vigorous trade with China . However, territorial or administrative rights
Japan and various European nations and restated the Open Door policy .
had acquired established spheres of Once the rebellion was quelled, Hay
influence there in the form of naval protected China from crushing in-
bases, leased territories, monopolis- demnities . Primarily for the sake of
tic trade rights, and exclusive con- American goodwill, Great Britain,
cessions for investing in railway
Germany, and lesser colonial powers
construction and mining .
formally affirmed the Open Door
Idealism in American foreign policy and Chinese independence .
policy existed alongside the desire In practice, they consolidated their
to compete with Europe’s imperi- privileged positions in the country .
al powers in the Far East . The U .S .
A few years later, President
government thus insisted as a matter Theodore Roosevelt mediated the
of principle upon equality of com- deadlocked Russo-Japanese War of
mercial privileges for all nations . 1904-05, in many respects a strug-
In September 1899, Secretary of gle for power and influence in the
State John Hay advocated an “Open northern Chinese province of Man-
Door” for all nations in China — churia . Roosevelt hoped the settle-
that is, equality of trading opportu- ment would provide open-door
nities (including equal tariffs, har- opportunities for American busi-
bor duties, and railway rates) in the ness, but the former enemies and
areas Europeans controlled . Despite other imperial powers succeeded in
its idealistic component, the Open shutting the Americans out . Here
Door, in essence, was a diplomatic as elsewhere, the United States was
maneuver that sought the advantag- unwilling to deploy military force
es of colonialism while avoiding the in the service of economic imperi-
stigma of its frank practice . It had alism . The president could at least
limited success .
content himself with the award of
With the Boxer Rebellion of 1900, the Nobel Peace Prize (1906) . De-
the Chinese struck out against for- spite gains for Japan, moreover, U .S .
eigners . In June, insurgents seized relations with the proud and new-
Beijing and attacked the foreign ly assertive island nation would be
legations there . Hay promptly an- intermittently difficult through the
nounced to the European powers and early decades of the 20th century . 9
Japan that the United States would
oppose any disturbance of Chinese
186
OUTLINE OF U.S. HISTORY
J.P. MORGAN AND FINANCE CAPITALISM
The rise of American industry required more than great industrialists. Big industry required big amounts of capital; headlong economic growth required
foreign investors. John Pierpont (J.P.) Morgan was the most important of the
American financiers who underwrote both requirements.
During the late 19th and early 20th centuries, Morgan headed the
nation’s largest investment banking firm. It brokered American securities to
wealthy elites at home and abroad. Since foreigners needed assurance that
their investments were in a stable currency, Morgan had a strong interest in
keeping the dollar tied to its legal value in gold. In the absence of an official U.S. central bank, he became the de facto manager of the task.
From the 1880s through the early 20th century, Morgan and Company
not only managed the securities that underwrote many important corporate
consolidations, it actually originated some of them. The most stunning of these was the U.S. Steel Corporation, which combined Carnegie Steel with several
other companies. Its corporate stock and bonds were sold to investors at the
then-unprecedented sum of $1.4 billion.
Morgan originated, and made large profits from, numerous other merg-
ers. Acting as primary banker to numerous railroads, moreover, he effectively
muted competition among them. His organizational efforts brought stability to
American industry by ending price wars to the disadvantage of farmers and
small manufacturers, who saw him as an oppressor. In 1901, when he estab-
lished the Northern Securities Company to control a group of major railroads,
President Theodore Roosevelt authorized a successful Sherman Antitrust Act
suit to break up the merger.
Acting as an unofficial central banker, Morgan took the lead in support-
ing the dollar during the economic depression of the mid-1890s by marketing
a large government bond issue that raised funds to replenish Treasury gold
supplies. At the same time, his firm undertook a short-term guarantee of the
nation’s gold reserves. In 1907, he took the lead in organizing the New York
financial community to prevent a potentially ruinous string of bankruptcies. In the process, his own firm acquired a large independent steel company, which
it amalgamated with U.S. Steel. President Roosevelt personally approved the
action in order to avert a serious depression.
By then, Morgan’s power was so great that most Americans instinctively
distrusted and disliked him. With some exaggeration, reformers depicted him
as the director of a “money trust” that controlled America. By the time of his death in 1913, the country was in the final stages of at last reestablishing a central bank, the Federal Reserve System, that would assume much of the responsibility he had exercised unofficially.
187
188
C H A P T E R
9
DISCONTENT
AND
REFORM
Suffragists march on
Pennsylvania Avenue,
Washington, D.C.,
March 3, 1913.