The Progressive Era Regulationist Institutional Structure

THE PROGRESSIVE ERA REGULATIONIST INSTITUTIONAL STRUCTURE: A CASE STUDY OF THE AMERICAN IRON AND STEEL INDUSTRY A Dissertation Submitted to the Graduate School of the University of Notre Dame in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy by Daniel Earl Saros, B.S.E., M.A. Martin H. Wolfson, Director Graduate Program in Economics Notre Dame, Indiana April 2004 © Copyright by Daniel Earl Saros 2004 All rights reserved THE PROGRESSIVE ERA REGULATIONIST INSTITUTIONAL STRUCTURE: A CASE STUDY OF THE AMERICAN IRON AND STEEL INDUSTRY Abstract By Daniel Earl Saros This research examines the U.S. economy in the early twentieth century in an attempt to reconcile the contradictory coincidence of regulated industrial and labor conditions with the systematic destruction of organized labor in the iron and steel industry. A modified version of social structure of accumulation (SSA) analysis is employed to demonstrate how different periods in American history may be construed as being governed predominantly by free market or regulatory mechanisms. This framework draws heavily upon the recent attempts of radical political economists to generalize SSA theory using the notion of an institutional structure. The modified SSA framework is then used to explore the specific institutional structure of the progressive era in American history to reveal its regulated character and provide the historical background for the more detailed case study of the iron and steel industry. The industrial case study provides support for the hypothesis that regulated periods tend to increase the rates of profit, output growth, and capital accumulation relative to free market periods. The enhanced performance of the steel companies was achieved as a result of a price and wage stabilization program initiated by the United Daniel Earl Saros States Steel Corporation. The case study also shows how this part of the Steel Corporation’s regulatory program led to increased fluctuations in employment and longer working hours for the steelworkers. In an effort to combat potential threats from the federal government, the American public, and organized labor to the market stabilization program and mechanization drive, the steel companies introduced a paternalistic welfare program, company unions, and limited hours reform. The ultimate goal of the steel companies in maintaining the progressive era regulatory environment in the iron and steel industry was the indefinite continuation of the period’s enhanced profitability. The study thus provides a solution to the contradictory nature of the industry during the progressive era and offers a general model for radical political economists who seek to use SSA analysis to investigate microeconomic questions in addition to the macroeconomic questions for which the framework was originally devised. This dissertation is dedicated to my parents, John and Linda Saros, my grandmother, Virginia Smith, and my brother, Michael Saros, for their never-ending love and support. Included in this dedication is my grandfather, Earl C. Smith, who lost his life while working for General Tire and Rubber Company in Akron, Ohio on January 16, 1977. ii CONTENTS LIST OF TABLES…………………………………………………………………… v LIST OF FIGURES…………………………………………………………………... vi ACKNOWLEDGMENTS…………………………………………………………….. viii INTRODUCTION…………………………………………………………………… 1 CHAPTER 1: A THEORETICAL FRAMEWORK FOR THE HISTORICAL ANALYSIS OF AMERICAN INDUSTRY………… 13 1.1 Social Structure of Accumulation (SSA) Theory…………………………… 14 1.1.1 An Overview……………………………………………………….. 14 1.1.2 Social Structures of Accumulation in U.S. Economic History…….. 17 1.2 Recent Developments in Social Structure of Accumulation Theory………... 25 1.3 Capital-Labor Relations in Two Regulationist Institutional Structures……... 33 1.4 Methodology………………………………………………………………… 37 CHAPTER 2: THE STRUCTURE AND PERFORMANCE OF THE PROGRESSIVE ERA REGULATIONIST INSTITUTIONAL STRUCTURE (RIS)……………………………. 42 2.1 The Late Nineteenth Century Liberal Institutional Structure (LIS)………... 43 2.2 The Centralization of Capital: Inter-Capitalist Relations…………………... 44 2.3 The Regulatory State: State-Capital Relations……………………………... 54 2.4 The Philosophy of Social Responsibility: The Dominant Ideology………... 66 2.5 The Decentralization of the Financial System: State-Finance Capital Relations…………………………………………………………………….. 80 2.6 The Transformation of Labor and the Repression of Organized Labor: Capital-Labor Relations and Inter-Worker Relations………………………... 84 2.7 The Performance of the Progressive Era Regulationist Institutional Structure……………………………………………………………………... 96 2.8 Chapter Summary……………………………………………………………. 101 CHAPTER 3: REGULATION IN THE ERA OF BIG STEEL……………………… 104 3.1 The Iron and Steel Industry in the Competitive Era…………………………. 104 3.2 Capitalist Competition in the Iron and Steel Industry during the Progressive Era………………………………………………………………. 116 iii 3.3 State Involvement in the Iron and Steel Industry during the Progressive Era………………………………………………………………. 131 3.4 The Performance of the Iron and Steel Industry during the Progressive Era………………………………………………………………. 142 CHAPTER 4: THE CONSEQUENCES OF PROGRESSIVE ERA REGULATION FOR THE STEELWORKERS……………………... 155 4.1 The Battle for Regulatory Control of the Iron and Steel Industry…………… 155 4.2 Part I of Big Steel’s Regulatory Program: Regulating Circulation and Production…………………………………………………... 172 4.3 Part II of Big Steel’s Regulatory Program: Positive and Negative Defensive Measures………………………………………………... 192 4.4 The Revival of Unionism: A Negative Response to the Capitalist Program of Regulation……………………………………………. 207 CHAPTER 5: ANALYTICAL RESULTS OF THE CASE STUDY………………... 225 CONCLUSION……………………………………………………………………….. 241 REFERENCES………………………………………………………………………... 245 iv LIST OF TABLES Table 1.1: Boom and Crisis in the U.S. Economy: 1846-1988……………………… 18 Table 1.2: Alternating Institutional Structures in U.S. Economic History: 1900-2001…………………………………………… 33 Table 3.1: Extreme Annual and Monthly Price Variations for Finished Steel in the United States: 1898-1922………………………….. 123 Table 3.2: Physical Growth Rates of Iron and Steel Output in the United States: 1879-1929…………………………………………….. 144 v LIST OF FIGURES Figure 2.1: Number of Mergers in Manufacturing and Mining in the U.S.: 1895-1920………………………………………………… 46 Figure 2.2: Gross Assets Involved in Mergers in Manufacturing and Mining in the U.S.: 1895-1920……..…………………………….. 46 Figure 2.3: Failure Rate for U.S. Business Enterprises: 1870-1930……………….. 50 Figure 2.4: The Changing Composition of the U.S. Banking Structure: 1870-1920………………………………………………….. 82 Figure 2.5: Labor Union Membership in the U.S.: 1897-1930……………………. 91 Figure 2.6: Number of Work Stoppages in the U.S.: 1881-1926………………….. 92 Figure 2.7: Rate of Gross Surplus in Manufacturing in the U.S.: 1869-1929……………………………………………………………… 98 Figure 2.8: U.S. Unemployment Rate: 1900-1930………………………………… 100 Figure 2.9: Real Average Annual Earnings in Manufacturing in the U.S.: 1890-1920…………………………………………………. 100 Figure 3.1: The Wholesale Price of Steel Rails in the U.S.: 1879-1923……………………………………………………………… 125 Figure 3.2: Total Capital Invested in the U.S. Iron and Steel Industry: 1879-1929……………………………………………………. 145 Figure 3.3: The Profit Rate of the United States Steel Corporation: 1901-1932………………………………………………... 149 Figure 3.4: U.S. Steel’s Percentage Share of Steel Ingot Production: 1901-1938………………………………………………… 151 Figure 4.1: The Total Membership of the Amalgamated Association of Iron and Steel Workers: 1877-1901………………………………… 167 vi Figure 4.2: Growth Rate of Physical Primary Steel Output in the U.S.: 1877-1929……………………………………………………….. 174 Figure 4.3 Average Number of U.S. Steel Employees Per Year: 1902-1923……………………………………………………………… 178 vii ACKNOWLEDGMENTS Limited space prevents me from thanking every person who contributed to the successful completion of this project. I am especially grateful to my dissertation director and friend, Martin Wolfson, whose guidance ensured that I never lost perspective during my research. His assistance and encouragement were unceasing, and I will always be in debt to him for the role he has played in my intellectual development. I would also like to thank the members of my dissertation committee for making the dissertation process so enjoyable and rewarding. Charles Craypo, Kwan Kim, and William Leahy devoted considerable time to reading my dissertation and all made a number of valuable suggestions that have greatly improved the final product. I would also like to thank my lifelong friends, Stephen Anway, Jared Cavileer, Nicholas Chordas, and John Vogel, for encouraging me to persevere through the most difficult period of the dissertation process. I am grateful as well to my friends, Shannon Hillmann, Kylee Hillmann, Sharon Leahy, and William Leahy, for raising my spirits many times along the way. Warm thanks also go to Rita Donley for her assistance during the spring of 2003 and to Kali Rath for his official support that made possible the timely completion of this project. I would also like to thank Jennifer Bryant, Kimberly Burham, Aida Ramos, Taranee Wangsatorntanakhun, and the many other friends I have made here at the University of Notre Dame. Finally, I need to acknowledge my great intellectual debt to Karl Marx who opened my eyes to the reality of exploitation. viii INTRODUCTION During the latter half of the nineteenth century, the American economy experienced a dramatic transformation in the social organization of capitalist production. As the harsh realities

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