Free People, Free Markets. George Melloan
writing that “a combination of labor is just as legal, just and moral as a combination of capital.”
However, he was opposed to “union shops” agreements that required union membership as a condition of employment, regarding them as infringements on the rights of workers. He also wrote eloquently cautioning labor unions that once they had signed a contract with management, they should adhere to it. Contracts freely arrived at were a moral obligation for both parties.
In his usual analytical style, Dow argued that the ability to enter into a contract was a mark of freedom. A slave couldn’t make a contract because he was not free to uphold its terms, being subject to the wishes of his master. Only a free man could enter into a contract; hence, private contracts were artifacts of freedom and thus sacrosanct, he wrote.
The strike was ultimately settled by the hyperactive Theodore Roosevelt by means of a federally backed Anthracite Coal Strike Commission. The miners got a 10% pay raise and a one-hour reduction, to eight hours, in the working day. It was said to be the first presidential intervention in a major strike, setting a precedent that, in some future cases where political partisanship was involved, would not win favor from Journal editorialists.
The Dow commentary shows that the youthful Wall Street newspaper was already broadening its participation in the national debate beyond the realm of stocks and markets. But it was with regard to markets that Dow would make a lasting name for himself. In those early days, he originated a means for taking the minute-to-minute temperature of the stocks listed on the New York Stock Exchange by inventing the Dow Jones averages. The first average, compiled in 1884 when Dow Jones was still only a news service, consisted of nine railroad and two industrial stocks, chosen because they were actively traded. Dow simply divided the closing prices of his chosen stocks each day by 11 to get an average.
Out of that primitive beginning, which Dow himself improved by adding more stocks, would grow the carefully managed market samples that comprise the averages of today. It’s interesting how closely the Dow readings have paralleled those of newer and broader samples, such as the S&P 500, suggesting that Dow’s original design, as modified to reflect stock splits and the emergence of important new industries, was fundamentally sound.
Since Dow was primarily a market analyst, there is not a sufficient record from those early days to offer an account of what he thought about a broad range of issues. He was no doubt less skeptical of federal regulation than the editors of today. A hint of that comes from the writing of Woodlock, who became editor of the Wall Street Journal on Dow’s death in 1902 (Jones had already departed to join a stock brokerage, and Bergstresser had become less active) and whose 50th-anniversary recollections provide some of the best records of those early days.
Woodlock suggests that Dow looked with favor on the Interstate Commerce Act of 1887, which was enacted under pressure of shippers to bring the rates and service terms of the railroads under federal regulatory control. If true, that would have been counter to free-market principles. A free marketer would have answered the complaints of the shippers that, even though they were captive to the railroads that served them, the combinations of shippers and railroads serving separate regions were in competition with each other in urban markets where the lines terminated and thus had an interest in keeping the costs of the shipped products competitive. Moreover, the railroads, built at great expense, had to charge rates sufficient to amortize their debts and meet operating costs. Dow would have known all this.
Woodlock’s later recollection may have been colored by his own attitude toward regulation. After leaving the Journal in 1905, he became a Wall Street railroad analyst. In 1926, Calvin Coolidge appointed him a commissioner of the Interstate Commerce Commission (ICC). He spent four years as a regulator before returning to the Journal as a columnist.
But even if it is correct that Dow favored the ICC, it should be remembered that federal regulation of commerce and industry was far more limited in the 1880s than today. The federal government was small and in good favor with much of the industrialized North, because Abraham Lincoln had recently won a war to preserve the union. There can be little doubt that the tycoons of the 19th century invited political interventions with their sometimes high-handed business practices.
The arguments for federal regulation were based on far different circumstances at the turn of the century than now. Western grain shippers in particular argued that the railroads were in a position to take unfair advantage because shippers had no alternative way to get their products to market. Motor vehicles and trunk roads were still in the future, so there were no trucks to compete with the railroads. The farmers wanted lower shipping costs, and it seems that in the case of the ICC, farmers had more muscle in Congress than the railroads.
Dow’s own writings, including his stand on free collective bargaining and his interest in measuring market trends, support the conclusion that he was very much in the “free people, free markets” camp. Even today’s editors don’t oppose all forms of market regulation, for example, Securities and Exchange Commission rules that require corporations to promptly inform the public of any decisions that materially affect the value of their securities. Dow Jones built a business, the Dow Jones Newswires, on providing corporations with a medium for doing just that, and every reporter and editor quickly learned the importance of getting information that might move the market onto the wire as quickly as possible.
A skeptic might say that it’s far-fetched to suggest that the founders of Dow Jones in their cellar print shop set the tone and standards of the modern Journal, with its printing presses and electronic network serving just about every populated area of the world. But it is not so implausible, really. Customs and mores are handed down from generation to generation, and if that is true in a social sense, why can’t it be true of a long-lived business organization, particularly one that puts its institutional opinions on public view every day? Americans still hark back to the writings of Founding Fathers like James Madison and Thomas Jefferson for political guidance, and the Constitution those founders so carefully designed still is the basis for decisions by America’s highest court.
Editorial writing bears a certain resemblance to jurisprudence. A well-run editorial page adheres to precedents, fundamental principles established by core editorials of the past. Journal editors have by and large adhered to the principle that when an editor decides to depart from a precedent, he must let his readers know that he is doing so and explain why. An editorial page that merely reflects the daily changing whims of the editor is not likely to acquire the confidence and loyalty of readers.
Charles Dow could see the importance of establishing a reputation for integrity. When that reputation for integrity was put to the test 60 years later in a tussle with General Motors, its largest advertiser, the Journal scored high, and that may have been the event that set it on the growth path that has allowed it to reach its present level of size and influence. More about that later.
Barron Foresees a Fragile Peace
Dow died in late 1902, but before his death he had arranged to sell Dow Jones & Co. to his longtime friend and associate, Clarence Walker Barron. Barron, who lived in Boston, had developed a news agency similar to Dow Jones called the Boston News Bureau at roughly the same time Dow Jones was building clientele in New York. Early on, when both were using flimsies and runners, he and Dow struck a deal wherein they would share news from their two financial centers, giving both a greater scope of coverage. So it was natural then when Dow was in bad health and looking for a buyer, he would turn to Barron.
Barron handled the deal, but it was actually his wife, Jessie Waldron Barron, who came up with most of the cash in support of Barron’s promissory notes, and she became the sole proprietor of Dow Jones. She first relied on Tom Woodlock to edit the Journal, but in 1905 Woodlock had a quarrel with the remaining founder, Bergstresser, and offered his resignation. Jessie Barron accepted it.
She turned to his second-in-command, British-born William Peter Hamilton, a skillful writer and editorialist, to lead the Journal. He would continue to write editorials until 1929. Dow had