Taylor J. Smith wrote:
"By their works you shall know them." Before we dismiss the the Oil
Gang as bumbling fools . . .
Nobody dismisses them!
. . . remember that making ethanol from corn requires a net increase in oil
consumption and helps keep the price of oil up in the face of the
world oil glut.
Exactly. It is a gift to OPEC, as I said.
The other issue, control, is still a challenge to the Oil
Gang. They are making progress in Iraq as the oil fields are turned
over to American companies -- at the
cost of American lives and tax dollars -- but they still are no
closer to breaking the Russian grip on Kazakh oil than they were
before 911. . . .
PS Look for action to take out the Iranian oil fields.
I doubt they would go that far.
I am no friend of oil companies. I agree they are ruthless. Books
such as Yurgen's "The Prize" described the immense power they now
wield. But we should remember something: In the late 19th century,
the US was dominated by trusts and railroad companies to a greater
extent than we are now dominated by big oil or hospitals and
insurance companies. The biggest, most ruthless corporation back in
1890 was the Pennsylvania Railroad. Go back and read history books,
newspapers and magazines from that era, and you will find that people
were terrified of the power of large corporations. Many people feared
they would destroy capitalism, uproot democracy, and enslave the
nation. The large corporations had senators and congressmen in their
pockets. The robber barons were beyond the law. Their income was a
greater multitude of the average worker salary than the worst of
today's corporate CEOs.
Yet by 1932, the railroads' power was broken, and by the mid-1960s
the Pennsylvania Railroad vanished. Perhaps these trusts and
railroads might have destroyed capitalism and democracy, but the
nation took action to prevent this, and then the laws of economics
began to operate normally, and the problem was ameliorated. Not fixed
-- big corporations still do cause mischief. Looking at the railroads
in particular, I think the following series of events brought them down:
1. At the turn of the 20th century antitrust laws were passed and
then vigorously enforced Roosevelt and Taft. (Taft did not get the
credit he was due for this.) The same kind of intervention will
inevitably occur in our dysfunctional healthcare system. Sooner or
later, the Congress will step in and keep the insurance companies
from bankrupting GM and GE. Our political system will not stand by
indefinitely watching one industry sector run roughshod over others,
while it robs millions of voters. Powerful corporations always
overreach in the end.
2. Henry Ford began making cheap, mass-produced automobiles in 1908.
A small, unnoticed, incremental technological improvement came out
of nowhere and threatened the railroads most profitable business. We
all know the same thing could happen to the oil companies with cold
fusion, and I think they are so slow moving and filled with hubris, I
doubt they would try to prevent it in time.
3. By the 1920s, the politicians took note of automobiles and began
spending huge amounts of tax money on highways and road improvements
-- which is, we should admit -- grossly unfair competition to the
railroads. Unfair or not, by the 1920s railroads began to lose
business, and political power.
4. Railroads began to lay off workers as their business declined and
the technology became less labor-intensive. Then when the depression
struck they fired huge numbers. Then they were hit by the same
problem General Motors suffers from today: large numbers of
pensioners. Fortunately for the railroads, one of FDR's first acts as
president was to rescue them by reforming their pension system. It
says a lot that by the 1930s railroads and fallen so far that instead
of running the government, they needed the government to rescue them.
5. In the postwar era, massive highway building and the rise of
airlines took away the last vestiges of excess political power that
the railroads once had. Of course railroads are still powerful and
they still command a lot of attention from Congress but no more than
any other multi-billion-dollar industry, such as semiconductors.
In a capitalist society with a strong, active central government, no
corporation or industry can maintain undue power over the rest of
society for long. They are too tempting a target for the competition.
The government will bash them, or the competition will. WallMart's
success gives rise to Target. Dell will not dominate for long before
HP or some other computer company comes along. Sooner or later,
Google or some other corporation -- a or combination of corporations,
customers and government regulators -- will teach Microsoft a lesson.
To take one more example, from the 1960s through 1985 IBM held a
tremendous share of the computer business. This was partly because
IBM was very well run and their products were reliable, and it was
partly a coincidence. Because of the way the company IBM evolved, its
managers and design engineers had acquired superb skills in two critical areas:
1. Electromechanical devices such as printers, card readers, tape
drives, and hard disks. In the early days, these things were more
critical, more difficult to manufacture correctly, and more
profitable than the mainframe computer hardware.
2. Detailed knowledge of industry-specific data processing
techniques. These techniques are the basis of computer programming,
especially in business applications. Things like "registers" and
"stacks" used to be physical objects. The indexing and data recall
techniques developed by the giant 19th century insurance and railroad
corporations were later modeled by computer programmers. In 1970, IBM
knew how to do that better than anyone else.
IBM's hegemony could not last, and it did not.
By the same token, the oil companies gargantuan profits are too
tempting a target for other industries. Sooner or later, the managers
at GE, GM, Toyota or some other industrial company will ask
themselves: "Why are we letting Exxon-Mobil walk away with billions
of dollars? That's our money. We could be making wind turbines /
plug-in hybrids / cold fusion, and bring that gravy to our plates
where it belongs." GM will not stand by indefinitely watching Exxon
make more profit per car (over the life of the vehicle) than GM itself does!
- Jed
