CHAPTER XI John D. Rockefeller THE BUILDER

THE APPEARANCE of John D. Rockefeller marks the beginning of that historic struggle between the government and organized business for the control of our economic life, which now moves to its final phase. One may doubt whether anything can be done to turn aside the stream of inevitable logical sequence. These powerful movements in society intrude themselves at first like a small trickle that, ignored too long, becomes the invincible force of a vast erosion. The Civil War might have been prevented when the first boatload of African slaves landed on these shores. After that it was too late. Perhaps the time to have checked the rise of Fascism in America was when that first group of promoters set up the industrial town of Lowell with the seeds of all the growth of finance capitalism in their small corporate structure. And yet it seems that perhaps the critical point is to be found in the ’seventies, when Rockefeller and his contemporaries began to use with understanding those weapons that now, in their perfected form, make up the arsenal of the modern corporate chieftain.

It was at this period that men began to tinker with the idea of controlling the economic society. They talked affectionately—as they still do—of that thing they call free enterprise. But they went feverishly about restraining the freedoms at every point. They were so far from wishing the society to be free that they forged all sorts of devices for limiting, even destroying, its freedoms. It was not the economic society they wished to be free. They wanted to be free themselves, which is quite another matter. They wanted to be free to subject the workers, consumers, and their competitors to such limitations and laws—affecting price, production, and terms of competition—as suited their objective, which was profit.

Davis and Sanford

JOHN D. ROCKEFELLER

For seventy years this development would go forward. And during sixty-four of those seventy years the government would fight this development. The thing that organized business called “government interference in business” was not interference at all. Rather it was an attempt to prevent interference in business. These promoters, magnates, trade combines, cartels, trade associations were all attempting to interfere in the business activities and enterprises of businessmen generally—to make laws, regulations, agreements—to control business. The whole aim of the government, so far as it was pursued, was to keep free enterprise free—free from the intrusions and restrictions of organized business groups. In practice, however, the government was hopelessly defeated in this objective. Its attacks were halfhearted because its lawmakers, its executives, its judges were either the agents of organized business or at least men whose whole philosophy ran along with it. So that after sixty years of this gradual disintegration of the freedoms of free enterprise, culminating in an epochal depression, the liberal groups that had always fought the development surrendered and became the chief apostles of control.

The little war that we shall witness in the oil regions of Pennsylvania in 1872 was the first battle in a long struggle that ended in the strange episode of 1933, as Franklin Roosevelt came into power, known as the National Recovery Administration—the NRA. This was the complete adoption of the principle that the economic provinces of society and society itself must be subjected to rigid controls by the representatives of the producing groups under the general supervision of the government. It was just one of the concluding phases of the march toward the Fascist society, of which the corporative system is the economic expression. The NRA was the high point in the latest phase of this development toward the corporative state. The early projects of John D. Rockefeller in the ’seventies marked the serious beginning.

John D. Rockefeller was born July 8, 1839, in a small farmhouse just outside the then thriving village of Richford, New York. It was a farm without a farmer—for his father was a mysterious, roving peddler of medicines who appeared at the farmhouse only in the intervals between his long journeys over the country. Forced by the uncertain adventures of the elder Rockefeller to move frequently, the family lived first near Owego, then in Moravia, in Cayuga County, then back to a small farmhouse near Owego again, and then, when old Bill Rockefeller was indicted for some irregularities with some rustic wench, across the state and into New Connecticut in Ohio. The family settled in Strongville and later in Cleveland. And slowly the lusty old journeyman-pill-salesman drifted out of their lives.

Young John D.’s education consisted of the usual first years at the village school near Owego, then to Owego Academy, a small institution apparently partaking of the qualities of a junior high school, and finally to Central High School in Cleveland. When he finished there he took a course in B. S. Folsom’s Commercial College, from which he was graduated in 1855 at the age of sixteen. As things went in those early days it was about as good an education as was afforded to all but that small number of youths who were privileged to go to college. It was very different from the education that the lordly young J. Pierpont Morgan was absorbing at the same time in select schools in Boston, Switzerland, and Germany.

At these schools Rockefeller met at least three people who were to play important roles in his life. Thomas C. Platt, the “Easy Boss” of New York, was at Owego Academy. At Central High in Cleveland one schoolmate was Mark Hanna and another was Laura Celestia Spelman, who was to become his wife.

His first job was as a clerk in the office of Hewitt & Tuttle, commission merchants, near the docks in Cleveland. He was paid $400 the first year, a little more the second, was offered $700 the third year, but demanded $800, and quit to launch his own business as a commission merchant with Maurice B. Clark as a partner, under the name of Clark & Rockefeller, along River Street. Thus, at eighteen, the precocious enterpriser was his own master. His firm cleared $4400 the first year and $17,000 the second year. When he was twenty, Rockefeller was a successful businessman and recognized as such in Cleveland. He was a quiet, handsome, dignified, serious, earnest young man, utterly absorbed in the important business of getting along. He had joined the church—the old Erie Street Baptist Church. He went to no plays, played no games, took part in no movements, acted on no committees, but resolutely “minded his own business.” His diversions were found wholly at the Erie Street Church, where he acted as usher, took up collections, taught Sunday school, and religiously attended all the picnics and church affairs. He was in all things the model young Christian businessman.

On August 21, 1859, Col. Edwin L. Drake struck oil at Titusville on Oil Creek in Pennsylvania, an event that was to have more far-reaching consequences than the discovery of gold in California ten years earlier.

This discovery made no immediate sensation in Cleveland. A few businessmen ventured a timid investment in the new industry. Some merchants along River Street commissioned young Rockefeller to look over the prospects in oil. He did so, made up his mind that the refining end was the only department worth considering, but advised against going into that.

The oil towns along the Allegheny River grew in activity, turbulence, and the mad and disorderly pursuit of new riches on the pattern of the mining towns of the West. The whole business partook of the nature of a gamble. Oil fetched twenty dollars a barrel at the well until 1860. Then it slipped to twelve dollars. Wells multiplied. Oil flooded the valley. The price went to seven dollars, to two dollars. No one knew when these wells might run dry and the whole adventure come to an end. When the Civil War broke over the country, petroleum sank to ten cents a barrel.

It was at this point that Rockefeller decided to go into oil. He was twenty-two. Lincoln was calling for men. But Rockefeller, like young J. P. Morgan, had his own business to consider. He went on no committees, joined no movements, got mixed up in no wars. There would be no wars in the world if the John D. Rockefellers and the J. P. Morgans had to fight them.

Walworth Run, near Rockefeller’s commission house, reeked with the smell of oil. Many little refineries making kerosene for lamps flourished there. One was operated by Samuel Andrews, a practical mechanic, who had been a maker of candles and was then a maker of lamp oil. He needed capital, which meant a partner. He also needed management, needed it worse than he knew. Rockefeller and his partner Clark became silent partners of Andrews. After two years both silent partners saw the golden profits in oil. Rockefeller made up his mind he was done with vegetables. He sold his interest in the commission business to Clark. He bought Clark’s interest in the oil business for $72,500 and paid for it in cash. That was in 1865. The circumstance that decided Rockefeller was the discovery of oil at Pithole. That revealed to him that there was plenty of oil in the ground. The new firm became Rockefeller & Andrews. The year before Rockefeller had formed another partnership—he had married his old schoolmate, Miss Laura Spelman. His amazing career was soundly launched.

The commercial world thinks of the oil industry—or indeed any industry—as the product of certain groups of able enterprisers of the Rockefeller type. The oil industry, like the electrical industry, resulted from a long series of discoveries, experiments, inventions, adventures. Men active in those fields enabled the oil industry to become a source of wealth. The enterprisers swarmed over the oil industry after the real pioneers had created it.

Because America wanted better light than candles gave, lamps had been invented. They burned whale oil in New England, lard oil in the West, cotton-seed oil in Virginia, camphine distilled from turpentine along the Gulf Coast. Then coal oil was distilled from shale. All these were costly or limited in supply. Back in 1833 Professor Benjamin Silliman of Yale found that a luminant oil could be distilled from petroleum. Others explored that idea in the late ’fifties. Dr. Samuel Kier, who sold petroleum taken from salt wells, distilled kerosene from the crude oil, invented a lamp, and did some business. The commercial possibilities of kerosene were apparent. Only the supply of petroleum was lacking. That is why some men had their eyes peeled for it.

Along the Allegheny River in Pennsylvania, Dr. H. F. Brewer saw oil floating on the surface of Oil Creek. He sent a sample to Professor Crosby at Dartmouth who refined it and pronounced it a practical luminant. Crosby showed it to George H. Bissell, New York lawyer, with a promoter’s instinct, who went to Venango County, Pennsylvania, and bought 103 acres. He took a partner, Jonathan G. Eveleth, organized the Rock Oil Company, which collected oil from the surface of the streams. But the supply thus gathered was negligible. The idea of drilling for oil—an idea that was worth billions to a generation of oilmen—originated with Eveleth. Salt wells were worked by drilling. Salt wells yielded some oil. Why not drill deeper and, perhaps, find more oil? Eveleth organized the Seneca Oil Company and induced Edwin L. Drake, a conductor on the New York, New Haven & Hartford Railroad, to undertake the drilling on a royalty basis. After innumerable discouragements and difficulties, Drake’s drilling was crowned with success on August 21, 1859. These were the pioneers—Silliman who distilled petroleum in 1833, Kier and another named Ferris who saw the commercial possibilities in kerosene and produced a suitable lamp, Brewer who surmised that Oil Creek would yield enough oil, Crosby who confirmed the luminant properties of the Oil Creek product, Bissell who made the first effort to get oil there, Eveleth who conceived the idea of drilling, Drake who did the drilling and found that ocean of liquid gold that would change the living habits of the world. I need hardly say that none of these men made very much money out of their contributions to the industry. Drake died in poverty and would have starved save for charity.

It was so with the men who contributed the various devices and techniques of production and distribution after the industry was established—the men who originated the tank cars and pipelines and the process of manufacture. For example, Samuel Van Syckel, who invented the pipelines, became involved in ruinous litigation with the Standard Oil Company over patents and processes and died with but a small money reward for his services.

After the Civil War the industry revived, as Rockefeller had foreseen. New cities and towns sprang up along the Allegheny River, new and foolish fortunes flowered, hotels flimsy but gaudy, opera houses, dance halls, gambling joints, houses of prostitution, chambers of commerce, streets of mud, politicians, pettyfoggers, quacks of every description flourished.

The impact of Rockefeller on the industry became very quickly its great central fact. His growth was extraordinary. In 1867 he induced his brother William to join the firm of Rockefeller & Andrews. A separate firm was established in New York—William Rockefeller & Company—to handle the export business.

Rockefeller’s ceaseless need was money. Money was got in those days by borrowing at the bank, taking a partner, or getting credit from dealers. Rockefeller solved his early money problems by taking in partners. One of the first was Henry M. Flagler, who had married a daughter of Stephen V. Harkness, wealthy whisky manufacturer. Harkness put $70,000 into the Rockefeller business, became a silent partner, and made his son-in-law Flagler an active one. Harkness died worth countless millions as a result of that happy gamble. The firm became Rockefeller, Flagler & Andrews.

In 1870 Rockefeller turned his business into the corporate form—the Standard Oil Company. He could refine 1500 barrels a day—largest capacity in the world. Cleveland became the largest refining center. He employed about 300 men in his refineries; 600 more were busy making barrels for him and operating 20 teams. He employed about a million dollars in the business and had outstanding bank loans as high as $350,000. In the Standard, Rockefeller held 2667 shares; William Rockefeller, Flagler and Andrews and Harkness, 133 shares each; O. B. Jennings, 1000 shares. There were thirty refiners in Cleveland with a capacity of from two to 1500 barrels a day.

Rockefeller’s next move was to buy up nearly all his competitors in Cleveland, absorbing them into a single concern—the Standard. From this point on his course was one of gradual absorption. First, he acquired all the brains of the industry—rivals like Pratt and Rogers and Archbold and Vandergrift; second, he took over all his competitors without distinction, paying them in cash or Standard Oil stock. Those who took Standard stock and held it died rich. This process continued until the Standard Oil Company became as near to a complete monopoly as any such business in modern history, while the business itself produced a flock of fabulous multimillionaires whose names became household words in the realm of finance and industry for the next two generations.

Behind this very simple chronological account of Rockefeller’s personal rise to fortune lies the whole story of the rise of American big business. The entire tale can be told in the life of this man.

What happened in the oil regions is one of the great epic stories of American life and growth. It surpassed in drama, in importance, and in the outpouring of riches the great gold saga of California.

The story is more or less embedded in the American mind as a dramatic struggle between great numbers of noble little businessmen fighting to preserve the ways of free enterprise against a great and ruthless giant who sought to strangle not only them but the American system of free opportunity. What follows is a very great oversimplification of that story.

It was, in fact, a logical development of the forces that were at work, which few understood, and that were forcing men with the invisible but irresistible motion of a glacier.

Three sets of influences had been operating in America. One was the discovery and development of our vast natural resources, hitherto undreamed of. Another was the widening of the markets in which men could work and sell, a process made possible by the development of the railroads and the flood of immigration. The other was the development of machine methods that was but a lengthening and quickening of the industrial revolution.

The new age of big business was really beginning. Of course, for many years an increasing number of larger plants had been erected, but as yet there were few very large concerns. The pattern of industry was not greatly altered as yet save in spots. Every village had, in addition to its merchant, its barber, its saloonkeeper and hotel man, a group of small industries that supplied its own people—the shoemaker, the tailor, the tinsmith, the blacksmith, who made simple farm equipment and other materials, the wheelwright who built wagons, the gunsmith, the sawmill, the whisky still, the apothecary, the tobacconist who made cigars and cigarettes, the dressmaker. Mostly raw materials and a few standard articles came in from outside, but foods were prepared almost wholly in the homes.

The city reflected this manufacturing self-sufficiency. Cleveland, when Rockefeller went into business, had twenty-one flour mills, twenty-seven clothes factories, seventeen boot and shoe factories, thirteen furniture factories, seventeen machine shops, and fifty lumber mills. They supplied their local markets. There were a few large industries, of course. The textile mills were among them, located largely in New England, employing thousands of workers. The sewing-machine companies were operating large plants and selling everywhere, with gaudy showrooms. McCormick was making reapers, Case threshing machines, Studebaker wagons, Deere plows. At Chicopee Falls, Ames Brothers employed a thousand men. The arms factory of Colt was a modern plant. The machines were tooled, handwork abolished, platforms provided with jigs and cranes instead of men. E. K. Root, superintendent of the Colt arms factory, was the mass-production god in that machine. He got the fabulous salary of $25,000 a year. And so we see that while production and distribution was in the hands of small businessmen, the large production unit had made its appearance, and while production was carried on chiefly in localities, there were already a number of industries in which men produced for a national market. In short, the notion that Henry Ford or even Rockefeller originated mass production is wholly unfounded.

The development of machinery has taken two forms—first, the development of power and, second, the development of processing tools. All production involves an expenditure of power. Much of that power has always been provided by men, but for many ages an immense amount of the sheer power was taken from animals. For many years various mechanical devices have also been used to convert the power of men and animals to higher potentialities. The lever, gravity, pulleys enormously multiplied the power of men. But with the invention of the steam engine and the later invention of electrical power, the power at the command of man has been extraordinarily increased. How much, it is difficult to say. Mr. Carl Snyder, in his book Capitalism the Creator, makes the startling statement that the electrical industry now supplies an output of kilowatt energy that equals the product of 500 million men a year.

But the productive capacity of a nation supplied with the vast resources of power we now have must very clearly indicate one of the reasons for the greater production of wealth compared with an earlier age when power was so much smaller.

The other phase of mechanical development has been in processing machines, power tools that perform a multitude of operations. These require very little human power but demand great human skill. The linotype machine offers one example. This has gone on until it reaches terrifying heights—witness the great automobile-frame plant of A. O. Smith in Milwaukee. We have heard with awe of the Ford assembly line where the Ford car starts out as a mere embryonic frame, then moves along, pausing for a few seconds at intervals between long lines of men. Each man at his stop puts on a bolt, a screw, a piece of steel, a spring, until at the end of the line a complete car emerges. But in the A. O. Smith plant all this goes on with a difference. Instead of men adding a gadget here and a bolt there, little upright mechanical figures move toward the frame as it stops, insert a rivet, hammer it, or perform some other one of those cumulative acts that produce a finished frame at the end—literally a factory without men.

This development, therefore, passed through these phases—first power, then processing, then scientific management—which has had a startling effect upon our immense power productivity in the last fifty years.

The other factor, of course, was the extension of the market. Business establishments remained small for the very obvious reason that they produced for a small market—for the town, the neighborhood, or the state in which they were located. And this was due to the great expense of transportation. Transportation of heavy articles by stagecoach was altogether too expensive. Where a factory could reach a new market by means of water it could expand its sales, and many did so. But even here serious obstacles arose. The transportation problem involved not merely delivering the finished product but getting the raw materials. American producers actually found it cheaper to bring timber and iron across the ocean from Europe than to transport them by horse-drawn vehicles. Hence many of our natural resources long remained undeveloped. But the railroads were already changing this. A man in Cleveland could now produce goods and look for his market not merely in Cleveland and along its wagon trails, but wherever a railroad went, and railroads were going everywhere as the miles of new track multiplied yearly. It cost from twenty to sixty cents a ton mile to send flour from Pittsburgh to Philadelphia by horsepower; the same shipment could be made by railroad for three cents.

There was the development and discovery of America’s natural resources, especially fuel and iron, the very heart and bones of the machine age. It is a singular thing that rich as America was in almost all the essential raw materials up to a decade or so before the Civil War, it did not realize these possibilities but depended for many materials—iron, copper, gold, silver—upon Europe. It was in the fifteen years before the Civil War that men began to find those precious deposits of coal, iron, copper, silver, gold, and oil that opened up a world of riches to those who were there to use them—not merely the mining prospectors who found the wealth, but the producers of locomotives, rails, engines.

These tools, therefore, were at the service of the businessman of Rockefeller’s era. It had become possible for any able businessman to make far more money because machines, power, and the railroads enabled him to operate upon a far larger scale. The producer commanded not merely the increasing resources of the country and a great population of customers; he also possessed an immensely broadened technological endowment—an endowment from the brains of countless scientists, physicists, and inventors over several centuries. This mass of knowledge lay waiting like a huge mountain of gold. A man had only to dig in and use it, either by mastering its principles himself or hiring with money those who had mastered them.

But this is not the whole story. Large-scale operations required far larger sums of money. And the means of bringing together the necessary money resources for operation were not as yet very highly developed. These money resources involved savings, in the first place, and the means of tapping them, in the second place.

There were banks, but as yet neither the savings bank nor the insurance company was very widely exploited. Most banking resources remained in commercial banks, while the masses themselves possessed a very large part of their own savings. Even countless small businessmen kept their money reserves in their shops or cashboxes.

The techniques of gathering large amounts of money through the machinery of the investment bankers were, of course, known. They had been developing since the days of Fugger and Medici. But they had been applied chiefly to the money wants of states. The bonds of governments and municipalities were issued and sold and dealt in freely. There had also been operations in the securities of a few large-scale enterprises such as the stocks of the great trading corporations of Holland, France, England, and Belgium. And in America, railroad stocks had already been sold to large numbers of people. Nevertheless, the businessman’s access to money for the larger scale operations of the new order was limited. Generally the man who wanted additional money went to a commercial bank, took in a silent partner or two who had amassed wealth, or else increased the number of his active partners. This is what Rockefeller did—taking in men like Harkness, Paine, Pratt, and others and borrowing incessantly at the banks. The corporation enabled partners to come into an adventure without assuming liability for more than the amount of their stock subscription.

The selling of stock in industrial enterprises was coming modestly into use. Most corporations were merely incorporated partnerships with a handful of stockholders. But the possibility of expanding the corporation was growing. National resources, machinery, power, savings—these were the instruments in the tool kit of the modern enterpriser.

We may now see with some clearness what took place in the oil regions—that historic struggle between Rockefeller and his smaller rivals. And in looking at it and at the wealth-getting techniques involved, we may see in camera the whole picture of modern American business. We see also the growth of that destructive force that intruded itself into the capitalistic system as money intruded itself into the feudal system and destroyed it.

The story has been confused and disordered and obscured under the forms of the hero-villain theory of human conduct, with Rockefeller as the villain and the little men of the regions as the oppressed.

What took place in the oil regions duplicated precisely what was taking place in other regions and industries and for that matter in other countries. In a sense, it was merely an extension of what had been taking place for many centuries. Competition between producers has always been disorderly. In its nature—since each competitor is a little despot in his own domain—it can be nothing else. It produces disturbances, personal, social, economic. All competitors are not equally competent or equally scrupulous, nor do they have equal resources. In the nature of competition they contend for business. It is a continuous contest. It generates quarrels, hatreds, controversies, injustices, unfair dealings, wastes, losses. Wherever competition has existed its defects have been apparent. And men have always attempted to do something about them. There were the ancient guilds—organizations of tradesmen, craftsmen, merchants to make rules among themselves to regulate their rivalries, soften the asperities of the commercial contest, protect them from the operation of economic laws. As the capitalist system advanced the merchants formed pools and cartels among themselves—they can be found in the fifteenth century. State monopolies were established to increase profits. Other merchants sought to bring their economic provinces under control through the medium of outright monopolies, as in the case of Fugger’s copper monopoly in Hungary.

All down through the years businessmen have made various attempts to avert the dislocations, losses, consequences of many men making the same goods, without the necessity of making agreements among themselves.

All this was true during the years when the producer found his competitors right in his own town or even neighborhood, could see him, chat with him occasionally, keep an eye on him, match his stratagems swiftly. Also the conditions of competition were more even. Given the same abilities, one man could summon to his assistance only a very limited number of artificial aids. And there was also a more or less natural limitation upon the individual’s power to absorb business.

This was why there were twenty-one flour mills in Cleveland and seventeen boot and shoe factories.

But all this was changing rapidly. The artificial aids were being rapidly multiplied. Machines were being installed with greatly augmented producing power, thus limiting the number that could enter a given field because of the large capital investment required. Then there was, quite as important, the widening of the market so that the boot and shoe man could compete not merely for the trade of Cleveland but for the trade of cities hundreds of miles away. All the boot and shoe factories of all the cities were hurled into competition with each other, and competition with more powerful machines, so that competition became more violent for the same reason that war became more violent, because it included more combatants over a wider battlefield, using more terrible weapons. The advantage of the bigger and richer units in this struggle became obvious. The advantage to the better generals became greater. A higher quality of ability was needed, rarer abilities were called for. The very size of the field and of the combatants added to the fury, the disorder, and the fatalities of the combat.

In the midst of this something was causing trouble. Some strange force smote all this machinery for abundance. In simpler times the people had fewer resources to draw on; they had to work with simpler tools; they had less money and hence were satisfied with less. But here was all this flood of riches—gold from California, oil from Pennsylvania, coal from Pennsylvania, Virginia, Illinois, iron from Michigan, forests illimitable, grain without limit, and new machines to multiply the product of every man’s labor. Nevertheless, poverty lingered on, men starved, crises appeared, depressions followed on each other’s heels.

What could be the explanation? Well, it was obvious, quickly enough. It was so obvious men thought that they did not have to think about it. It was overproduction, they said. Too many people went into every business. Too many people bored for oil, dug coal, made iron or sugar or hemp or cord. We simply produced more than our people could buy. And when we piled up the surplus in the factories, the factories closed down until they could dispose of it. So there it was, as plain as a pikestaff—the thing to do was to control production and to limit competition and to keep prices up so there would be a profit for all.

This was not new, although the simple man, including Rockefeller, who labored in the oil regions, supposed it was. It is more or less clear from certain remarks dropped in later life that Rockefeller believed himself to be one of those misunderstood pioneers who had got hold of a great new idea, for which he was despised by his own generation until time had proved his wisdom and canonized him for it. But all this had happened before. The control of competition has been attempted throughout the ages. The old guilds did it. Jacob Fugger and his contemporaries tried their hands at cartels. Fugger went farther and built monopolies in the copper industry in order to control prices and production. The Fugger-Thurzo Company in sixteenth-century Hungary was a forerunner of Standard Oil in the nineteenth.

Indeed, history reveals that the little fellows in the oil regions saw this and acted upon it even before Rockefeller did. For these oil-well men got the notion that the earth gave up its black wealth for their benefit. Although the newcomers who flocked into the oil regions were a horde of strangers, they very quickly developed the illusion that they had some kind of God-given claim upon these riches; therefore, they had a right to govern the flow of oil, to decide how much would be permitted to flow, what price oil would sell for and to whom. They said: we ought to get five dollars a barrel for it, but we do not get that because too many bore for oil. We must unite against the rest of the world to limit the flow. And they came to have a sort of conviction that there was something immoral about places like Cleveland or Pittsburgh or New York harboring refiners to compete with them.

This is the producer’s complex. It accounts for that series of legal, economic, social, and ethical concepts that grow out of the habits that men have of looking upon themselves as producers primarily, and forming their philosophies upon the basis of their interests as producers. Therefore, they organize as producers to get as much as they can for their product, and then, as they step into the market place with their earnings to spend, find themselves, as consumers, helpless and at the mercy of all the other producer groups organized against them.

The real force that was smiting the machine, slowing it down, fouling it, and at intervals halting it was something altogether different. This force arises out of a flaw in the money economy. No man can possess himself of food or clothing or anything he needs save by having money to buy it. And no man who produces anything can use it to get what he wants, rather than what he produces, save by selling what he produces for money. The thing that men use to buy what they want is money. And this money they obtain from their so-called money income.

In order to buy what we need we must convert into money the goods we produce or the services we render. Each year the nation produces a vast mountain of goods. Each year it pours out into the hands of its people a vast stream of money income. It is that money income that the people use to buy that vast mountain of goods. We have apparently solved the problem of how to produce a mountain of goods. We could produce twice as much if we wished. What we have not solved is how to make that stream of income—money income—flow out in sufficient volume, properly timed, to enable the people to buy that great heap of goods.

The problem lies there. The businessmen have supposed that it lies elsewhere—that it all comes from producing too much goods in that mountain. They bend all their efforts therefore to producing less. They overlook the fact that the goods are produced in our factories and business enterprises and that our income is produced in the same place. In other words, there goes out of all our business enterprises every day a great stream of goods into the market place and another great stream of money—payments for wages, rent, interest, and other services. These naive gentlemen imagine that the way to make it possible for them to sell all they produce is to produce less—to cut down the size of the goods stream to the size of the income stream. What they do not realize is that when they cut down the size of the goods stream they also cut down the size of the income stream. Shut down a factory and you stop producing goods, but you also stop producing income. Curtail production and you curtail production of both goods and income. Reduce production in order to raise prices and by the very act of raising prices you reduce money income—by reducing its purchasing power.

American businessmen in the late ’sixties and early ’seventies began to play on an ever-increasing scale with this idea of limiting production upon the theory that overproduction was our curse. This notion persists to this day and has guided all organized business policies so far as they have been deliberate. It gradually penetrated government policies until finally, under the New Deal, we beheld the strange spectacle of the planners for abundance uniting with the business leaders to organize the most comprehensive and ruthless machine for producing scarcity in the interest of high prices and profits. The movement in America that culminated in the NRA had its organized beginnings on a large scale in the oil regions in the early ’seventies.

In those regions the competition took on several aspects. First, there was the competition between the producers themselves—the men who drilled for and produced the crude oil, wells being furiously put down, newcomers arriving daily, the derricks spreading out over all the surrounding hills and farms.

Then there was the competition between the refiners as such. There was the warfare between the producers and the refiners. There was the warfare between the various refining centers—city against city, Cleveland, Pittsburgh, Buffalo, Erie, New York, and others, and the regions against all of them. Oil has been the child and mother of war. Finally, there was the warfare between the railroads for the traffic and later between the railroads and the pipelines.

As early as 1866 the producers discussed a “combine for the purpose of attempting to make better terms with the refiners in the price of the crude product.” The jobbers were also discussing a combination with a million dollars to build tanks and store oil to hold it off the market to raise prices. The refiners in the regions formed into a combination—a league as they called it—and boasted in the streets of Oil City that “they were determined to wipe Cleveland out as with a sponge.” In 1870 the producers met in Oil City in Library Hall and agreed to stop the drill for three months to raise prices. The men in the oil regions were determined to make a monopoly out of their oil for the benefit of those in the regions. This happened before Rockefeller made any attempt at combination.

It was at this point that Rockefeller decided upon his course. He saw clearly enough his general objective. But it was only after several experiments that he hit upon the final plan that would bring him to a virtual monopoly of the oil industry and make him, perhaps, the richest man that ever lived.

Generally Rockefeller’s objective was to do away, in the oil industry, with the evil effects of competition and to bring the oil industry as such under some kind of central government. Control of the economic province of oil was what he wanted. Rockefeller looked upon the small oil producer and refiner first as a shockingly wasteful and inefficient businessman. Second, he regarded him as upsetting the whole industry. Next, he felt that the industry as a whole could be operated upon a more secure and efficient basis if the small producer were eliminated. And finally he disliked, was indeed horrified at, the losses suffered by these little men and the losses of profits suffered in consequence by the larger producers.

His march toward his plan took the form of a series of stratagems. And this series may be said to mark the course of most of the other large industries.

First came the general spread of the idea of controlling prices, production, and such, by association, such as the small oil producers attempted in 1866.

The second phase was the cartel system—a sales cartel, used first by the salt-well men along the Saginaw River in Michigan in 1868. Then came, in 1871, Rockefeller’s organization of the South Improvement Company. Under this plan Rockefeller in Cleveland and the leading refiners in each of the great refining centers—Pittsburgh, New York, Erie, the regions—would attempt to form local combinations. That is, Rockefeller would attempt (1) to take into his company the leading refiners of Cleveland; (2) to buy out the balance, and (3) to crush those who refused to surrender. The other leaders would do the same thing in their regions. Then these leaders would unite in a combination called the South Improvement Company, which would control the refining industry and dictate to the producers of crude oil and the consumers of kerosene. This South Improvement Company scheme was advanced by the use of railroad rebates and certain other favorable devices. But the plan became known before it went into effect. It produced a sensation and a storm of denunciation in the oil regions and was killed before it got under way.

Rockefeller’s next attempt was still through association. It was a combination of the large refiners in all the regions. Its plan was to put the selling of refined and the buying of crude oil in the hands of a committee headed by Rockefeller. It too was a cartel. The country was divided into districts, each permitted to refine a certain amount. It was called the National Refiners’ Association, with John D. Rockefeller as president.

It didn’t work because the members refused to live up to the restrictions. The Association had no means of enforcing compliance. This is, of course, the weakness of these cartel agreements in democratic states. Individualists will not obey the rules; the democratic state cannot enforce them. Rockefeller in six months decided this would not work and dissolved it in June, 1873. It was not an exclusive combination. It was to admit every existing refiner. Price schedules were fixed. The Association made a contract with the producers. They agreed to stop the drill. The Association fixed a schedule of oil buying with them. The producers did not live up to their agreement. So Rockefeller broke it and they denounced him. The Producers’ Association failed and the Refiners’ Association was dissolved.

Rockefeller, however, did not abandon his plan that oil must be controlled. He merely decided that this could not be done in a voluntary combination. The only means was the outright corporate monopoly.

He had an absolute monopoly in Cleveland. He would extend that to the nation. He went to the leading refiners in all the large centers with a new proposition. It was not that they would join an association, but that they would merge their companies with his Standard Oil. He proposed they turn their plants over to the Standard, receive Standard Oil stock instead of their own stock, and become corporate partners with him, taking their places on the directorate of the Standard. Thus he brought in Warden and Lockhart of Philadelphia. He persuaded Pratt of New York, Archbold of the regions, Henry H. Rogers, Vandergrift, and others. Before long, all the important refiners in the industry were Rockefeller’s partners in a corporate organization. When Rockefeller sat down with them now it was not as a member of an association but of a corporation of which they were complete masters.

They then set out to crush all competition so that they could make laws for the oil industry in their board rooms with no one to question them save their employees. They succeeded in this—in building the nearest approach to outright monopoly yet known in America.

In all this Rockefeller and his associates encountered grave difficulties, savage opposition. State and national governments pursued them. Legislatures investigated them. Courts prosecuted them. Laws were enacted to frustrate them. To evade the antimonopoly laws the trust was invented by Rockefeller’s lawyer, S. C. T. Dodd. When this was declared illegal, the holding company made its appearance. The corporation to own corporations was adopted as the means of creating a monopoly without violating the Sherman Antitrust Laws. But this too was outlawed in 1911. But by this time the work had been done. The dominance of the Standard was everywhere recognized. Rockefeller’s fortune was the greatest in history. And he himself was retired. And then, singularly, the automobile and its voracious appetite for gasoline was driving the horse from the streets and creating the immense new industry of gasoline production, from which Rockefeller would make far more money in retirement than he ever made in all the years of exhausting industry during his busy life.

These men, however, were making the pattern of the future America. The long, eloquent, bitter battles of liberals and radicals against the monopolistic practices of the great corporations and the trade associations would gradually lose their virility. Little by little great and powerful groups—including labor—would drop into the way of thinking that our economic society needed direction and control on the trade-association model—the plan used by Rockefeller first and discarded as unworkable. This is the central idea of the corporative system, which is the economic core of Fascism. It would not work for Rockefeller in 1872 because there was no means of enforcing compliance. It would not work for Franklin D. Roosevelt in 1933 because the government of a democratic society cannot possibly possess the ruthless powers that are necessary to enforcement. The corporative system can be made to work only under a dictatorship. It is in the direction of the Fascists’ corporative system that our whole society tends. That tendency is based on the principle upon which Rockefeller worked in 1872—the principle of control by either monopoly or agreement of the economic factors in society in the interest of profit.

What we have seen is the chart of the economic phase of the Rockefeller history. But mixed up with these economic threads were other strands that arose out of the struggle itself. These strands represented moral and ethical issues. They had to do with the methods Rockefeller used in pursuit of his objectives. And it was these that provoked those storms of protest and abuse that harried him for forty years.

Rockefeller was remorseless in following out his plans. He knew he was in a war and that the little men in the oil regions would rend him apart unless he extinguished them. Whether or not Rockefeller was a cruel man we cannot say. But certainly he had that quality of the great commander engaged on large enterprises of surveying the necessities of his task with high intelligence and appraising the suffering of his victims in its proper proportion to the scene. He did not shrink from measures because smaller men were hurt. He told rivals whose refineries he coveted that they could have cash or Standard stock for their properties, that if they were wise they would take the Standard stock, that if they did they would be rich, but that if they refused to surrender they would be crushed, and he crushed them. He undersold them. He intrigued to cut their credit. He put obstacles in their way. He made profit impossible to them. And he did it without a flutter of the spirit as he knelt in the Euclid Avenue Baptist Church on Sunday.

He used—though he did not invent—the system of rebates to crush rivals. That is, he made arrangements with the railroads to pay the published freight rates but got back secretly a large rebate on his freight bills, receiving as high as fifty per cent from some roads. The man who had to pay a dollar a barrel freight on his shipments could not contend with a competitor who shipped to the same point for fifty cents a barrel. What this meant to Rockefeller may be surmised from a report revealing that in the six months preceding March, 1879, the Standard shipped 18,556,000 barrels of oil on which it got an average rebate of over fifty-five cents, amounting to something over $10,000,000. Rockefeller defended the rebate on the principle of the quantity discount. Shipping in huge quantities, requiring whole trains at times, and ensuring regular runs and economical handling of loading, the roads could perform the service for him more cheaply. The defense would be more valid if the quantity discount had been open to others who had large shipments. They were not, save in a few isolated instances.

Far worse than the rebate was the drawback—an instrument of competitive cruelty almost unparalleled in industry. It amounted to this: the road allowed Rockefeller a rebate on his own shipments and paid him also a similar sum on his competitors’ shipments. The railroad paid rebates on competitor shipments but the rebate went to Rockefeller and not to the shipper. Thus, on every barrel a rival shipped, Rockefeller made a profit. In March, 1878, H. C. Ohlen shipped 29,876 barrels of oil to New York. Ohlen paid $1.20 a barrel freight. Rockefeller collected from the road twenty cents on each of these barrels—a squeeze of $5975 out of one rival in a single month.

Rockefeller’s competitors long felt that some cruel and mortal force was killing them, but did not know what it was. When they discovered it, words cannot describe the fury of their hatred.

A volume would be insufficient to outline the cases of men who ascribed their ruin to Rockefeller. Every incompetent who failed named Rockefeller as the cause of his failure. Ugly stories got wide currency. One example was that of Mrs. Backus, widow of an oilman who told how she had appealed for assistance when her husband died and how Rockefeller had taken away her oil refinery at a third of its value. Miss Ida Tarbell gave much space to this case. No one can examine the facts without putting Mrs. Backus out of court.

Another was the much-advertised case of the Merritts, who claimed they had been swindled out of the priceless ore fields on the Mesabi Range. There is plenty of evidence on this case since it dragged through the courts. It is not possible to scrutinize that evidence without conceding that Rockefeller’s conduct was without blemish throughout. The truth is that Rockefeller did not engage in what might be called personal perfidy. He was a patient, ruthless rival in business. He did not rob either his stockholders, his partners, or those with whom he dealt in personal relations. Those who came within the orbit of his competitive warfare got the full measure of the devices he had fabricated for their destruction.

Having set out to corner the refining industry, he came after a while to the conclusion that he must control the pipelines, which were slowly supplanting the railroads as carriers of petroleum. Also he went into the distributing field as well. One of the most dramatic and critical battles of his career, in which he revealed the full measure of his genius as a commercial chieftain, was his struggle with the Empire Pipe Line backed by the powerful Pennsylvania Railroad. After Rockefeller had forced the Pennsylvania to surrender, his prestige was so great that there was little energy left in the opposition to him.

Having got the pipelines and the large distribution units, he used them effectively to knock out ambitious rivals. George Rice made a lifelong fight against the Standard. That story broke into the newspapers at regular intervals as a stain on Rockefeller’s name. Rice built a refinery at Macksburg, Ohio. Later he owned some wells there. Rockefeller hit him on the distribution front. The grocers were the retail outlets for kerosene. Grocers who carried Standard Oil were supplied with groceries at low prices in order to undersell those who dared to buy from Rice. Rice paid fifty cents a barrel freight to the railroad on his oil, the Standard paid twenty-five cents. On another road Rice paid thirty-five cents a barrel, the Standard paid twenty-five cents and collected ten cents on every barrel Rice shipped. Rockefeller ruined Rice, and in this case the evidence is complete against him.

John D. Archbold, Henry H. Rogers, and the Standard’s local representative were indicted in Buffalo for blowing up the refinery of a competitor, Matthews. This was a grave charge indeed. Rogers and Archbold were acquitted. But the local manager was convicted and subjected to a grotesque fine of $250. Matthews sued the Standard and got a settlement of $85,000. But that sum was consumed in lawyers’ fees and other costs. And Matthews was effectively ruined despite his settlement.

Bribery of public officials and the press was part of the equipment of the great company as it rose to power. State and national laws, city ordinances stood in its way. It must march through them. It would buy up the mayor and common council of Bayonne as readily as the members of the New Jersey legislature or some of the most important statesmen in Washington. The Ohio legislature was bought up to defeat an early antitrust bill with such a display of cash that it went into Ohio history as the Coal Oil Legislature. The Standard backed Henry B. Payne for United States Senator from Ohio, and his son, Oliver H. Payne, treasurer of the Standard, sat at a desk in a Columbus hotel with stacks of bills in front of him, paying for votes on delivery.

The company bought space and good will in newspapers. One investigation revealed at least 110 Ohio papers had signed contracts to print editorials and news supplied by a Standard-supported agency in return for advertising. Some of the “copy” thus furnished makes strange reading today.

Standard officials, including Rockefeller, did not hesitate to mount the witness stand and lie gallantly in defense of their projects. In the Hepburn investigation Archbold denied on the stand that Standard controlled the Acme. Henry H. Rogers swore as a witness in court that he did not know who controlled the United Pipe Lines, though, of course, he knew the Standard did so. Rockefeller himself swore that he was not interested in gas and copper, though the Standard owned a dozen subsidiary corporations that produced natural gas, while Rogers and Stillman and William Rockefeller gathered up dozens of gas companies that bought their oil from Standard. When they could not lie with safety they took refuge in refusals to answer, which led to the most grotesque performances. Jabez Bostwick refused to state his name on the witness stand on the ground that it “might incriminate him.”

Most famous—or infamous—of the corrupt performances of Standard Oil was carried on in an episode that became notorious as the “Archbold letters.” William Randolph Hearst got possession of a packet of letters and copies of letters stolen by an office messenger from Archbold’s files. They revealed Archbold as the archcorruptionist of the company, sending checks and certificates of deposit to various Congressmen and judges and to such distinguished Senators as Joseph B. Foraker of Ohio and Joseph Bailey of Texas and to Matthew Stanley Quay. This made a long and shocking story when it broke upon the country as a sensation and ruined all of the public men it touched. Actual proof that the Standard vice-president sent a series of checks ranging from $5000 to $15,000 and totaling $44,000 in six months to a great Senate leader shocked the public. These revelations quickened the pace at which state legislatures, public prosecutors, political groups, and the national government pursued the Standard. Investigation followed investigation. Subpoena servers shadowed Rockefeller. In the end, at the direction of Theodore Roosevelt, the Attorney General brought suit to dissolve the Standard Oil holding company as a monopoly. This suit ended in the famous dissolution decree of 1911, which did break up the company into its component corporations, while at the same time the decision contained elements—the famous “rule of reason”—that so weakened the antitrust laws that they were effectively reduced as a fortress against the onward march of corporate restraints on trade.

When the Standard holding company was dissolved it owned thirty-three corporations, and John D. Rockefeller personally owned something more than one fourth of all the stock. What it was worth, it is difficult to say. The shares when first sold on the market immediately following the dissolution were valued at $663,000,000. Four months later they had risen to $885,000,000. They were probably worth still more. For the Standard had never made any effort to inflate its values. Whatever may be said of Rockefeller’s fortune it was never made in stock adventures in Standard shares. The shares of that company were never peddled about. They formed the subject of no market operations. Rockefeller issued no bales of stock to be listed on the exchange, manipulated to higher levels, and then unloaded on the public. This was the method that Morgan employed and that later became the curse of American corporate business. No stockholder ever had any reason to complain against Rockefeller. As for consumers, he did strive to make the best oil and to furnish unequaled service. He was the best employer of his time, instituting hospitalization and retirement pensions. He paid the best wages in the industry. His sins were the sins of the industrial warrior, the sins of the ruthless competitor. His offenses were leveled against those who dared to sell oil in an oil world that this great monopolist had marked for his own.

When he retired, the Standard Oil Company was the greatest industrial corporation in the world. Its tanks were to be seen not only at every railroad station in America but along the Ganges, the Yangtze, and the Amazon, wherever boats or pipes or railroads or wagon wheels could carry his oil.

The precise period of Rockefeller’s retirement always remained a mystery. As a matter of fact, it is of more than passing interest that this man, reputed the most omnivorous money getter in history, retired from active business when he was fifty-four. Stories of his broken health fascinated the public mind. People hated him cordially and told stories of priceless irony about the world’s richest man who had snatched the bread from the mouths of his little competitors only to find himself unable to eat a square meal. It was said he had a standing offer of a million dollars to any doctor who could heal his inhospitable stomach. Rockefeller himself always denied the stories of his illness. The truth seems to be that his stomach had become seriously affected by the long, cruel strain that business, the pursuit of the law, and public odium had put upon it. His physician demanded that he relax his labors. In 1896 he complied. He remained president of the company, but withdrew from any daily or direct supervision of its affairs. He was worth, at this point, probably $200,000,000. But as he withdrew into the leisure of Tarry-town, patents were being taken out on the first simple automobile designs that, perfected later, changed the oil business from a kerosene to a gasoline industry, multiplying many times over the operations and profits of his companies. There did come a time, doubtless, when Rockefeller’s fortune could have been estimated at a billion dollars.

After 1896 he planned to devote himself chiefly to the recovery of his health and the administration of his fortune in the interest of his philanthropies. And this he did until 1911, after the dissolution decree, when he separated himself entirely from all further connection with the immense industry.

Rockefeller must be recognized as perhaps the most constructive philanthropist in the history of America at least. How far this was Rockefeller’s own conception and how far it was the plan of his almoner, Dr. Frederick T. Gates, who acted as the director of his charities for many years, it is not possible to say. Rockefeller had begun his benefactions by donations for churches, hospitals, schools, seemingly good causes that came to his attention. But in time he developed a theory of giving to which he adhered to the end. This is best expressed by saying that Rockefeller became interested in agencies to study and prevent disease rather than in hospitals to treat its victims. He came to feel that human pity was a very active agent and could be relied on to provide hospitals after suffering men and women were stricken, but that it was of infinitely greater importance to find the seeds of disease and keep the patients out of the hospitals. This idea ran through all his subsequent philanthropies, whether in the field of science, business, or education.

When he founded the University of Chicago he was still the zealous Baptist. Before he was through he gave altogether $45,000,000 to that institution. By 1928 the total of his gifts was as follows:

Rockefeller Foundation and Laura Spelman Memorial	$256,580,081.87
General Education Board	129,197,900
Medical Institute	59,778,141.14
University of Chicago	45,000,000
Miscellaneous	18,365,000
by John D. Rockefeller, Jr.	65,234,606.29
TOTAL	$574,155,729.30

This, of course, does not represent what the public has received from his gifts. Thus, he gave the Rockefeller Foundation $182,000,000, but that Foundation out of its yearly revenues gave the public $141,000,000 in gifts between 1922 and 1928.

Rockefeller must be accepted as the greatest business administrator America has produced. His immense wealth was the product of intense application to the business of accumulation, to the habit of planning with infinite patience and then executing these plans with indomitable fortitude, cautiously and slowly when possible, with militarylike swiftness when necessary. Unlike Morgan, he was in no sense the scowling autocrat. Rockefeller possessed an extraordinary capacity for acting with others. He made it a rule never to adopt a decision on any important matter unless he had the unanimous consent of his partners. He could spend years trying to convince them when his simple word would have been law. His fortune belongs in the group of the Carnegies, the Henry Fords—enterprisers who were producers and who got their fortunes by creating wealth and retaining for themselves as large a share of it as they could. They were wholly different from the group that included Morgan, Gould, and Henry H. Rogers, Rockefeller’s partner. These were primarily speculators and gamblers, who insinuated themselves into industries created by other men, converted the ownership of those industries into liquid securities, and made money from the market changes in those securities. Rockefeller, Carnegie, Vanderbilt, many of the old railroad builders—whatever their other faults might be—left behind them great industries and great railroad empires.

Perhaps one of the most interesting features of Rockefeller’s career was the length of his life. It was a planned life—in all things down to the last detail. When his stomach became affected in the ’nineties and the alarm became obvious, he proceeded to devote to the business of living the same meticulous planning he had brought to bear on the business of getting. Rockefeller, older than most of his colleagues, marked for the grave in mid-life by a public that hated him, actually outlived them all. He died on May 23, 1937, at the age of ninety-eight. The great fortune had been put either into the huge endowments already named or made over in some way to his family, chiefly his son, who administers it largely as a philanthropic enterprise. That portion retained by Rockefeller himself until his death amounted to $26,273,845.25. It included only one share of Standard Oil stock, valued at $43.94.