Author’s note:
This series of blogposts will be my paraphrased notes on a lecture given by Murray Rothbard called “The American Economy and the End of Laissez Faire“. This means the post will contain some word for word transcriptions of Rothbard’s words and some editorializing and rephrasing of my own. I will not distinguish between the two.
A House Divided
The proper question to ask about the Interstate Commerce Commission Act is why it was passed during the first Democratic Administration since the Civil War (Cleveland Administration). One must realize that while politics from 1865 to 1912 was Republican dominated, the elections were still very close and Federal political politics were just as divided as ever.
In 1876 Democrats won the election but it was stolen by fraud, allowing Hayes to win by 1 electoral vote. The popular vote was won by Tilden who secured 50.9%, whilst Hayes only secured 47.9% of the popular vote, Hayes was only given enough electoral votes to win by fraudulent administrative reconstructions during the election. Hayes made a deal with the southern Democrats that they would give him their electoral votes if he promised to get Federal troops out of the South to wrap up the post Civil War reconstruction period.
Typically throughout the period Democrats maintained control of at least half of congress. Other presidential elections of the period were also extremely close in terms of popular vote. In 1880 Garfield (Republican victor) had 4.45 million votes and Hancock (Democrat opponent) had 4.4 million. In 1884 Cleveland (Democrat victor) had 4.9 million votes and Blaine had 4.85 million. Cleveland’s victory marked the first win for a Democrat presidential candidate since the Antebellum period.
But the question remains, given what we know about the history of US politics, why was the first federal regulatory commission act passed under a Democratic administration, a political party that had historically been committed to laissez-faire commerce? What led Cleveland to abandon these principles?
Grover Cleveland
Cleveland came from Buffalo, NY which was the heartland of yankee pietism, it was called by historians the “Burned Over District”, to denote a region burned over by repeated fires of pietistic pseudo religious fanaticism (this includes the Mormon church, the Shakers, among others). Interestingly, many of the leaders of the Whig and Republican parties originated from this region. Cleveland himself, on the other hand, was an old school Presbyterian, a Calvinist, who resisted the mainstream revivalist and pietistic evangelicalism of the day.
Cleveland won the presidential election in 1884, the first democratic presidential victory since James Buchanan before the Civil War! He ran again in 1888 and won the popular vote but lost in the electoral college. In 1892, he won once again in a considerable landslide. Cleveland was the leader of the Laissez-faire side of the Democratic party during his tenure, and well read historians have been known to refer to libertarian types as an “old school Cleveland Democrats”.
After the civil war there was a huge growth corporations in the United States. To demonstrate this growth, consider that the highest paid lawyer before the civil war was Daniel Webster and he made about $20,000 per year ($400,000 in Q1 2025 terms), whereas, the highest paid lawyers were making $200,000 per year (which is over $6.5 million in Q1 2025 terms) after the civil war. This difference was exclusively a result of the growth in corporate lawfare, which by itself was a natural extension of a growth in corporatism. Before the civil war, most lawyers were trial lawyers, meaning that they made their living defending clients in the courtroom rather than in complex contract law and arbitration (settling disputes out of court).
In the antebellum period, when there were few to no corporations in the US, there was very little corporate law. Corporations, by definition, are business entities which are specially privileged by the US government, that is to say, they are afforded certain rights and treatments not granted individuals or small businesses. I will leave the ethics of such devices up to the interpretation of the reader.
J.P. Morgan & Co Cabinet
The reasons Cleveland abandoned his “old school democratic” principles in favor of a federal regulatory commission is quite obvious when you consider his personal involvement in railroad law, as well the close ties of various Bostonian financiers (mainly J. P. Morgan & Co) in the Democratic party.
The railroads, as previously discussed, were, of course, in great favor of corporate cartelization, in particular, this was the case with the great railroad investment banker J. P. Morgan after the panic of 1873. The Cleveland administration was heavily tied in with J.P. Morgan and company, Tilden (Democratic statesmen & presidential runner up in the 1876), for example, was a highly influential railroad lawyer. Cleveland himself, prior to becoming governor of Buffalo, NY, was also a railroad lawyer. One of Cleveland’s major railroad law partners, Francis Lynde Stetson, reunited as a law partner with Cleveland after his presidency completed.
Stetson was the top railroad lawyer for J.P. Morgan and Co. and his firm Stetson & Jennings is now which is still operative as one of the top Morgan lawfirms as of this writing. One of Cleveland’s major clients was NY Central Railroad, which was the largest rail line in the state of New York, and was originally owned by Commodore Cornelius Vanderbilt, who was essentially taken over in an alliance by Morgan.
The Cleveland cabinet was made up entirely of Morgan-Vanderbilt allies.
- Secretary of State – Thomas Bayard (Sen from Delaware): A disciple and tool of August Bellmont, a German investment banker who was an agent of the Rothschilds. Bellmont’s son was Bayard’s main administrative assistant and cohabited with him. Bellmont was the secretary treasurer of the Democratic party for 40 years. The Morgans and Rothschilds were in a strong alliance around this time period.
- Secretary of Treasury – Daniel Manning: A close friend of Tilden and a lawyer and director of Albany and Susquehanna railroad which not only was a Morgan type railroad but also had J.P. Morgan himself on the board of directors.
- Secretary of Treasury (2nd) – Charles Fairchild: A disciple of Tilden who was previously Attorney General of NY. Fairchild married the niece of Horatio Seymour, who ran for president in NY in 1868, Horatio Seymour’s father was Sydney Fairchild was on the board of directors of the Erie & Pittsburgh Railroad and also attorney chief council of the NY Central Railroad (owned by Morgan).
- Attorney General – Augustus Garland (Sen from Arkansas): A railroad director
- Secretary of the Army (before WWII the Department of Defense was simply called the Department of War) – William Endicott: A Boston lawyer and former judge urged by Stetson well connected with the Boston financial elite, in particular, his wife Ellen Peabody of the Peabody elites, the head of whom George Peabody was the head of a banking firm which had J.P. Morgan’s father Junius Morgan as a partner. Another uncle of Ellen Peabody was the best man at J.P. Morgan’s wedding.
- Secretary of the Navy (The Navy in those days was much more important because the army only existed during war times) – William C Whitney: Close friend and disciple of Tilden, close friend of Cleveland, and a close friend of Cleveland’s campaign manager. Member of the board of directors of two Vanderbilt (which became Morgan properties) railroads in New York. The Son in Law of Whitney Henry Payne, was the director of 4 Vanderbilt railroads. His brother, Oliver Payne, was the officer of Standard Oil of New Jersey (of the Rockefeller empire which dominated the Republican party from 1876 to 1970s).
- Secretary of the Interior – Lucius Lamar: A railroad lawyer from Mississipi who worked for J. P. Morgan.
- Post Master General – William Vilas: A railroad lawyer from Wisconsin for Vanderbilt-Morgan.
- Ambassador to Great Britain – Edward Phelps: A Vermont chairman of a Vanderbilt-Morgan railroad
- Ambassador to France – Robert McLane: His Father was the president Baltimore & Ohio Railroad which was Morgan connected
