The Age of Big Business - Burton Jesse Hendrick (read me like a book .TXT) 📗

already described. Their competitors could rage, hold public meetings, start riots, threaten to lynch Mr.

Rockefeller and all his associates, but they could not long survive in face of these advantages. The only way in which the smaller shippers could overcome this handicap was by acquiring new methods of transportation. It was this necessity that inspired the construction of pipe lines; but the Standard, as already described, succeeded in absorbing these just about as rapidly as they were constructed.

 

Not only did the Standard obtain railroad rebates but it developed the most death-dealing methods in its system of marketing its oil. In these campaigns it certainly overstepped the boundaries of legitimate business, even according to the prevailing morals of its own or of any other time. While it probably did not set fire to rival refineries, as it has sometimes been accused of doing, it undoubtedly did resort to somewhat Prussian methods of destroying the foe. This great corporation divided the United States into several sections, over each of which it appointed an agent, who in turn subdivided his territory into smaller divisions, each one of which likewise had its captain. The order imperatively issued to each agent was, “Sell all the oil that is sold in your district.” To these instructions he was rigidly held; success in accomplishing his task meant advancement and an increased salary, with a liberal pension in his old age, whereas failure meant a pitiless dismissal. He was expected to supervise not only his own business, but that of his rivals as well, to obtain access to their accounts, their shipments, and their customers. It has been asserted, and the assertion has been supported by considerable evidence, that these agents did not hesitate to bribe railroad employees and in this way get access to their competitors’ bills of lading and records of their shipments, and that they would even bribe dealers to cancel such orders and take the oil from them at a lower price. This information laid the foundation for those price-cutting campaigns that have brought the name of the Standard Oil into such disfavor. And when the Standard cut, it cut to kill; the only purpose was to drive the competitor from the field, and, when this had been accomplished, the price of oil would promptly go up again. The organization of “bogus companies,” started purely for the purpose of eliminating competitors, seems to have been a not infrequent practice. This latter method emphasizes another quality that accompanied the Standard’s operations and so largely explains its unpopularity—the secrecy with which it so commonly worked.

Though the independent oil refiners were combating the most powerful financial power of the time, they were frequently fighting in the dark, never knowing where to deliver their blows.

 

This same characteristic was manifested in the form of corporate existence which the Standard adopted. The first great “trust” was a trust not only in name but in fact. The Standard introduced not only a new economic development into our national organization; it introduced a new word into our language and an issue into American politics that provided sustenance for the presidential campaigns of twenty-five years. From the beginning the Standard Oil had always been a close corporation. Originally it had had only ten stockholders, and this number had gradually grown until, in 1881, there were forty-one. These men had adopted a new and secretive method of combining their increasing possessions into a single ownership. In 1873 the Standard Company had increased its capital stock (originally $1,000,000) to $3,500,000, the new certificates being exchanged for interests in the great New York and Philadelphia refineries The Standard Oil Company of Ohio never had a larger capital stock than that. As additional properties were acquired, the interests were placed in the hands of trustees, who held them for the joint benefit of the stockholders in the original company. In 1882 this idea was carried further, for then the Standard Oil Trust was organized.

The fact that the properties lay in so many different States, many of which had laws intended to curb corporations, was evidently what led to this form of consolidation. A trust was formed, consisting of nine trustees, who held, for the benefit of the Standard Oil stockholders, all the stock in the Standard and in the subsidiary companies. Instead of certificates of stock the trustees issued certificates of trust amounting to $70,000,000.

Each Standard stockholder received twenty of these certificates for each share which he held of Standard stock. These certificates could be bought and sold and passed on by inheritance precisely the same as stocks.

 

Ingenious as was this legal device, it did not stand the test of the courts. In 1892 the Ohio Supreme Court declared the Standard Oil Trust a violation of the law and demanded its dissolution.

The persistent attempts of the Standard to disregard this order increased its reputation for lawlessness. Finally, in 1899, after Ohio had brought another action, the trust was dissolved. The Standard interests now reorganized all their holdings under the name of the Standard Oil Company of New Jersey. Again, in 1911, the United States Supreme Court declared this combination a violation of the Sherman Anti-Trust Act, and ordered its dissolution. By this time the Standard capitalists had learned the value of public opinion as a corporate asset, and made no attempt to evade the order of the court. The Standard Oil Company of New Jersey proceeded to apportion among its stockholders the stock which it held in thirty-seven other companies—refineries, pipe lines, producing companies, marketing companies, and the like. Chief Justice White, in rendering his decision, specifically ordered that, in dissolving their combination, the Standard should make no agreement, contractual or implied, which was intended still to retain their properties in one ownership.

As less than a dozen men owned a majority interest in the Standard Oil Company of New Jersey, these same men naturally continued to own a majority interest in the subsidiary companies.

Though the immediate effect of this famous decision therefore was not to cause a separation in fact, this does not signify that, as time goes on, such a real dissolution will not take place. It is not unlikely that, in a few years, the transfers of the stock by inheritance or sale will weaken the consolidated interest to a point where the companies that made up the Standard Company will be distinct and competitive.

 

This is more likely to be the case since, long before the decision of 1911, the Standard Oil Company had ceased to be a monopoly. In the early nineties there came to the front in the oil regions a man whose organizing ability and indomitable will suggested the Standard Oil leaders themselves. This man’s soul burned with an intense hatred of the Rockefeller group, and this sentiment, as much as his love of success, inspired all his efforts. There is nothing finer in American business history than the fifteen years’ battle which Lewis Emery, Jr., fought against the greatest financial power of the day. In 1901 this long struggle met with complete success. Its monuments were the two great trunk pipe lines which Emery had built from the Pennsylvania regions to Marcus Hook, near Philadelphia, one for pumping refined and one for pumping crude. The Pure Oil Company, Emery’s creation, has survived all its trials and has done an excellent business. And meanwhile other independents sprang up with the discovery of oil in other parts of the country. This discovery first astonished the Standard Oil men themselves; when someone suggested to Archbold, thirty-five years ago, that the midcontinent field probably contained large oil supplies, he laughed, and said that he would drink all the oil ever discovered outside of Pennsylvania. In these days a haunting fear pursued the oil men that the Pennsylvania field would be exhausted and that their business would be ended. This fear, as developments showed, had a substantial basis; the Pennsylvania yield began to fail in the eighties and nineties, until now it is an inconsiderable element in this gigantic industry. Ohio, Indiana, Illinois, Kansas, Oklahoma, Texas, California, and other states in turn became the scene of the same exciting and adventurous events that had followed the discovery of oil in Pennsylvania.

The Standard promptly extended its pipe lines into these new areas, but other great companies also took part in the development. These companies, such as the Gulf Refining Company and the Texas Refining Company, have their gathering pipe lines, their great trunk lines, their marketing stations, and their export trade, like the Standard; the Pure Oil Company has its tank cars, its tank ships, and its barges on the great rivers of Europe. The ending of the rebate system has stimulated the growth of independents, and the production of crude oil and the market demand in a thousand directions has increased the business to an extent which is now far beyond the ability of any one corporation to monopolize. The Standard interests refine perhaps something more than fifty per cent of the crude oil produced in this country. But in recent years, Standard Oil has meant more than a corporation dealing in this natural product. It has become the synonym of a vast financial power reaching in all directions. The enormous profits made by the Rockefeller group have found investments in other fields. The Rockefellers became the owners of the great Mesaba iron ore range in Minnesota and of the Colorado Fuel and Iron Company, the chief competitor of United States Steel. It is the largest factor in several of the greatest American banks. Above all, it is the single largest railroad power in America today.

 

CHAPTER III. THE EPIC OF STEEL

 

It was the boast of a Roman Emperor that he had found the Eternal City brick and left it marble. Similarly the present generation of Americans inherited a country which was wood and have transformed it into steel. That which chiefly distinguishes the physical America of today from that of forty years ago is the extensive use of this metal. Our fathers used steel very little in railway transportation; rails and locomotives were usually made of iron, and wood was the prevailing material for railroad bridges. Steel cars, both for passengers and for freight, are now everywhere taking the place of the more flimsy substance. We travel today in steel subways, transact our business in steel buildings, and live in apartments and private houses which are made largely of steel. The steel automobile has long since supplanted the wooden carriage; the steel ship has displaced the iron and wooden vessel. The American farmer now encloses his lands with steel wire, the Southern planter binds his cotton with steel ties, and modern America could never gather her abundant harvests without her mighty agricultural implements, all of which are made of steel. Thus it is steel that shelters us, that transports us, that feeds us, and that even clothes us.

 

This substance is such a commonplace element in our lives that we take it for granted, like air and water and the soil itself; yet the generation that fought the Civil War knew practically nothing of steel. They were familiar with this metal only as a curiosity or as a material used for the finer kinds of cutlery. How many Americans realize that steel was used even less in 1865 than aluminum is used today? Nearly all the men who have made the American Steel Age—such as Carnegie, Phipps, Frick, and Schwab-

-are still living and some of them are even now extremely active.

Thirty-five years ago steel manufacture was regarded, even in this country, as an almost exclusively British industry. In 1870

the American steel maker was the parvenu of the trade. American railroads purchased their first steel rails in England, and the early American steel makers went to Sheffield for their expert workmen. Yet, in little more than ten years, American mills were selling agricultural