Edward Jay Epstein: The Rockefellers – The Trust Builder
Surrounded by round-the-clock armed guards and a barricade of barbed wire, the body of Laura Celeste Spelman Rockefeller awaited burial for some twenty weeks between March and August, 1915, while her husband John Davidson Rockefeller avoided angry mobs and process servers. At that time Rockefeller was perhaps the wealthiest man the modern world had ever known. His personal fortune was equal to 2 percent of the total gross national product of the United States and this did not include the vast fortune passed on to the rest of his family which then controlled banks, railways and philanthropic foundations (which were themselves a newly – created device of Rockefeller). The Standard Oil Companies which he had created and in which he still held a major (25 per cent.) interest, then refined more than 90 percent of the oil sold in America and most of that of the rest of the world. Its political power was such that it was accused of doing everything with state legislatures except ‘refining them’.
Yet despite such economic resources, Rockefeller had become an object of hatred and derision in America; he could not bury his wife of more than half a century for fear that the body might be desecrated or that he might be subpoenaed at the funeral by any of a dozen governmental bodies investigating his activities. Indeed, for more than a decade Rockefeller had been hounded by relentless muck rakers, who portrayed him as a ruthless robber baron; investigated continually by state attorney generals and congressional committees who turned him into a fugitive from his own family; and denounced by political leaders of both parties as an ‘arch-criminal’. Even charities hesitated to accept Rockefeller’s ‘tainted money’ on the ground, as Senator Robert M. Lafollette argued, that “he gives with two hands but robs with many … he is the greatest criminal of the age”.
In 1915 public passions were further aroused against Rockefeller by widely circulated reports of massacres of women and children at the Colorado Fuel and Iron company which his family controlled. In such an atmosphere wealth was of little use in quieting public opinion. Effective power, Rockefeller learned, depended on control of not merely pipelines, refineries, railways and banks, but also of the leaders and conduits of public opinion. And just as the old Rockefeller was able to organise industries systematically for great profit, his heirs learned to organise just as efficiently the perceptions and passions that constitute that vague realm known as ‘public opinion’.
John D. Rockefeller, born on a farm in New York State in 1839, was the son of an adventurer who had made a small fortune selling patent medicines and cancer cures which owed their success, if they were like other ‘botanic medicines’ of their day, to an opiumbase.
When John D. reached the age of 20, his father advanced him sufficient funds to buy a half interest in a commodity commission business in Cleveland. That same year, 1859, the first oil well in America was drilled at Titusville, Pennsylvania, and part of the oil was shipped down the Cuyohoga River to Cleveland for refining and then re-shipping to New York. In the next few years, the oil fields of Pennsylvania became the main source of kerosene for theentire world and young Rockefeller moved his commodity business from grain, hay and meat into oil. By the time he was 26 he had bought out his partners in what was then the largest refinery in Cleveland, and formed what was eventually known as the Standard Oil Company.
Rockefeller immediately foresaw that transportation, not production of oil or retail sales, would be the key to controlling the burgeoning industry. Any refiner who could ship the oil for a few cents a barrel less than other refiners to the major market in New York would drive his competitors out of business. With this insight, Rockefeller proceeded to dominate the oil industry.
By negotiating a ‘rebate’ with railroads on each barrel his refinery shipped, Rockefeller received a secret lower rate which allowed him to under sell all his compctitors in New York. Since greater profits for all could proceeed from the lower shipping rate, it was in the self-intcrest of competing refineries to join Standard and most of them rushed to exchange their stock for either Standard stock or cash.
By 1882 the Standard Company was reorganized by Rockefeller’s lawyers into a ‘trust’ (which had previously had a benign meaning).
The trust controlled 95 per cent of the refining capacity of the United States and Rockefeller, at the age of 43 controlled it.
With the power of this virtual refining monopoly behind him, he expanded into all phases of the oil industry, including exploration, shipping and marketing.
Before Americans were subject to income tax, the dividends from Standard Oil made Rockefcller the wealthiest man in the country. Eventually, the government, first the states and then the Federal, moved against Standard Oil and laws were passed against ‘rebates’ and ‘trusts’. Finally in 1911 under the crusading zeal of President Theodore Roosevelt, the Standard Oil trust was dissolved into 33 separate companies of which the Rockefellers remained large shareholders (receiving about 25 per cent of the shares of each new company).
Rockefeller’s organizational genius was not limited to oil. During the boom of the 1890s, he bought up a large share of the entire Pacific Northwest, including railways, steel mills, paper mills, factories, ore deposits, lumber, and vast tracts of real estate, including the entire city of Everett in the state of Washington. A dedicated Baptist, he founded the University of Chicago on the condition that it be “aggressively Christian” with no “infidel teachers”. He also created tax-exempt foundations for the “well being of mankind” (just before income tax laws were passed in the United States) which changed the shape of ‘philanthropy’ in the United States, and insulated a large portion of his fortune from modern taxation.
Rockefeller, who had wanted to live until 100, died in his sleep from sclerotic myocarditis at the age of 97 at The Casements, his Winter home, in Florida. None of his immediate family was with him at the end. A special car was sent to Florida to bring back his body for a funeral at Pocantico Hill and a burialin Lakeview Cemetery in Cleveland, where Rockefeller had began his empire as a $12-a-month clerk.
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