection with the law.

The Sherman Act has two main provisions. The first declared it
illegal for any person to enter into contracts, combinations, and
conspiracies “in restraint of trade or commerce.” The second
provision made it illegal for any person to monopolize — or to try
to monopolize — trade or commerce. Though the word “monopoly”
appeared nowhere in the text of the law, the word “monopolies” did
appear in the header: a clue as to its intent. Broad and open-ended,
these provisions would be subject to a great deal of juridical
interpretation in the years to come. 

The inclusion of the word “person” in the law was a term of art.
As the law’s final section specified, the word referred not only to
human beings, but also to any corporation or association (an
umbrella term that would be interpreted to include labor unions and
trade groups) that existed under the laws of the United States, its
states and territories, or any foreign country. The only exception
concerned conduct that had been confined entirely within the spatial
limits of a state, a domain that the law deemed to be outside of the
jurisdiction of Congress.

That Sherman’s name has been immortalized in the annals of
anti-monopoly law is ironic. The measure as it was finally enacted in
July 1890 was very different from the bill Sherman had introduced in
the Senate the previous December. In the eight months between the
bill’s initial introduction and its final enactment, it would be
extensively debated, and almost entirely rewritten. Much of that
debate centered on tariff policy: an issue with which anti-monopoly
was joined at the hip. 

Tariff policy was a late-19th-century legislative perennial. In 1890
Republican lawmakers embarked on a sweeping upward revision in the
duties that the U.S. government charged on the importation of foreign
goods. Known today as the McKinley tariff — in honor of one of its
most fervent champions, the Ohio representative and future president
William McKinley — this law increased the import duties on foreign
goods to almost 50%. 

Tariffs on foreign imports were in Sherman’s day a major source of
federal revenue. (The legality of a federal income tax would not be
settled until the ratification of the 16th amendment in 1913.) Derided
by critics as the “mother of trusts,” tariffs were blamed not only
for raising prices on consumer goods — a major issue today — but
also for enabling big U.S. producers to destroy their smaller U.S.
rivals. The willingness of lawmakers to help U.S. producers raise
tariffs on imported goods to levels that, in practice, precluded
foreign competition, was widely derided as corrupt, especially since
it was universally assumed that lawmakers were in on the take.

Sherman, a loyal Republican, defended his party’s traditional
support for high tariffs as a boon to U.S. workers. European
manufacturers, he believed, paid starvation wages. In the absence of
tariff protection, U.S. producers in many sectors would be trapped in
a soul-crushing race to the bottom that would leave them no choice but
to reduce their wages to levels that were unacceptably low. Yet
Sherman also recognized that it was unjust for large and sluggish U.S.
firms to weaponize the protection high tariffs gave them to
temporarily lower their prices at the expense of their smaller and
more nimble rivals. To guard against the abuse of power, Sherman’s
bill in its original form empowered Congress to strip tariff
protection from any manufacturer that weaponized its tariff-based
monopoly power to destroy its rivals. In Sherman’s view, the men who
ran the financial combines that were forcing their smaller rivals out
of business were not market-savvy innovators but an indolent, overfed
“leisure class,” as the political economist Thorstein Veblen would
memorably describe them in 1899. Anti-monopoly, in short, was good
business.

Anti-monopoly was also good politics. Sherman had almost won the
Republican presidential nomination in 1888 and he fully intended to
mount another presidential campaign in 1892. Big business at this time
wielded less influence over the electorate than it does today: the
multitude of small firms and proprietorships that the trust movement
threatened were a solid voting bloc. By attacking big business,
Sherman hoped to widen his electoral base.

Had Sherman’s original bill been enacted, and had it passed muster
in the Supreme Court (two big ifs), Congress would have had a cudgel
to strip tariff protection from any corporation that reorganized
itself as a trust. How such a law would have operated in practice is
anyone’s guess. Also unknown is how, if at all, it would have
affected several of most notorious trusts — such as Standard Oil
— which enjoyed no tariff protection: around 80% of Standard Oil’s
market was overseas.

For several months, Sherman and his colleagues filled the national
legislature with earnest speeches decrying special privilege. When the
final bill came up for a vote in July, it had been stripped of the
tariff-related provisions that Sherman had backed. Lawmakers on the
judiciary committee feared that Sherman’s bill would prove
unenforceable, and they rewrote it to federalize the venerable common
law ban on restraints of trade. In this revised form, the law was
relatively innocuous: only one lawmaker opposed it. In the eyes of one
recent historian, this was proof that Sherman’s original bill had
been so watered down that insiders knew it would be a sham. 

The Sherman Act would defy the skepticism of its naysayers — as the
history of the 20th century antitrust jurisprudence makes plain. From
the breakup of Standard Oil and American Tobacco in 1911 to the
consent decrees against IBM and AT&T in 1956, the breakup of the Bell
System in 1982, and the Microsoft settlement in 2001, antitrust has
been an effective tool for the erection of guardrails between economic
sectors to encourage competition, limit monopoly power, and foster
innovation.

The Sherman Act has never been without critics. Some have derided it
as ineffectual; others have denounced it as anti-business. Yet on
balance, it has proved to be not only consequential, but also salutary
— and, despite protestations to the contrary, resolutely
pro-business, just as John Sherman had hoped. This was true even in
the 1930s, the decade that witnessed the greatest economic downtown in
U.S. history. Though several members of President Franklin D.
Roosevelt’s inner circle disparaged the Sherman Act as outmoded —
following the lead of progressive-era thought leaders like the
journalist Walter Lippmann, who ridiculed the Sherman Act as outdated
in _Drift and Mastery_, an influential policy brief from 1914 —
prominent voices from across the political aisle demurred. For Supreme
Court Justice Charles Evans Hughes, writing
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a court opinion in 1933, the law deserved to be lifted up as a
“charter of freedom.” For the lawyer-turned-regulator Thurman
Arnold — who, as the head of the U.S. justice department’s
antitrust division between 1938 and 1943, did more than any other
single individual to breathe fresh life into a statute that many
derided as obsolescent — the Sherman Act remained in 1941 the
“principal government instrument” to “attack conspiracies which
hamper production and distribution.” Hughes was a Republican; Arnold
a Democrat. Yet when it came to the Sherman Act, they saw eye to eye.
Neither saw any merit in the frenzied calls for its suspension that
had come from influential members of Franklin Roosevelt’s New Deal
coalition, either as a remedy for the nation’s economic woes or as a
response to the looming threat of a second world war.

The search for “original intent” is rarely simple and often a
fool’s errand, and the parsing of congressional oratory can only
take one so far. Like all landmark U.S. laws, the Sherman Act has
never had a single meaning. To understand how it should be interpreted
today, it would be a mistake to rely unduly on what Sherman and his
colleagues were reported as having said in Congress in 1890. “It is
always a task to discover the range and meaning of a statute whose
lines are as lean as the Sherman Act,” as one perceptive student of
the subject aptly observed in 1941. “The bill which was debated was
never passed; the bill which was passed was little debated.”

Even so, it can be instructive to compare the law as Sherman
envisioned it with a little-known law that Sherman had shepherded
though Congress several years earlier to regulate the telegraph
combine Western Union. By 1866, Western Union had become not only the
nation’s first nationwide network provider, but also a premier
example of what one might call Victorian Big Tech. In response to its
rise, Sherman devised the first federal law to regulate a platform
monopoly. 

Enacted in 1866, the National Telegraph Act created a mechanism to
open railroad rights-of-way for Western Union’s rivals. The law
obliged every network provider who signed on to its voluntary
provisions to permit their assets to be purchased by Congress at a
mutually-agreed-upon time at a mutually-agreed-upon cost. It also
mandated low rates for government messages, facilitating the rise of
what is today the National Weather Service. Every major network
provider quickly signed on, including Western Union. In the highly
uncertain legal environment of the post-Civil War South — when the
status of individual-state-enforced contracts in the former
Confederacy might well be open to doubt — it made sense for even the
nation’s dominant network provider to take advantage of the legal
protections that Congress provided. 

The National Telegraph Act deserves to be remembered as a landmark in
anti-monopoly jurisprudence. By establishing a legally binding
relationship between network providers and the federal government, a
new kind of social contract for corporations chartered in the
individual states, it was simultaneously anti-monopoly, pro-business,
and pro-innovation — making it far more expansive in ambit than the
final version of the 1890 act that bears Sherman’s name. 

Though the National Telegraph Act has been often overlooked even by
specialists in the field, it deserves to be remembered as the kind of
law Sherman hoped to enact in 1890, had he been given the chance. By
breaking the stranglehold that Western Union, the Google of its age,
had come to exert as a platform monopoly, it created the preconditions
for the flourishing in the following decade of an entrepreneurial
hothouse in which a talented cohort of inventors led by Thomas Edison
and Alexander Graham Bell competed to develop a quartet of blockbuster
inventions: the broadband telegraph, the telephone, sound recording,
and the electric power station. Few federal laws did more to catalyze
the late-19th-century transformation of the United States into the Big
Tech dynamo that would prompt one British journalist in 1901 to
announce the “Americanization” of the world.

It remains an open question if the 1890 anti-monopoly law that bears
Sherman’s name retains enough of his jurisprudential DNA to shape
the momentous Big Tech contests of our own age. For Sherman,
anti-monopoly was good business, and good business thrived in open
markets that fostered economic security. In 1890, as in 1866,
anti-monopoly was a beacon that illuminated the path forward. Should
the stars align, it might remain a lodestar for U.S. industry policy
today.

Richard R. John is a professor of history and communications at
Columbia University, where he teaches courses in the history of
communications and the history of capitalism. He is currently working
on a history of anti-monopoly thought and practice in the United
States, for which he has been awarded a Guggenheim Fellowship.

* Anti-monopoly
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* Anti-trust
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