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The Midwestern Heritage of Antimonopoly Populism

The scope of the monopoly crisis requires an army of state officials pulling on every antimonopoly policy lever their respective legislatures will provide them.

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Credit: Javier Cruz Acosta

In the final week of his 1902 re-election campaign, the Minnesotan Governor Samuel Van Sant crisscrossed the state making his final pitch to voters. A key topic in these speeches was Van Sant’s crusade against the creation of the Northern Securities Company, a rail behemoth financed by James Pierpont Morgan that combined the rail empires of Edward H. Harriman and Minnesota’s James J. Hill. Van Sant would cruise to re-election and two years later when Northern Securities was broken up, he said it was the most impactful event since the Civil War. 

Van Sant’s battle against a would-be rail monopolist is part of Minnesota’s long history of populist opposition to concentrated corporate power. The ever-evolving fight for economic liberty against corporate tyranny that is threaded throughout the country’s history often has roots in Minnesota. As we look to address the pervasive consolidation that is choking off free enterprise, there is much to learn from Minnesota’s past. In particular, the efforts of Minnesota’s state-level policymakers point to a role that federalism and its inherent legislative experimentation can serve in addressing our monopoly crisis. 

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Northern Securities was the culmination of a bidding war between Hill, the president of the Great Northern Railway, and Harriman, who owned the Union Pacific Railroad, for control over the Chicago, Burlington, and Quincy Railroad. Hill survived the bidding war, but the conflict convinced the men, along with JP Morgan, to bring their respective empires together. In late 1901, the Northern Securities Company was formed in New Jersey, creating a massive rail monopoly that would have controlled railroad traffic across the northern part of the country. 

Van Sant had been in office less than a year when the rail merger was announced. A Republican and former two-term Speaker of the Minnesota House, Van Sant narrowly defeated the incumbent Governor John Lind in 1900. Tackling the issue of monopoly power was central to Minnesota’s politics at the time. Lind was elected in 1898 on a fusion ticket of the Democratic, Populist and Silver Republican parties. His election ended over 40 years of Republican control of the governor’s office in Minnesota and Lind made antitrust reform a key part of his one and only term as governor. 

Just days after Northern Securities had incorporated, Van Sant announced his opposition and urged Minnesota Attorney General Wallace Douglas to investigate the combination. “Believing it to be my plain duty I shall leave no stone unturned to prevent the contemplated consolidation,” Van Sant told the Minneapolis Tribune. At the end of December Van Sant had gathered together the governors and attorneys general of Idaho, North Dakota, Oregon, South Dakota and Washington in a conference in Helena, Wyoming. The group issued a unanimously adopted resolution voicing opposition to the merger, stating it violated various state laws and endorsing legal action by Minnesota to halt the creation of the company. 

Shortly after issuing the resolution, Douglas filed a lawsuit alleging the Northern Securities merger was a violation of Minnesota’s antitrust law as well as a state law prohibiting mergers that gave a company control over parallel or competing rail lines. In early August 1903 Judge William Lochren of the District Court of Minnesota ruled against the state and found the Northern Securities merger had not violated Minnesota law. While Van Sant lost his case, he had won public opinion, winning re-election by nearly 20 points in 1902. He would also have the last laugh. In 1904 the Supreme Court found the Northern Securities merger to be an illegal violation of the Sherman Act, which would solidify President Theodore Roosevelt’s stature as a trustbuster and mark a new era of antitrust enforcement. 

This was not the first time Minnesota’s populists had used state-level reforms to help drive important federal action against monopolists. Starting in the 1850s railroads had undergone an initial wave of consolidation that generated rising rates and discriminatory pricing for farmers who were then hit with collapsing crop prices during the Panic of 1873. That deep recession generated a popular backlash that spurred rapid growth in a young organization called the National Grange of the Order of Patrons of Husbandry. Founded in 1867 by Oliver H. Kelley of Minnesota and several of his colleagues from the U.S. Bureau of Agriculture, the Grange was created as a way to educate farmers and their families and enrich their social lives. 

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With the foresight and leadership of populist politician Ignatius Donnelly, the Grange became a political force across the Upper Midwest. Grangers won state legislative seats and in Minnesota, Iowa, Illinois and Wisconsin passed new laws regulating rates and prohibiting price-fixing by grain and rail monopolists. In Minnesota Donnelly would eventually help establish the Anti-Monopoly Party, winning seats in the state legislature and pushing for even more stringent controls on the railroads.  

While the Supreme Court struck down the Granger Laws in 1886, this state experimentation demonstrated it was possible to challenge the grip of corporate power. The regulations inspired the creation of the Interstate Commerce Commission and spurred states to begin passing antitrust laws as a way to end the abuses of monopolists. Just two years after passage of the first antitrust law in Iowa, Congress passed the Sherman Antitrust Act, empowering the federal government to protect competition, which it started to do two decades later when it broke up Northern Securities.

This was not the last time state laws helped inform and inspire federal action to tame corporate monopolies. The late 1920s saw the development of a grassroots anti-chain store movement concerned about the growing power of chains like the Great American & Pacific Tea Company (A&P). By 1929 chains like the A&P, Kroger, and Safeway had captured nearly 40 percent of the grocery market. Although anti-chain organizations appeared across the country, they were particularly strong in Nebraska, Texas, Wisconsin and Minnesota.

In Minnesota the anti-chain movement was spearheaded by organizations like Break The Chains and the Association of Independents. They found a champion in Floyd B. Olson, Minnesota’s first Farmer-Labor Party governor. Olson, who had lost his first bid for governor in 1924, centered opposition to chain stores and support for a chain store tax in his successful 1930 campaign. He earned the support of small retailers and began to speak before anti-chain organizations across Minnesota. Olson rode the wave of anti-chain sentiment to an overwhelming victory at the polls and made a chain store tax a key part of his tenure in office. While Olson’s Republican opponent in 1930 supported the chains, his predecessor, Republican Theodore Christianson, would testify before the House Ways & Means Committee in 1940 about the threat of the chain stores with a prescient warning that a monopoly over distribution was much more threatening than one over manufacturing. Much like Van Sant and Lind at the turn of the century, combatting the most pressing corporate monopoly was a bipartisan fight in the early days of the Great Depression in Minnesota.  

In April 1933 Olson signed a chain store tax bill that created a license fee and a gross earnings tax imposed on chains. Passage of the tax was part of a wave of state chain store taxes that were put in place across the country as the efforts of anti-chain activists to secure Congressional action stalled out. These state laws eventually pushed Congress to pass the Robinson-Patman Act, prohibiting price discrimination or the special deals large retailers have the power to extract from suppliers. The legislation, which has sat dormant for the past four decades while big box stores have established a chokehold over distribution, was once referred to as the Magna Carta of Small Business and, when aggressively enforced, was credited with creating the conditions for a vibrant ecosystem of chain and independent retailers.

This history not only reveals the possibility for a broad political movement dedicated to protecting economic liberty, but provides a potential roadmap for dealing with our current monopoly crisis. Monopoly power is pervasive today in a way even our forefathers that lived through the era of the great trusts might not recognize. The problem is not just Big Tech, Big Ag, or Big Pharma. Since 2005, the economy has become 50 percent more concentrated and, at the current rate of consolidation, just one company will remain in each industry by 2070 according to the Economic Security Project. This extreme level of economic consolidation is at the root of the seemingly intractable issues we face. Stagnant wages, rising income inequality, the high cost of everything from healthcare to housing to groceries, the loss of family farms and small businesses, and even the extremism and division in our politics can all be tied back to the takeover of our country by monopolists. 

Addressing a challenge of this magnitude will require a sustained movement that generates constant grassroots public pressure on policymakers, which means giving people the opportunity to push their local officials in addition to those in D.C. The modern antimonopoly movement that has burst forth in recent years needs a modern version of the anti-chain store organizations that emerged in communities across the country or a spirited movement like the Grange that brings together farmers, workers, small businesses and others in state capitols across the country. Simply put, the movement must go local and work to organize with attorneys general, governors, state legislators and state-based advocacy organizations.  

The antimonopoly effort not only needs more local advocacy, it needs policy reforms and experimentation. Four decades of underenforcement and adherence to the consumer welfare standard has rendered antitrust law and other protections against monopoly power nearly unenforceable. The new generation of enforcers, best embodied by Federal Trade Commission Chair Lina Khan and Assistant Attorney General for Antitrust Jonathan Kanter, need better tools for challenging monopoly domination. With Congress largely uninterested in antitrust reform whether one party is in charge or the two chambers are split, bold policymaking has been left to the states. Antimonopoly reformers should embrace the opportunity to have legislators bringing forward new ideas that can help forge a path to enhanced antitrust enforcement, not only because state reforms can inspire federal reforms but also because federalism itself is a necessary part of protecting economic liberty. 

In addition to strong officials at key federal agencies, the scope of the monopoly crisis requires an army of state officials pulling on every antimonopoly policy lever their respective legislatures will provide them. Just like reining in Northern Securities in the early 1900s took the efforts of both Governor Van Sant and President Roosevelt, reining in Big Tech or Big Ag will demand the same.  

Minnesota’s battles against corporate monopolies helped create a future class of populists in D.C. Former Vice President and US Senator Hubert Humphrey, who helped broker the merger of the Democratic Party and the Farmer-Labor Party into what is still the Democratic-Farmer-Labor Party, was a champion for small businesses. Humphrey fought for a national fair trade law to protect independent retailers from predatory pricing and wrote that the New Deal had “broken the power of big business and returned the reins of government from Wall Street to Washington, D.C.”

Decades later, Humphrey’s seat would be held by Paul Wellstone who arrived in Washington D.C. in 1991 at a time when a pro-monopoly consensus had taken hold in both parties. Wellstone did not buy into this consensus and built a record in the Senate of standing up to corporate monopolies. He was one of the few Democrats that voted against removing constraints on consolidation in the telecommunication and financial industries including voting against the repeal of Glass-Steagall, which had kept investment and commercial banks separate. While considering a run for the White House in 2000, Wellstone plotted out a populist campaign placing the concentration of corporate power front and center.

These national giants were standing on the shoulders of generations of local advocates and policymakers in Minnesota. Creating the next generation of populist economic champions will require the same, and that begins in our local communities.  

This article is part of the “American System” series edited by David A. Cowan and supported by the Common Good Economics Grant Program. The contents of this publication are solely the responsibility of the authors.

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