History Textbook Exercise

 

Rockefeller

 

Zinn, Howard. A Peoples History of the United States. New York: 1980.

 

 

John D. Rockefeller started as a bookkeeper in Cleveland, became a merchant, accumulated money, and decided that, in the new industry of oil, who controlled the oil refineries controlled the industry. He bought his first oil refinery in 1862, and by 1870 set up Standard Oil Company of Ohio, made secret agreements with railroads to ship his oil with them if they gave him rebates discounts ‑‑ on their prices, and thus drove competitors out of business.

 

One independent refiner said: "If we did not sell out. . . . we would be crushed out. . . . There was only one buyer on the market and we had to sell at their terms." Memos like this one passed among Standard Oil officials: "Wilkerson & Co. received car of oil Monday 13th. . . . Please turn another screw." A rival refinery in Buffalo was rocked by a small explosion arranged by Standard Oil officials with the refinery's chief mechanic.

 

The Standard Oil Company, by 1899, was a holding company which controlled the stock of many other companies. The capital was $110 million, the profit was $45 million a year, and John D. Rockefeller's fortune was estimated at $200 million. Before long he would move into iron, copper, coal, shipping, and banking (Chase Manhattan Bank). Profits would be $81 million a year, and the Rockefeller fortune would total two billion dollars.

 

Andrew Carnegie was a telegraph clerk at seventeen, then secretary to the head of the Pennsylvania Railroad, then broker in Wall Street selling railroad bonds for huge commissions, and was soon a millionaire. He went to London in 1872, saw the new Bessemer method of producing steel, and returned to the United States to build a million‑dollar steel plant. Foreign competition was kept out by a high tariff conveniently set by Congress, and by 1880 Carnegie was producing 10,000 tons of steel a month, making $1 million a year in profit. By 1900 he was making $40 million a year, and that year, at a dinner party, he agreed to sell his steel company to J. P. Morgan. He scribbled the price on a note: $492, 000, 000.

 

Morgan then formed the U.S. Steel Corporation, combining Carnegie's corporation with others. He sold stocks and bonds for $1,300,000,000 (about 400 million more than the combined worth of the companies) and took a fee of 150 million for arranging the consolidation. How could dividends be paid to all those stockholders and bondholders? By making sure Congress passed tariffs keeping out foreign steel; by closing off competition and maintaining the price at $28 a ton; and by working 200,000 men twelve hours a day for wages that barely kept their families alive.

 

And so it went, in industry after industry ‑ shrewd, efficient businessmen building empires, choking out competition, maintaining high prices, keeping wages low, using government subsidies. These industries were the first beneficiaries of the "welfare state." By the turn of the century, American Telephone and Telegraph had a monopoly of the nation's telephone system, International Harvester made 85 percent of all farm machinery, and in every other industry resources became concentrated, controlled. The banks had interests in so many of these monopolies as to create an interlocking network of powerful corporation directors, each of whom sat on the boards of many other corporations. According to a Senate report of the early twentieth century, Morgan at his peak sat on the board of forty‑eight corporations; Rockefeller, thirty-seven corporations.

 

Meanwhile, the government of the United States was behaving almost exactly as Karl Marx described a capitalist state: pretending neutrality to maintain order, but serving the interests of the rich. Not that the rich agreed among themselves; they had disputes over policies. But the purpose of the state was to settle upper‑class disputes peacefully, control lower‑class rebellion, and adopt policies that would further the long‑range stability of the system. The arrangement between Democrats and Republicans to elect Rutherford Hayes in 1877 set the tone. Whether Democrats or Republicans won, national policy would not change in any important way.

 

p. 256-258