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North versus South in business

The South took a long time to do much manufacturing; it was farther behind the North in industrialization in 1900 than it had been before the war. Even making cloth from cotton lagged in the South; although Southerners had built a few textile mills by 1900, two-thirds of the cloth was still being made in the North.

The only manufactured product that was good for the South was bad for people: cigarettes. The invention of the cigarette-manufacturing machine in the 1880s got Americans smoking in a big way. The machine meant more tobacco production and a cigarette-manufacturing industry for the South.

Breaking in against Northern firms on established products was tough. Birmingham, Alabama, just happened to have iron ore, coal, and limestone close to town — perfect for making steel. Northern railroads slowed this competition on behalf of their Pittsburgh steelmaking buddies by charging Birmingham steelmakers inflated shipping rates, as though they were sending their steel from Pittsburgh.

Private enterprise and antitrust laws

State governments tried to regulate the railroads but were pushed aside when the Supreme Court ruled in the Wabash Cases (1886) that states can't regulate interstate commerce, meaning that the states had to keep their hands off any business that worked between two or more states.

In response, Congress passed the Interstate Commerce Act (1887), which set up the Interstate Commerce Commission (ICC). Although the ICC didn't have much power to take on the powerful railroads, it established the principle that the public has an interest in private enterprise that the government has a duty to protect.

Besides the transportation companies, a number of other virtual monopoly trusts like steel and telephones took advantage of the public. To deal with companies so big that they stopped competition, Congress passed the Sherman Anti-Trust Act (1890). This (and other such laws) was designed to make sure that consumers get fair prices based on competition, not price-fixing by businesses. (The term antitrust law has persisted in the United States; the rest of the world calls such laws competition laws.)

Attacking the victims, the Anti-Trust Act was even used against union organization in its early days, until the Clayton Act stopped it in 1914 (see Chapter 15). As with the ICC, the Anti-Trust Act took years to be fully put into effect to stand up to business.

 
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