Book Three


“An American may do with impunity … what a European could only do in the spirit of the most reckless gambler or in the confidence of inspired genius. Freedom, and the newness and breadth of the land, explain this favored condition of the American.”


“Pi Omega Ro asked whether it would be correct to assume that Americans were free to say what they think, because they did not think what they were not free to say.”

LEO SZILARD, The Voice of the Dolphins

“All the ills of democracy can be cured by more democracy.”


THERE was no mystery about what gave Old World civilizations their aristocratic character. Culture and wealth were in the hands of a few: and just as earlier revolutions had aimed to open the vehicles and instruments of knowledge to large numbers, revolutions there since the nineteenth century aimed to disperse property more widely to accomplish justice or equality. American civilization, in the course of fulfilling its democratic mission, would diffuse property widely and give it novel forms. The liberal movements of early modern times had brought knowledge out of the dusty recesses of Greek and Latin, Hebrew and Arabic, into the fresh air of the vernacular. In the United States the democratizing of language and knowledge went one bold step further. The colloquial language and what passed for knowledge in the marketplace became the arbiters of the classroom and the academy. Knowledge and the arts were redefined to make them accessible and appealing. And the sophistication supposed to come from a familiarity with faraway places—once reserved for the rich and the powerful—was now within reach of the common citizenry.


The Thinner Life of Things

“Property is desirable, is a positive good in the world. Let not him who is homeless pull down the house of another, but let him work diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built.”


“A corporation is just like any natural person, except that it has no pants to kick or soul to damn, and, by God, it ought to have both!”


IN THE UNITED STATES in the century after the Civil War, ownership was enjoyed by unprecedented numbers. What they owned was not only land and houses and cattle and the tools of their trade, the traditional “property” of recorded history. This new nation produced new kinds of property. The automobile was only one of innumerable objects that were manufactured in such large numbers and so widely desired that their ownership came to seem a standard of subsistence. Men who did not possess these new objects were said to be deprived, yet those who possessed them were not necessarily thought to be well off.

Subtle consequences followed from the proliferation and the democratization of property. The most potent form of property and the most potent creator of property, the corporation, was both the most legalistic and the most ambiguous. New devices like the automobile stimulated novel forms of paying, of lending and borrowing. When more men “owned,” it became oddly uncertain in precisely what sense they owned.

America, where priority rule had governed the mines and the unoccupied Western plains, was where the law of property had been brought back to its fundamentals. But it was also where property became more elaborate, more metaphysical, more attenuated. Speedy change transformed the objects of experience. Advertising gave a new meaning to outer shapes; the package became the thing.


Endless Streams of Ownership

IN AMERICA the corporation would have a fertile new life. Since corporations, the creatures of government, could be made immortal and could be given whatever powers the lawmakers wished for them, popular leaders had long feared the corporation. Sir Edward Coke, seventeenth-century champion of common-law rights against a tyrant-king, warned that corporations “cannot commit treason, nor be outlawed nor excommunicated, for they have no souls.” While Americans never succeeded in giving corporations a soul, they did see the corporation magically transformed in other ways. Corporations here would multiply as never before, they would spread over the land, and finally permeate every citizen’s daily life. While the American corporation, a new species of an old genus, was not without its own menacing features, it became (what Coke could never have imagined) the democratizer of property.

The states themselves had their roots in corporations: the Virginia Company of London, the Massachusetts Bay Company, and other colonies had been established as trading corporations under authority of a royal charter. Throughout history, corporations had been units of self-government, with the power to make bylaws, and to do many of the things which a more remote central government had neither the means nor the knowledge nor the will to do. Our colonial history was a catalogue of what corporations were learning to do in America. In a sense, then, American federalism was a by-product of the corporation—of the novelty and variety of its creations.

WHAT HAD BEEN feeble seventeenth-century corporations would become a community of varied sovereign states. In the nineteenth and twentieth centuries, these in turn would make possible tens of thousands of new-style corporations, diffusing their ownership among tens of millions of citizens.

But the same uncertainties of law and constitution which occasioned the American Revolution had befogged the early American law of corporations. Although the government of each of the thirteen colonies was “sovereign” in some sense or other, its power to create “corporations” was uncertain and ill-defined. This vagueness gave American colleges and universities—Harvard, William & Mary, Yale, and Dartmouth, among others—an opportunity to blossom into something unheard of in the Old World. And a striking proportion of the epoch-making decisions of the Supreme Court before the Civil War (including, for example, the Dartmouth College Case, McCulloch v. Maryland, and Charles River Bridge v. Warren Bridge) were efforts to clarify the role of the corporation in this new federal world.

The Revolution made it clear that a sovereign power to create corporations resided on this side of the Atlantic. The Continental Congress chartered the Bank of North America in 1781. Under the new Constitution the Congress chartered a national bank, and before 1800 the new state governments had chartered more than three hundred corporations, mostly for banking and insurance, and for building canals and roads. Each of these corporations had been custom-made by a special act of some state legislature. Nevertheless, in the early years of the nineteenth century, such corporations were being created in ever increasing numbers. By 1830, in New England alone, there were some two thousand corporations.

Even before the Civil War, the American states had begun to devise new legal machinery in the form of “general incorporation laws.” With these procedures, it was no longer necessary to have a friend at court, to bribe a king or his advisers, or to reward legislators for their help in securing a special act of incorporation. The corporation was democratized by being made a standardized product, available to anyone who followed the simple steps prescribed and paid a small registration fee.

The Old World situation was reversed, and instead of businessmen anxiously seeking the special privilege of incorporation, the states competed for the favors of businessmen. The enticements offered by land speculators, city boosters, and railroad promoters to natural persons and their families were matched by enticements to these artificial persons. Businessmen were urged to domicile their newly created legal entities in Delaware rather than in Massachusetts, in New Jersey rather than in Pennsylvania, in Nevada rather than in New York. The less populous states, such as Delaware, New Jersey, and Nevada, were especially eager and ingenious in the competition. We have seen in some detail how Go-Getters in Nevada, for example, exploited this, along with other “federal commodities.”

There were two publicly declared motives for these general incorporation laws. One was to protect the public from the special privileges that corporations had devised for themselves when each could draw up its own act of incorporation for adoption by a friendly legislature. The other was to encourage commerce and industry.

After the general incorporation laws were adopted, it was not much more difficult for legally qualified persons to procure a state charter for a new corporation than it was to secure a marriage license. New York had led the way in 1811, followed by Connecticut in 1817 and Massachusetts in 1830. With the passing of the anticorporation bias of the Jacksonian era, similar laws appeared in Maryland, New Jersey, Pennsylvania, Indiana, and Virginia. Before 1861, a dozen states had written into their constitutions provisions that in the future, corporations could not be created by special acts of the legislature, but only under general incorporation laws. From state to state the rules varied, as did the privileges extended to the new corporate entities. In the two decades before the Civil War, banks and factories and hotels, canals and railroads and telegraph lines were built by these artificial persons who had been mass-produced by state legislatures.

The corporation had many advantages over the enterprising individual. A creature of the law, it was immortal, and therefore its contracts and leases had a longevity which no natural person could provide. For vast and risky undertakings it had other obvious advantages. Pieces of ownership, in the form of shares of stock, could be offered to thousands of small investors, who (as “limited liability” became common) could be confident that they would not be liable for the debts of the company, and so could lose no more than the amount paid for the stock. These investment units could be divided and multiplied according to the needs of the enterprise and the extent of public interest. The state laws of incorporation, together with the bylaws which each corporation was empowered to make for its own government, could delegate the running of the enterprise to a few managers. Stockholders could share windfall profits; yet, by “limited liability,” they were protected from unpredictable losses.

“Property,” multiplied in these ways, in this new form which separated ownership from management, acquired a new meaning, a new mystery, a new unintelligibility. Of course, the common citizen never was at home with the ways of the wealthy. But the counters of the wealthy—land, houses, gold, furs, precious stones—were no mystery. Now there was a new metaphysic of property. And the very counters in the prosperous gambles of the powerful became entities as abstract and nearly as baffling to the uninitiate as the Plotinian quintessences of the Neoplatonists or the theological emanations of the Holy Ghost would have been to a medieval serf. Yet at the same time the ordinary citizen was invited to acquire these entities, and by the twentieth century he had entered the market for corporate securities.

The high priests of this new metaphysic of property were the lawyers. Just as the lawyers held the clues to the obscure nuances of patents which made a fortune for one inventor or another, so now lawyers presided over the mysteries of corporation law. No layman could imagine all the new ways of building, combining, and controlling corporate wealth which lawyers might concoct. They made the subtleties of Duns Scotus and Aquinas look like child’s play. Property became a new realm of the occult.

THE CLASSIC PRODUCT of this new metaphysic was the Standard Oil Trust. The general incorporation laws in the years just after the Civil War had not offered any legal way in which corporations could combine to form larger corporations. Obviously this was inconvenient for giant Go-Getters like John D. Rockefeller who lived by the axiom that the most economical, and hence the most profitable, enterprise was the largest. Rockefeller and his collaborators needed a method for forming a “corporation of corporations.” They were looking for some legal way to combine the resources of several corporations so they could swallow their competitors. Pursuing this purpose, in 1879 under a secret agreement the stockholders of the Standard Oil Company of Ohio transferred their shares to nine trustees, and in return received “trust certificates.” The trustees had the power and the duty to administer the Company, while the stockholders received the profits. This Standard Oil Trust, then, by making similar arrangements with the stockholders of other corporations, became, for all practical purposes, a “corporation of corporations.”

The “trust” concept itself was an ancient English legal device, commonly used in the law of estates to look after the interests of widows and minor children, and for charitable purposes. Since that idea had been elaborated by “equity” (a supplementary branch of English law) instead of by the common law, the “trust” had been left more loosely defined, more flexible, and more informal than other legal entities.

The rudimentary document of 1879 (elaborated in the Trust Agreement of 1882) which first accomplished this purpose was devised by Rockefeller’s ingenious lawyer, Samuel C. T. Dodd, whose life was itself an allegory of the American lawyer. Son of a carpenter in western Pennsylvania, Dodd had worked his way through Jefferson College and then studied law as an apprentice in a small-town law office. He was admitted to the bar in 1859, the year of Drake’s first oil strike, which happened to be nearby. Foreseeing that fortunes would be made in oil, and that the oil magnates would require advice on how to organize their enterprises, Dodd studied the intricacies of the laws of corporations and of equity. At first he fought for the consumers and the small producers. As a delegate to the Pennsylvania Constitutional Convention of 1872–73, he had written into the constitution a clause forbidding rebates, a device which Rockefeller had been using to suppress competition. Then in 1881 he became a lawyer for the Standard Oil Company and moved to New York. In order to give his client Rockefeller the most detached and reliable legal advice, he actually refused to accept stock in the company, and he only received what, for the time, was a moderate salary. But he became one of the most ingenious legal metaphysicians of the age. His widely copied innovations eventually provided much of the essential legal framework for the growth of big business between the Civil War and the opening of the twentieth century.

These potent new legal devices made it possible to conduct the largest transactions in the deepest secrecy. And the very subtlety of the legal essences which lawyers were concocting actually allowed the powerful Go-Getters to keep their arrangements informal. For years John D. Rockefeller had been adept at hiding his consolidating activities. The men who were negotiating with the Standard Oil Company had been writing their letters under assumed names, and Rockefeller had cautioned them “not to tell their wives.” The entities conjured up by Dodd and other lawyers were intended to emanate an aura of legality over all sorts of necessary transactions.

This wonderful combination of deviousness and informality was dramatized in the testimony of one of Rockefeller’s closest associates before an investigating committee of the New York State Legislature in 1879. H. H. Rogers, who had pioneered in the oil industry by inventing a way of separating naphtha from crude oil and had become a leader in the affairs of the Standard Oil Trust, was on the stand.


You said that substantially 95 percent. of the refiners were in the Standard Oil arrangement?


I said 90 to 95 per cent. I thought were in harmony.


When you speak of their being in harmony with the Standard, what do you mean by that? …


If I am in harmony with my wife, I presume I am at peace with her, and am working with her.


You are married to her, and you have a contract with her?


Yes, sir.


Is that what you mean?


Well, some people live in harmony without being married.


Without having a contract?


Yes; I have heard so.


Now, which do you mean? Do you mean the people who are in the Standard arrangement, and are in harmony with it, are married to the Standard or in a state of freedom—celibacy?


Not necessarily, so long as they are happy.


Is it the harmony that arises from a marriage contract? …


Well, not going too far into detail, I would say that the relations are very pleasant.


But we want the detail; we want precisely what that harmony is, what it consists of, and what produces it.


Well, is it a railroad abuse, or is it an abuse to be in harmony with people?


No; it is not an abuse to be in harmony; there are some kinds of harmony that the law considers conspiracy.


Well, I have heard so…. but it is a question in my mind whether it is a proper thing for me, even if there is no harm done by it, to divulge my business secrets.

It is not surprising that Rogers became the friend and financial counselor of Mark Twain.

For six years the Standard Oil Trust Agreement of 1882 was kept secret. But meanwhile other Go-Getters were following Dodd’s example—forming an American Cotton Oil Trust (1884), a National Linseed Oil Trust (1885), and a Distillers and Cattle Feeders Trust (1887). When consumers and politicians became alarmed at the growth of monopolies, they passed the Sherman Antitrust Act in 1890 against “every contract, combination … or conspiracy in restraint of trade or commerce among the several states.” But the Go-Getting builders of big enterprise, aided by their legal metaphysicians, were not to be stopped. Legislating against them was like passing a law against the wind. The decision of the Supreme Court of Ohio in 1892 that the Standard Oil Trust was an illegal combination, and that by entering the trust the Standard Oil Company of Ohio had exceeded its corporate powers, proved to be merely a challenge to lawyerly ingenuity.

When the trust was outlawed, Dodd devised the “holding company.” This was a new kind of corporation whose corporate powers implicitly included the power to hold the shares of other companies. Finding that such a device was not outlawed by New Jersey’s new General Incorporation Act, Dodd set up the Standard Oil Company of New Jersey in 1899 as a holding company. Others followed. The United States Steel Corporation, founded in 1901 under the guidance of an enterprising Illinois lawyer, Elbert H. Gary, on Dodd’s holding company pattern, was the nation’s first billion-dollar corporation.

Until the early years of the twentieth century the trend toward combination continued. By 1904 it was estimated that nearly half the nation’s manufacturing capital was controlled by some three hundred trusts, or trustlike legal entities. Despite the multiplying laws against combination (notably the Sherman Antitrust Law of 1890 and the Clayton Act of 1914), and despite occasional epidemics of law enforcement, big business grew bigger and bigger. Louis D. Brandeis, the Boston lawyer who had made “scientific management” a national slogan by his attacks on the inefficient northeastern railroads, became the public’s champion. And in 1913, in his exposé of the legal manipulations which gave enormous new power to a secretive few, he coined a powerful self-explanatory slogan: “Other people’s money.”

The investment trusts, Brandeis explained, not only dealt in the corporate securities of already existing corporations but actually manufactured stocks and shares out of thin air, to suit their own purposes. “Thus it was that J. P. Morgan & Company formed the Steel Trust, the Harvester Trust, and the Shipping Trust. And, adding the duties of undertaker to those of midwife, the investment bankers became, in times of corporate disaster, members of security holders’ ‘Protective Committees’: then they participated as ‘Reorganization managers’ in the reincarnation of the unsuccessful corporation and ultimately became directors.” Brandeis became the eloquent voice of a crusade against “the Curse of Bigness.” Woodrow Wilson’s New Freedom, shaped on Brandeis’ pattern, was to be a freedom from trusts, which meant, too, a freedom from bigness.

The debate on trusts and on bigness continued through the twentieth century. In 1911 the Supreme Court of the United States declared that only “unreasonable” restraints of trade which did not serve the public interest were outlawed. Many economists and public-spirited lawyers gradually came around to the view that bigness itself was not a curse, or that in any event industrial America could not flourish except by vast and growing enterprises. Reformist efforts, instead, went mostly into devices to protect small investors and small businessmen. “Blue-sky laws” spread from Kansas, where they were enacted in 1911, to nearly all the other states—another American legal invention, this time to protect innocent citizens against unscrupulous promoters. These latter-day counterparts of the nineteenth-century Diamond Hoaxers located their El Dorados deep in the Dark Continent of Corporation Law where they had lured victims by promising them everything in the Great Blue Sky. After the stock-market crash of October 1929, popular demand grew for laws to control the securities market and so prevent frauds. In 1934, following a series of federal and state laws, the Securities Exchange Act created the Securities and Exchange Commission to oversee the stock market and to require stock promoters to publish verifiable facts. But no amount of government supervision could dispel the miasma of incomprehension which enshrouded the nation’s great and crucial corporate enterprises from the view of the common citizen.

AFTER THE CIVIL WAR the corporation became the normal business entity in the United States, and not only for large enterprises. Even before 1900, two thirds of all manufactured products in the United States were made by corporations; by 1930 the figure was well over 90 percent, and corporations employed more than 90 percent of all persons employed in manufacture. And the trend continued toward the concentration of productive wealth and production in the largest corporations. The hundred largest manufacturing corporations, whose proportion of the nation’s total manufacturing corporation assets was 40 percent in 1929, had increased their share to nearly 50 percent in 1962. The corporation form was reaching into all corners of American life, not only into manufacturing, merchandising, and construction but more and more even into personal services.

And the corporation had created a whole new world of property ownership. Nor merely for a few “capitalists” or financiers or bankers but for increasing millions of citizens. By 1929, shares of common stock were owned by about 1 million Americans, by 1959 the figure was 12.5 million, and by 1970 the total reached about 31 million. The United States was becoming a nation of citizen-stockholders. Owners of corporate stock were found among Americans of all occupations, all levels of education, in the city and on the countryside, and in all regions. More than ever before, “owners” were no longer managers. Even in 1929, the stockholder lists of the largest railroad (the Pennsylvania Railroad: 196,119 stockholders), the largest public utility (the American Telephone & Telegraph Company: 469,801 stockholders), and the largest industrial corporation (United States Steel: 182,585 stockholders) showed that the principal stockholder in each case owned less than 1 percent of the stock.

After A. A. Berle and Gardiner C. Means published their Modern Corporation and Private Property in 1932, it was a commonplace that in modern America the very experience of owning property had become something new—in one sense plainly more democratic, but at the same time more occult. In this “people’s capitalism,” more and more millions of citizens “owned” the means of production. But what did they own?

For most of these millions, their powers of ownership were clouded with ambiguity. And the very forms of “democracy” in the communities of stockholders made their ownership experience only more puzzling. Many stockholders, of course, considered their shares of stock simply a more speculative form of money in the bank. But control over the nation’s biggest enterprises rested legally in the hands of the stockholders, and the voting power of stock ultimately controlled the destiny of American industry. On March 8, 1929, John D. Rockefeller, Jr., wrested control of the Standard Oil Company of Indiana from Colonel Stewart by rounding up the votes of 5,519,210 shares against Stewart’s 2,954,986 shares. In 1955 at a dramatic meeting of Montgomery Ward stockholders in the Shriners’ Temple in Chicago, Sewell Avery, after three decades, was deposed from management, and Ward’s was given a new direction. Again and again proxy fights of corporate democracy made front-page news or were featured on television, while they baffled the millions. These Americans had acquired a share in a vast new institution, in what Berle and Means called “passive property.”

But this was only half the story, and perhaps not the most characteristically American half. The American nation had thrived on ambiguity—the ambiguity of the landscape, the ambiguity of what it meant to be an American, the booster-vagueness of the line between present and future. When American stockholders owned powers of which they were uncertain or ignorant, property itself, once the most reassuringly concrete of man’s possessions, had become a new source of ambiguity. By the late twentieth century the possibilities were only partly fathomed; the future of these invented entities was endless and unpredictable.

“Private” property was less private than ever before. So long as a company was owned by a few men, the responsibilities and the locale of ownership were apt to be discoverable. But when such a company went “public,” conjuring itself into a corporation with millions of shares, its ownership was dispersed and diffused. Going “public” therefore could mean going “private.” For size and numbers—the dimensions of democracy—had themselves become a resource of uncertainty and of secrecy.

If you find an error or have any questions, please email us at Thank you!