Standard Oil And The Fate Of America
January 15, 2015
America Made A Wrong Turn
R. E. Prindle
Contrary to over a hundred years of American history writing industrialists were the innovators while socialists, Communists and Progressives were the reactionaries unable to adjust to innovation. It is time to set the record straight. It was a very serious error when the reactionary agents forced the breakup of the Standard Oil Co. and the trusts. Contrary to the fearful notions of men like Louis Brandeis and Woodrow Wilson small companies are not more efficient than big companies. It is quite the opposite as John D. Rockefeller proved when he brought order out of the chaos of the emerging oil industry. Unfortunately the reactionary ideal of smallness was to forestall the future and cripple America. A second major error perpetrated by historians over the same last hundred years or so is the notion that innovators who became wealthy impoverished the majority by ‘owning’ the wealth. Using that notion as a starting point let us briefly review the progress of the nineteenth century concentrating on the US. The distance between the founding of the US in 1793 and the nineteenth century seven years later is immense. The US was founded at the very tail end of the post-medieval world. Between 1793 and 1800 a whole new psychological outlook came into existence, a change in scale. The world was seen with completely new eyes as the Aryan intellect began the remarkable unfolding shouldering the post-medieval world aside.
While in Europe there were two thousand years or more of continuity by 1800 the US was a virtual tabula rasa, a new beginning. Still, the US citizen moved to the ancient rhythms until very close to the Civil War. Scientific developments had been accruing in Europe and England for a couple hundred years and as the nineteenth century advanced the unfolding of the Aryan intellect virtually exploded. Discoveries in physics and chemistry were enormous resulting in steam, electricity, photography and at the end of the century a host of related discoveries that made the alchemists look like pikers. Reality had exceeded magic with much more to come. Not least of these was the invention of the railroad that would be the engine that drove industry in the nineteenth century. Prior to the Civil War numerous shortlines led from one city to the next but they were small easily comprehended operations that the average person’s mind could encompass while no truly large fortunes came into existence. To be a millionaire was nearly miraculous. There was ferment and excitement but the connection to the medieval mentality was not yet broken. However, as though a wizard had waved a magic wand, a new world began to form in the wake of the Civil War. It was a very rapid transformation from the village blacksmith under the spreading chestnut tree of Longfellow to the fabulous steel mills turning out hundreds of thousands of steel rails to carry the giant iron locomotives hauling a half mile of fully laden rolling stock of Carnegie. Suddenly there were great multi-millionaires, tens and even a couple hundred millions of dollars. It boggled the post-medieval imagination. Seeing only the millions the awed populace asked where those millions had come from. They hadn’t been there before. The only conclusion those overawed brains could come to was as there was only so much money in the world the rich had stolen it from the masses leaving them poor. This was a very serious error made more dangerous by the constant reporting that, say, five percent of the population owned seventy-five of the country leaving only twenty-five percent to be divided among the impoverished ninety-five percent. The idea of it rocked their senses. Soon they feared the ninety-five percent would be standing naked without two nickels to rub together.
Most of those very rich people had made their fortunes in railroads. To take then the first transcontinental railroad, the Union Pacific/Central Pacific as an example: the UP/CP was an enormous undertaking uniting the three thousand miles between the East and West coasts. Financing such an enormous undertaking was the problem. The whole idea of the stock company was new. There were no established rules, indeed, really, no one knew what they were doing. It was all done on the fly. Even the New York Stock Exchange was in its infancy, hence all the wild stories about Vanderbilt, Jay Gould, Jim Fisk and Daniel Drew. The period was probably the loosest the world had ever seen or could imagine. Laissez faire in spades until the industrialists like Carnegie, Roosevelt and J.P. Morgan began to impose order. So, before the UP/CP let us assume that the net worth of the US was X dollars in 1865. In 1869 with the completion of the two lines adding enormous value to the country what was the new value? X2? X3, X4, X5 or maybe X6? The wealth to be divided had been increased exponentially. The steel industry had gone from the village blacksmith to the enormous rolling mills of Carnegie steel. Steel wheels had to be made, hundreds of miles of rolling stock. Because the UP/CP went where only open vistas had existed the land was opened to settlement, acreage was available to all, working stiffs or not. Where there had been no millionaires there were thousands of millionaires. There were men with twenty or thirty million who had been penniless ten years earlier. While unskilled labor did less well than skilled labor or the white collar caste the US was still famed for paying the highest wages in the world. Why do you think they came, for religious freedom? No, no, it was the money. This was made possible by the development of the railroads and industry. One must understand the colossal reorganization of society that entailed. A mere forty-five years earlier Lewis and Clark had taken years to slog across the continent and back risking their lives in the process. By 1870 one could ride in comfort from NYC to San Francisco in a few days. This was a transformation of the way life was lived. While White society was sophisticated compared to that of the stoneage Indian through whose territory the roads were driven White society was still primitive compared to today. Financial institutions and knowledge of finance were in a raw state. True, the US government contributed hugely including millions of millions of acres of free land to the roadbuilders yet the railroads couldn’t have been built any other way. The financing had to come from somewhere. As there was no adequate financial system financing had to be done on the run. That is the money followed the added value not preceding it. Something, as it were, had to have been created from nothing. Looked at another way, twenty years after the gold rush with a huge Civil War intervening, the South devastated and under martial law, the Bay Area had been populated and the job was done. The University of California was created in Berkeley, and even Berkeley had been created, while Stanford was in the works. These were sensational achievements. After all, the Mexicans in their hundreds of years had built only a few Missions. While chronic fault finders such as the Jewish writer Gustavus Myers blackened the reputations of the creators and belittled their achievements the builders truly built well. And out of the building the result was unparalleled prosperity and well being for the majority if not for the less qualified few. The next question was the nature of bigness.
John Henry he said to his captain
Now, a man ain’t nothin’ but a man,
But before I let that steam drill drive me down
I’ll die with this hammer in my hand.
Die with my hammer in my hand.
Prior to the Civil War all was on a small scale. Longfellow could celebrate the village smithy under his chestnut tree and it’s a homely and pleasant image. Life was on a very human level unlike the life bigness would create that would require serious reevaluation of reality by the people. Carnegie steel mills with their regimented specialized work forces were a far cry from Longfellow’s blacksmith. In point of fact no blacksmith could compete with a rolling mill. The difference was magnificently told in the story of John Henry the steel driving man of song. As mighty as John Henry was he was no competition with a steam drill. He died of a burst heart with his hammer in his hand. Undoubtedly he was buried with his hammer beside him. Nothing pictures the industrial change so well. With bigness went organization such as was never seen before and consolidation that overawed the people in its bigness. The rather simple minded jurist Louis Brandeis who would be a major influence in the US government from Wilson through Franklin Roosevelt was an anti-bigness critic preaching the efficiency of smallness. Brandeis may or may not have been a wizard lawyer but he knew nothing of business or manufacturing.
It would seem that all America trembled before the sight of John D. Rockefeller’s Standard Oil, the most efficient business structure the world had ever seen. He created the model for what was to follow. The contest between what had been and what was was too great an adjustment for the human mind on such short notice. Remember this was happening just as the concept of evolution and the onset of modern psychology were also disturbing the human mind in a very profound way. Within a decade or so the whole of reality was turned upside down or upside right depending on how you look at it. This terrified those unable to make the leap from the horse and buggy mentality to that of the internal combustion engine. The ancient and the modern required two different mindsets. The transition has not yet been made by the majority. For instance, over half of the US population still… still rejects the concept of evolution. The casual imprecision of the horse and buggy mind set within its wide parameters of precision was replaced almost overnight with the need for precision with little or no tolerance for personal idiosyncrasies. Thus when Henry Ford introduced the precision assembly line utilizing the Taylor scientific measurement of motion among its system repeated for as long as an item came down the assembly line at a measured speed it was really too much for the sloppy horse and buggy mentality. The workers didn’t understand why their minds rebelled but their reaction was one of rejection. They were reactionaries as were those of the Wilson-Brandeis school who reacted negatively to the mere thought of bigness. In the coming global economy, which could be seen on the horizon, in which bigness was absolutely necessary, combinations or trusts as they were called were the wave of the future. While Wilson and Brandeis envisioned a country of locally sized or regionally sized at best circumstances called for nationally sized combinations preparatory to international or global organizations.
The industrialists led by J.P. Morgan were preparing for just that development. In other words Rockefeller was anticipating twenty-first century competitive circumstances. Indeed Ford Motors was a global corporation before globalism entered popular parlance. Bigness should have been encouraged rather than inhibited. The muckraking journalists propagandized the breaking up of Standard Oil, that is reducing it to smaller units and that was a very wrong turning. The ideal of smallness prevented the US from assuming its potential role so cherished by the reactionary Liberals as the savior of the world, the manifest destiny that George Bush tried to impose on the world by force. America made a wrong turn as the century passed. The bigness should have been understood and encouraged but perhaps the transition was so sharp that the American mind or at least the reactionary Progressive mind was paralyzed by fear at the sight of Leviathan or the Titanic while the really progressive minds of the Rockefeller type were caught up in a backlash they didn’t know how to resist. Yes, I know that the new truly revolutionary economic order had its faults but then model 1.0 to use computer terms is always less perfect than subsequent models. The bugs have to be worked out. In automobile terms one cannot expect Ford’s Model T, the best selling car of the era to compare to twenty-first century models of any make from the least to the most expensive. Things have to evolve.
Just as technology went from the horse and buggy state to assembly line production so the financial system was passing from a very primitive state through several changes of scale to a more contemporary stage. Forms had to be created to deal with the needs of each successive increase of scale. Before the Civil War the stock market consisted of a few dozen equities while the bond market was non-existent except for a few government issues. The number of shares in equities were not in the millions or billions as today. More of the order of a few tens of thousands, the excesses of cornering a stock or crashing it by short selling, price manipulation, was not prohibitively expensive so that in a laissez faire unregulated market what could be done was done. But as the scale of transactions increased so new rules had to be made with each increase in scale. When what could have been done could no longer be done, well, it wasn’t. As there was no existing plan of action, no sound economic theory, management of the economy had to be done on the fly. There were capable men to step in and bring order out of chaos. The leader who emerged was the now much reviled J.P. Morgan. Like Rockefeller and Ford, Morgan was a great man. At the time the economy and the government were two separate entities, interlocked but not merged. Morgan did a good job. Since the merger of the government and the economy nothing has improved, it has gotten worse. Under Morgan the national debt was non-existent while today the trillions of debt that government merged with the economy has created is pure absurdity. Anyone who thinks one penny of that debt will be returned is an amusing fantasist. As the scale of business increased so necessarily did the amount of currency in circulation. Thus when the Republic was founded money was scarce to non-existent, people at the most were land rich. There were no millionaires. With each successive change in scale more millionaires were created with, for the time a novelty, fortunes of two hundred million having come into existence. In today’s values that would represent billions, still fortunes such as Carlos Slim’s and Bill Gates mounting into the tens of billions are greater. The people having become accustomed to great fortunes are no long irate. Since the novelty of huge fortunes has passed the outcry against these accumulations is much muted. There an now hundreds of billionaires and nearly countless thousands of millionaires. When John Roskab in the twenties said that everyone should be rich his prophecy has been nearly realized. But, then, the thought of that much wealth in the hands of the few made grown men and women shiver. The idiotic response of the time was to take the money away from them; that is gang up on them under government auspices and steal it from them through taxation. This was done under Franklin Delano Roosevelt in the thirties and forties when tax rates shot up to the 90% range. Further, business was saddled with an ‘excess’ profits tax. Reaction is one thing but this was total criminal insanity while undermining the prosperity of the masses. Every time the scale of business bumped up the amount of money required to finance the new growth increased geometrically. If companies were not allowed to generate the increased need internally then it would have to come from the government or be borrowed from banks. In the move to destroy the old Morgan order, the new socialist order created the Federal Reserve to do what Morgan had done. Federal Reserve officers are appointed not made by rising to the top through competition. Hence under Morgan there was no national debt while today it is laughable to even talk of the debt. The pressure is still against bigness and wealth creation. Hence America has been castrated in the now newly created global economy. America cannot now be the leader. The jump in scale is now enormous while the amount of capital to bring the global economy into existence is totally lacking. The global economy is now in the same state as when the necessity to build the transcontinental UP/CP railroad was made but the means of financing it were virtually non-existent. Then the US gave the railroad men millions of acres to open up settlement of virgin lands allowing a sort of boot strap operation; today the only recourse is to print money creating an even greater debt than can never be repaid. It’s like, why even joke about it? Meanwhile from the transition from the Morgans to the Federal Reserve the US government is in such an insolvent position that it cannot even collect enough taxes to meet immediate expenses. Hence it is in the position of increasing the national debt by more trillions each year. Thus it was a sorry day for posterity when our forefathers were overwhelmed by the face of success and began the retreat to failure. The US gave up its preeminent role in the world even as it achieved it. The moral is, think big and rich not small and poor.