Money, Power and Modern Art PART II: A Monetary Coup d'etat By Henry C K Liu
The rise of Rockefeller In 1868, John D Rockefeller struck a major deal with a railroad, guaranteeing a certain volume of shipments in exchange for rebates. The first of many, this deal was made with Jay Gould, owner of the Erie Railroad. The financial importance of controlling railroads was highlighted by the meteoric success of Rockefeller, who in 1871 struck secret deals with the oil-transporting railroads to not only give him rebates on the oil he shipped but also to pay him drawbacks on shipments by rival oil refineries. The refineries that were driven into bankruptcy and the oil drillers who were forced to accept whatever distressed price Rockefeller offered described him as a ruthless monster, although the methods Rockefeller used were common practice at the time. All the victims would not have hesitated to do what they denounced Rockefeller for doing if they had the foresight and discipline to do it. Rockefeller nevertheless became the lightning rod for the scandal surrounding the South Improvement Co scheme, a secret alliance between major refiners of which Rockefeller was one of several and the railroads. By March 1872, the 33-year-old Rockefeller had used this special relationship with the railroads and iniquitous financial tactics to take over 22 of the 26 refineries in Cleveland. Known as the Cleveland Massacre, this was the first step in his rise to unprecedented industrial supremacy. Rockefeller created the original "trust" and after the state of Ohio outlawed the trust corporate structure, he engineered a change in New Jersey laws and moved to New Jersey in 1889 to form a giant holding company by the name of Standard Oil of New Jersey. Standard Oil employed a number of cutthroat business practices, including monopolization, buying up all the components needed for the manufacture of oil barrels in order to deny competitors the means of getting their oil to the market; waging rate wars by cutting the price of oil temporarily to force smaller competitors who could not sustain the short-term losses out of business; insisting on rebates on public rates offered by the railroads; and using intimidation by dispatching thugs to break up competitors' operations that could not otherwise be controlled. Often, Rockefeller did not personally partake in unethical conducts. His style was merely to lay down a corporate objective and leave it to his zealously aggressive managers to achieve the result by whatever means. Thus by focusing on the positive vision while isolating himself from the dirty tasks needed to achieve that vision, Rockefeller was able to believe honestly that he did no wrong and created much good. It's the "breaking eggs to make omelet" argument. The holding company expanded beyond oil by acquiring, with oil profits, ownership of railroads, iron and copper mines, public utilities, shipping, communication and real estate. In Rockefeller's eyes, the state of the oil business was chaotic and wasteful. Because entry costs were low in both oil drilling and oil refining, the market was glutted with crude oil due to overcapacity accompanied with high levels of waste and redundancy. In his view, free competition worked only at the infancy of an industry when a dominant firm had not emerged. Free competition ceased to work well as soon as a few very large, efficient firms emerged amid many medium and small inefficient firms. His view was that the financially weak and badly managed firms, or evenly well-managed small firms that were structurally inefficient due to their small size, in their desperate attempts to survive drove prices down below production costs, hurting not only themselves but even the well-managed and well-capitalized large firms such as his own. This is an insight that is still applicable to globalized trade today in the so-called race-to-the-bottom effect. Rockefeller's solution was an oligarchic-controlled market with a few large, vertically integrated firms to bring order into the growing industry. This was a pattern into which other industrial sectors eventually also evolved. This pattern of consolidation launched the US economy as a world power. The success of the industrial nationalization programs in the early history of the Soviet Union was modeled after the Rockefeller scheme of central planning and control, with the exception of state ownership replacing private ownership. Similarly, the economic miracle of the Third Reich was modeled after the Rockefeller vision of orderly markets with no wasteful competition and redundancy. Notwithstanding the neo-liberal myth of the linkage between free competition and growth, the American system was built by monopolies. Even today, with a century of antitrust efforts, every industry in the US is dominated by two or three major players who manage to fix prices and wages without the need of direct collusion, with a spattering of inconsequential minor companies tolerated for appearance' sake. http://henryckliu.com/page71.html **************New year...new news. Be the first to know what is making headlines. (http://www.aol.com/?ncid=emlcntaolcom00000026) _______________________________________________ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
