It was through the erosion of the Constitution, the growing power of the federal government, and the concentration of the profits of empire in the hands of a privileged business elite—as the Founding Fathers had warned—that, according to the American economist and sociologist Thorstein Veblen in The Theory of Business Enterprise (1904), the conditions emerged that made possible the rise of the eugenic and fascist deep state in the United States.
Gustavus Myers was an American journalist and historian who published a number of highly critical and influential studies on the social costs of wealth accumulation. History of the Great American Fortunes was Myers’s most important and influential work, documenting in detail the corruption and criminality that, according to his research, underlay the formation of the great American fortunes during the nineteenth century. From the Astors and Vanderbilts, Jay Gould and Marshall Field, Stanford and Harriman, to Elkins, Morgan and Hill, Whitney, Rockefeller, Dodge, Havemeyer, and many others, Myers detailed the enduring and devastating effects that the accumulation of wealth had on the structure of the American economy, society, and the quality of life of the vast majority of Americans.
Myers’s well-documented account argues that the great fortunes throughout American history—including those of the Astors, Vanderbilts, and Rockefellers—were created through fraud, contrary to the claims of free-market fundamentalists. According to Myers, the founders of this ”government of wealth” depended on government support and the exploitation of workers, rather than on hard work and intelligence alone. He further argues that state and federal governments had, since colonial times, oppressed the poor while supporting the wealthy. Myers cites laws that, for much of the nineteenth century, imprisoned people for debt, prohibited workers from striking through conspiracy laws, and records instances in which police and military forces killed workers who attempted to organize in defense of their rights.
Ida Tarbell was an American author, investigative journalist, biographer, lecturer, and a pioneer of investigative journalism. She is best known for her 1904 book The History of the Standard Oil Company. Historian J. North Conway called it ”a masterpiece of investigative journalism,” while historian Daniel Yergin described it as ”the single most influential book on business ever published in the United States.” The documentary evidence and oral interviews that Tarbell assembled, according to her account, demonstrated that the Standard Oil monopoly had employed coercive tactics and manipulated competitors, railroad companies, and others in order to achieve its business objectives. Tarbell organized this material into a compelling narrative that became both ”a damning portrayal of big business” and a personal account of Rockefeller’s persecution of smaller competitors.
Tarbell succeeded in locating a crucial source that had largely disappeared: Rise and Fall of the South Improvement Company, published in 1873. According to her account, Standard Oil and Rockefeller had their origins in the illegal arrangements of the South Improvement Company. Standard Oil had allegedly attempted to destroy all available copies of the book, but Tarbell eventually succeeded in locating one at the New York Public Library.
Another break in the story came from Standard Oil itself and served as evidence that the company was still employing illegal and questionable methods. An office boy working at Standard Oil’s headquarters was instructed to destroy records containing evidence that railroad companies had provided the company with advance information about refinery shipments. This allowed Standard Oil to undercut competing refineries on price.
The young man happened to notice the name of his Sunday school teacher on several of the documents. His teacher worked in the oil refining business, and the young man took the papers to him. The teacher, in turn, delivered them to Ida Tarbell in 1904.
Historian Charles R. Geisst suggested that there has long been a ”tug-of-war” between business interests on Wall Street and the authorities in Washington, D.C., the nation’s capital. Throughout the nineteenth century, Wall Street generally developed its own ”distinctive character and institutions” with very little outside interference.
Between 1860 and 1920, the American economy evolved from being ”agricultural to industrial to financial,” and, according to historian Thomas Kessner, New York retained its dominant position despite these transformations. It ranked second only to London as the world’s leading financial center. Ron Chernow’s The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance traces the history of Anglo-American banking, with roughly two-thirds of the book describing how financial power gradually—but inexorably—shifted from London to New York. J. P. Morgan was an American financier and banker who dominated corporate finance on Wall Street during the Gilded Age (from the 1870s to around 1900). He headed the banking firm that eventually became known as J. P. Morgan & Co. and enjoyed immense prestige, international influence, and extensive political and financial connections. His influence reached its peak between 1880 and 1930, and his firm remains one of Wall Street’s leading financial institutions today.
The American journalist and author Matthew Josephson wrote The Robber Barons: The Great American Capitalists (1934), a well-written history of the steel, railroad, shipping, oil, and coal magnates of the post-Civil War era through the time of Theodore Roosevelt. According to this interpretation, this was the first period in American history in which a government ”of the people, by the people, and for the people” became thoroughly corrupted by men of immense wealth who considered themselves to be above the law. Their wealth made it possible, quite literally, to buy influence in Congress. The Founding Fathers had never intended for the nation to be governed by hereditary elites; that was precisely the kind of system they had sought to escape in Europe.
For further study of this subject, one can read The Ending of Hereditary American Fortunes by Gustavus Myers, published in 1939. The extent of market manipulation that took place on Wall Street is truly astonishing.
One scholar who has written extensively about both the earlier history of corruption and the modern corruption of Wall Street and the major banks is Charles R. Geisst, an academic, author, and former investment banker. Since 1985, he has taught economics at Manhattan College, where he currently serves as the Ambassador Charles A. Gargano Professor of Global Business and Finance. He is the author of Wall Street: A History.
Other People’s Money and How the Bankers Use It is a collection of essays by Louis Brandeis, first published in book form in 1914. The book criticized the use of investment capital to promote the consolidation of various industries under the control of a small number of corporations, which Brandeis argued was a means of suppressing competition.
Brandeis was highly critical of investment banks that controlled vast sums of money deposited by middle-class customers. He pointed out that the executives of these banks routinely sat on the boards of railroad companies and major manufacturing firms, and regularly directed their banks’ financial resources to benefit the companies in which they held positions. Those companies, in turn, sought to maintain control over their industries by crushing smaller businesses and penalizing innovators who developed superior products capable of competing with them.
Brandeis supported his arguments by discussing the actual amounts of money—millions of dollars—controlled by specific banks, industries, and industrial corporations such as J. P. Morgan. He observed that these interests had recently come to control a far greater share of American assets than any previous business enterprises. He frequently cited testimony presented during the congressional investigation conducted by the Pujo Committee, named after Louisiana Representative Arsène Pujo, which was established to investigate self-serving and monopolistic business practices.
The book received widespread publicity and was highly praised by legal scholars. Interest in the work increased further following Brandeis’s nomination to the Supreme Court of the United States in 1916.
In Other People’s Money and How the Bankers Use It, Brandeis warned as early as 1914 about interlocking directorates among banking institutions. He wrote, in part:
”The dominant element in our financial oligarchy is the investment banker. Associated banks, trust companies, and life insurance companies are his tools. Controlled railroads, public utility, and industrial corporations are his subjects. Though properly they are middlemen, these bankers bestride the United States as masters of business, so that practically no large enterprise can be undertaken successfully without their participation or approval.
These bankers are, of course, able men and possess great wealth. But the most potent factors in their control of business are not the possession of extraordinary ability or great fortunes. The key to their power is combination—concentration, intensive and comprehensive—advancing along three distinct lines.
First: There is the obvious consolidation of banks and trust companies; the less obvious affiliations—through stock ownership, voting trusts, and interlocking directorates—among banking institutions that are not legally connected; the joint transactions, gentlemen’s agreements, and ’bankers’ ethics’ that eliminate competition among the bankers.
Second: There is the consolidation of railroads into great systems, the vast combinations of public utility companies, and the formation of industrial trusts which, by making enterprises so ’large’ that local, independent banking houses cannot themselves provide the necessary capital, have created a relationship of dependence upon the New York bankers. Yet combination, however intensive, along these lines alone could not produce a financial oligarchy. Another, and even more powerful, element of combination was added.
Third: Investment banking houses, such as J. P. Morgan & Co., dealers in bonds, stocks, and securities, gradually came to dominate the functions of the three other classes of corporations with which their business had brought them into contact. They became the controlling force in the railroad, public utility, and industrial corporations through which our great business enterprises are conducted—the creators of bonds and stocks. They became the controlling force in the life insurance companies and the other great corporate reservoirs of the people’s savings—the purchasers of bonds and stocks. They became the controlling force as well in the banks and trust companies—the custodians of the nation’s liquid capital, the lifeblood of business, by means of which they and others carried on their operations.
Thus, four distinct functions, each essential to business and each originally exercised by a separate group of men, became united in the function of the investment banker. It is chiefly to this union of business functions that the financial oligarchy owes its existence.”
The development of our financial oligarchy has, in this respect, followed the pattern with which the history of political despotism has made us familiar: usurpation proceeding through gradual encroachment rather than through violent acts; subtle and often long-concealed concentrations of different functions which are beneficial when exercised separately but become dangerous when united in the hands of the same individuals. It was through processes such as these that Caesar Augustus became the ruler of Rome. The framers of the American Constitution had similar dangers in mind with regard to American political liberty when they took such great care to separate the powers of government.
One of the earliest critics of America’s elite families, such as the Rockefellers, was Ferdinand Lundberg, who published America’s 60 Families in 1937. Lundberg was an American journalist known for his frequent and forceful criticism of American financial and political institutions. He was outspoken in his contrarian views, describing the United States as an oligarchy composed of prominent American families, including the Rockefeller family. In his book The Rockefeller Syndrome (1968), Lundberg traced what he argued were the illicit origins of the Rockefeller family’s fortune. Based on his research, he contended that a small group of sixty interconnected American families controlled the mainstream media, dominated the U.S. economy, and exercised unchecked influence over American political institutions.
An even earlier critic of the Rockefeller family than Ferdinand Lundberg was New York City Mayor John Francis Hylan. Although he did not write an academic study on the subject, he spoke publicly and forcefully about his concerns.
In an article entitled ”HYLAN TAKES STAND ON NATIONAL ISSUES,” The New York Times quoted Mayor John Francis Hylan on March 27, 1922 (p. 3):
”The warning of Theodore Roosevelt is especially pertinent today: the real menace to our Republic is the invisible government which, like a giant octopus, sprawls its slimy length over city, state, and nation. Like the real octopus, it operates under cover of a self-created screen. At the ends of its long and powerful tentacles are our executive officers, our legislative bodies, our schools, our courts, our newspapers, and every agency created for the public protection. It seizes the reins of government from the shadows, secures the enactment of laws favorable to corrupt business interests, violates the law with impunity, muzzles the press, and reaches into the courts.
To pass from mere generalities, let me say that at the head of this octopus are the Rockefeller–Standard Oil interests and a small group of powerful banking houses generally referred to as the international bankers.
This small coterie of powerful international bankers virtually runs the United States Government for its own selfish purposes. They practically control both political parties, write political platforms, use the leading men of private organizations, and employ every device to nominate only candidates for high public office who are amenable to the dictates of corrupt big business. They favor the centralization of governmental power on the theory that a small group of carefully selected and secretly controlled individuals in positions of authority can be more easily managed than a larger body in which there will almost certainly be men genuinely devoted to the public welfare.
These international bankers and the Rockefeller–Standard Oil interests control the majority of the nation’s newspapers and magazines. They use the columns of these publications to coerce into submission—or drive from public office—those who refuse to obey the dictates of the powerful and corrupt cliques that constitute the invisible government.”
In the early 1960s, the prominent American historian, Council on Foreign Relations (CFR) member, and insider Carroll Quigley conducted extensive research for his encyclopedic work Tragedy and Hope: A History of the World in Our Time. Spanning more than 1,300 densely printed pages, Tragedy and Hope recounts how a cadre of extremely wealthy and powerful individuals gradually rose to positions of influence. Some were bankers, while others began in different industries before moving into banking because they regarded it as the true center of power. They generally operated behind the scenes, not as the political elite of individual nations but as an international elite—or super-elite. To them, national borders and traditional loyalties became increasingly irrelevant.
When the first major exposé of the so-called shadow government and the CIA appeared in 1964 with the publication of The Invisible Government by journalists David Wise and Thomas B. Ross, the CIA reportedly considered purchasing the entire print run in order to keep the book out of the public’s hands, but ultimately decided against doing so. ”To an extent only dimly perceived,” Wise and Ross wrote in the book’s introduction, ”this shadow government shapes the lives of 190 million Americans.” They continued: ”Major decisions involving peace and war are made beyond public scrutiny. An informed citizen may come to suspect that American foreign policy often moves publicly in one direction while, through the invisible government, it moves secretly in precisely the opposite direction.”
The American politician William Jennings Bryan wrote as early as 1924 that an invisible government existed on Wall Street, exercising great influence over both political parties. In 1954, Senator William Jenner warned in a speech that ”the road to total dictatorship in the United States can be laid by strictly legal means, invisible and unknown to Congress, the President, and the people…. Outwardly, we have a constitutional government; operating within our government and political system, however, is another body representing another form of government…” Four American presidents also warned of this invisible government and hidden power, a subject that will be discussed in the next article.
Arthur Selwyn Miller was a leading authority on constitutional law. He served as Professor of Constitutional Law at the National Law Center of George Washington University Law School in Washington, D.C., from 1961 to 1978. He frequently testified before congressional hearings and served as a consultant to numerous congressional and presidential commissions. In his 1987 book The Secret Constitution and the Need for Constitutional Change, he wrote:
”…those who formally govern take their signals and commands not from the electorate as a whole, but from a small group of men (plus a few women).
This group is called the Establishment. It exists, despite the fact that its existence is vigorously denied. That is one of the secrets of the American social order. A second secret is that the existence of the Establishment—the ruling class—is not supposed to be discussed. A third secret is implicit in what has already been said—that there is really only one political party of any consequence in the United States, one that has been called the Property Party. The Republicans and the Democrats are, in reality, two branches of the same (secret) party.”
Sometimes referred to as ”Power Elite Analysis” or ”Establishment Studies,” this examination of the causal relationships surrounding the nature and extent of political power—who possesses it and how it is exercised—is presented as essential to understanding the relationship between the state and organized crime. According to this perspective, there are similarities between this approach and what scholar Peter Dale Scott calls ”Deep Politics”: the critical investigation of the concealed reality behind surface appearances, an attempt to unmask the true face of power by identifying the elite among the social, economic, and financial groups and individuals who benefit from the coercive power exercised by the state.
The concept of the Establishment was first used in England in reference to the established—or official—state church, the Church of England, created by King Henry VIII during the Protestant Reformation. The nineteenth-century writer William Cobbett later expanded the concept to include the networks of financial institutions associated with the Bank of England, elite public schools and clubs, and publishing organs (such as The Times) that the ruling aristocracy used to train and sustain the oligarchic bureaucracy that administered the British Empire. Cobbett referred to this power elite as ”The Thing.”
As Leonard Silk and Mark Silk observed in their influential book The American Establishment, the British historian A. J. P. Taylor later adapted Cobbett’s term ”The Thing” into ”the Establishment” in a 1953 article published in The New Statesman, followed by journalist Henry Fairlie’s use of the term in The Spectator in 1955.
The broader concept was soon adopted by a wide range of American analysts who focused on the nation’s ruling elite, including Richard H. Rovere, C. Wright Mills, Dan Smoot, Phyllis Schlafly, Carroll Quigley, John Kenneth Galbraith, and G. William Domhoff.
These writers argued that although the First Amendment to the U.S. Constitution prohibits the establishment of an official religion, the United States nevertheless possesses an Establishment comparable to that of Britain, complete with its own theological canon and civic doctrine of statesmanship and intelligence operations. According to this view, its ”Vatican” is the Council on Foreign Relations (CFR). Its principal source of wealth and patronage has been the financial empire of Morgan and Rockefeller, which they argue was instrumental in the creation of the Federal Reserve, described as the principal enabler of the modern welfare-warfare state. Many of its leading members, they contend, studied at Ivy League institutions such as Harvard, Princeton, or Columbia, with some—particularly at Yale—being initiated into the Skull and Bones society.
Political scientist Andrew Bacevich’s book Washington Rules, which summarizes and critiques what he describes as the ”rules” and ”creed” of the American foreign policy establishment, is presented as another notable example of power elite analysis, or ”Establishment Studies.” Bacevich focuses on the immediate post-Second World War era, tracing the bipartisan foreign policy consensus of the Cold War through to the Bush and Obama administrations’ War on Terror. He identifies this period as the decisive formative era during which the vision of ”the American Century,” articulated by Henry Luce, was implemented through the Truman administration’s creation of the national security state and its doctrine of containment as the public justification for global political engagement, alongside what he describes as the parallel policy of rollback or liberation pursued through covert operations conducted by the Office of Policy Coordination (OPC) and the CIA under figures such as George F. Kennan, Robert A. Lovett, and the Dulles brothers.
But the Establishment’s rules and creed were outlined long before 1948. They were first articulated by visionary advocates of profit, conquest, and empire some fifty years earlier, during the Spanish–American War and the Philippine–American War.
A central figure was the influential Elihu Root, later the first president of the Council on Foreign Relations, who—like his interventionist counterparts Theodore Roosevelt and Barack Obama—was awarded the Nobel Peace Prize. In this account, Root is portrayed as the Establishment’s archetypal ”wise man,” a term often used by the mainstream press to describe selected servants of power, from Root to the late Richard Holbrooke—U.S. Special Representative for Afghanistan and Pakistan, a member of the Trilateral Commission and the Council on Foreign Relations, former managing director of Lehman Brothers, and a member of the board of AIG until July 2008, shortly before the financial bailouts.
Before the Truman administration’s well-known ”Wise Men” came an earlier generation referred to here as ”the Four Evangelists.” Led by Elihu Root and including his protégé, ”Colonel” Henry L. Stimson, together with ”Colonel” Edward M. House and Raymond B. Fosdick, this relatively little-known quartet is presented as the true architects of the American Establishment and of its interventionist doctrine supporting the welfare-warfare state. According to this interpretation, they wrote the creed that transformed the American republic into a sprawling and corrupt empire.
The rise of the invisible government and the evolution of the empire – Part 2
