The Rockefeller Billions
Among the many problems that confronted John D. Rockefeller when he first set out in the 1870s to monopolize the American oil business there was at least one that, in only slightly different form, was later to face Stalin when he undertook to collectivize Soviet agriculture. For both tycoons it was a matter of converting the kulaks—the small time operators—or, failing that, of liquidating them, if not in one way then in another. For both men too it was the outraged criticism of the liberals, with their Jeffersonian or populist longings, that forced them or their successors to mend their ways, at any rate to improve their public relations. The Rockefeller Billions by Jules Abels is a sketchy but earnest attempt to retell the history of the man who collectivized the American Oil industry and of his money from its origins to the present. Though most of the anecdotes are familiar, the first half of the book makes lively reading as it describes the adventures of the austere young Calvinist, the hymn-singing Sunday School teacher who, while his contemporaries were about to march off to the Civil War, stayed behind to run the modest commission brokerage in which, with $1000 borrowed from his father, he had become, at the age of twenty, a partner.
As with all geniuses, the springs of Rockefeller’s character are largely enigmatic and Abels does little to enlighten us. Still, if we cannot understand we can nevertheless marvel at the astonishing single-mindedness of this worthy graduate of Folsom’s Business College who, from the age of sixteen, maintained a personal ledger which, in later years, he was to value more highly than “all the ledgers in New York and all they would bring” and in which he would record such useful disbursements as $0.25 to a “poor man in the church” and $0.12 to the Five Points Mission in New York for whose poor this adolescent seemed to feel a special responsibility. The links between religious devotion and capital accumulation are, by now, of course, famous, but nothing explains the special phenomenon of young Rockefeller in whom every instinct, every capacity or potentiality from the onset of his manhood was consecrated to his balance sheet and to his church so that for years he was to begin each business day with a current statement of his net worth and even in his eighties would sing hymns as he made his way around the golf course. Yet he was not as cautious as his notorious devotion to small change would suggest. He was bullish from the start and, to the alarm of his more conservative partners, he would in the early days habitually extend his (and their) small capital to extremes which men of smaller faith might reasonably consider hazardous. The banks, on the other hand, knew the divine imprint when they saw it and were happy to let the godly young man go into debt.
Abels records only one episode in which Rockfeller’s faith in his predestined success seems to have faltered. It was when he sent a shipment of grain across Lake Erie to Buffalo and decided, since the weather was fair, to forget about insuring, his cargo. Suddenly a storm blew up and Rockefeller sent his partner with $150 to take out a policy. No sooner had the partner returned with the receipt, than a message arrived that the ship had landed safely. Rockefeller went home sick.
The second half of Abels’s book, which tries to justify, if not the old man’s depredations, at least the right of his heirs to hang on to his money is less rewarding. As worthy as the benefactions of John Jr. and his sons may be, they are surely dull to read about, especially in the superficial and adulatory account that Abels supplies. The real adventure is how the money was made in the first place. The rest is puffery and anti-climax.
As for how the monopoly was created, Abels gives a somewhat fuller, and one suspects a less partial, account than can be found in the authorized history of Standard Oil by Ralph and Muriel Hidy. By 1871, Standard Oil, which Rockefeller had joined as a partner, having given up his commission business, was one of several small Cleveland refiners in the somewhat speculative business of producing lamp oil—chiefly kerosene—from the petroleum which had only recently begun to be exploited in the fields of Western Pennsylvania. The refiners were, at this period, in difficulties. Their capital was strained as a result of expansion after the Civil War, the price of lamp oil had begun to fall as production exceeded demand, and the price of crude, though it too had fallen, had not fallen in proportion to the price of refined. To make matters worse, none of the individual refiners was strong enough to buy his crude at a preferential price from the highly independent producers, nor was any refiner in a position to sell his product at a lower price than his competitors. The technology was, at the time, simple and the basic processes were available to anyone. What seemed to be an impasse for the industry generally proved, however, to be for Rockefeller his grand opportunity, for while the cost of crude and the price of refined were necessarily uniform for all refiners, the cost of transportation was, as Rockfeller knew, subject to pressure. Whoever applied this pressure most vigorously could undercut his colleagues and drive them out of business.
Three roads carried the oil to market: the New York Central, the Pennsylvania, and the Erie. They competed fiercely for shipments. Rockefeller, taking advantage of the situation, had been in the habit of playing one off against another by promising larger shares of his business to whichever carrier would offer him the largest rebates, and by 1870 it had become clear to the roads that if Rockefeller’s blackmail could not be stopped it should at least be regulated. It is unclear who first proposed the scheme—the railroads or Rockefeller—but it took the form of the notorious South Improvement Company, under a charter from the Pennsylvania legislature, a body controlled by Tom Scott, President of the Pennsylvania Railroad. The plan was simple. The shareholders in South Improvement were to be the three railroads and a group of refiners of whom Rockefeller and his associates were the dominant members. Together they would establish rebates for the refiners who were in on the scheme and raise the rates for all the others. To make matters worse (or better) a share of the higher rate would then be returned by the roads to the participating refiners in the form of “drawbacks.” In recognition of these favors the refiners would apportion their business equitably among the three roads.
In years to come a number of Rockefeller’s associates were to share the general view that South Improvement was an outrage and the Hidys, in their company history, refer to the episode as Rockefeller’s greatest single mistake. Even Allan Nevins in his unctuous biography of Rockefeller thinks that the scheme was disgraceful. But Rockefeller himself seems not to have shared these misgivings and Abels, a more pragmatic historian than these others, treats the affair indulgently. Indeed, though Abels tells little about Rockefeller’s personal reactions at the time (Rockefeller, according to all accounts, seems to have had few personal reactions on this occasion or on any other), it seems clear that he must have been delighted, for not only was he the only Cleveland refiner in on the scheme, and thus in a position to destroy his local competition (which he promptly did), but he and his associates controlled more than half the shares in the group as a whole. Had not the Pennsylvania legislature, responding to the fury of the petroleum producers, rescinded South Improvement’s charter within a few weeks of the public disclosure of the plot, Rockefeller could have controlled the refining industry—and thus the petroleum industry as well—in the entire country. As it turned out, Rockefeller had plenty of time between the formation of South Improvement and its ultimate dissolution (a matter of less than a year) to “massacre,” as Abels nicely puts it, his Cleveland competitors. By the time it was all over Rockefeller controlled twenty-one of the twenty-six refineries in Cleveland and thus produced a quarter of the country’s kerosene. At the age of thirty-two he was the dominant figure in the industry.
It is a rousing success story and, embarrassing as it may be to our national pride to admit it, much within the American grain. One marvels at the instinctive American hypocrisy which has so far excluded the story of South Improvement from its standard folklore. It is as if France were to have suppressed the account of Napoleon at Jena or as if Rome had been ashamed of Caesar. A part of Abels’s intention in the present book is to restore this omission and to recite the saga of Rockefeller’s money without apology and even with gusto, admitting the private ruthlessness of the man as well as his public shiftiness while insisting that the fortune, despite the excesses of its founder, has by now revealed something like a divine intention that ultimately it would justify itself. Abels’s theme is that the churches which once fretted over Rockefeller’s charities on the ground that his money was “tainted” and the muckrakers and other reformers who so violently criticized Standard Oil have proven, in the long run, to be wrong: as wrong, indeed, as those recalcitrant refiners who refused at the time of South Improvement to sell out to Standard and thus lost their chance to share with the Paynes and the Archbolds, who did sell out, the fruits of Rockefeller’s success.
To his credit, it must be said that Rockefeller himself never seems to have felt the need for such justifications as Abels supplies, though if Rockefeller had been interested in self-justification he would almost certainly have approved the case that Abels makes out. But Rockefeller appears never quite to have understood why he had become, through his efforts to make money, a kind of public enemy. Certainly he would never have agreed with his colleague John Archbold who, having made his millions out of Standard Oil, later declared that “South Improvement was an outrage on the business as a whole that was not included in it.” Rockefeller’s own idea was that “God gave me my money,” and there is as much reason to believe that he meant this literally as there is to believe that Joseph Smith or John Brown meant it to be taken literally when they too insisted on the intimacy of their relations with the Lord. From the time of South Improvement till the end of his life Rockefeller seems to have gone about his business as serenely as a Pope or an angel. To skeptics who wondered how he was able to make so much money, he would reply “I have ways of making money that you know nothing of.” Of his later reliance on public relations agents, one must assume that this gesture, like Archbold’s denunciation of South Improvement, was prompted by the strategies of Standard Oil rather than by any need for self-justification; and if Rockefeller seems hardly to have protested the decision of the Supreme Court in 1911 to liquidate the Standard Oil Trust, his passivity can have had little to do with remorse or with a decision to run his business hereafter according to the rules of fair play. Within a week after the various Standard stocks went on the market, in compliance with the dissolution ruling, their value increased by $200 million and by 1925 Standard was still refining 50 per cent of the country’s oil. One must assume that by 1911 Rockefeller knew that dissolution would be little more than a formality—a gesture on behalf of an early and simpler America, more in keeping with Theodore Roosevelt’s enthusiasm for grizzly bears than in recognition of the needs of a modern industrial society. By 1911 Rockefeller had won his game and there was no reversing the decision. The prospect of nationalization, which would have completed the logic of his efforts to collectivize the industry, never arose. Obviously God intended that Rockefeller should keep his money and make more of it and that the public should continue to provide it. As for Ida Tarbell, whose books and articles had much to do with the public furor that led to the Decision of 1911, her impact on Rockefeller was to have inspired his only recorded joke. He called her Ida Tarbarrel.
It is true, on the other hand, that an atmosphere of guilt and a need for expiation seems to have surrounded Rockefeller’s money from the beginning. But as Abels shows, the sources of these feelings are theological. They had nothing to do with the plight of the independent refiners whom Rockefeller ruined when they would not sell out or with the fact that in the cruel Depression year of 1908 Standard’s profits were $116 million, having fallen from $131 million the year before, or with the company spies whom Standard would hire to destroy its competitors and occasionally to dynamite their plants. It would be naive to assume that Rockefeller undertook his enormous charities to compensate his fellow citizens for having appropriated for his own profit one of their chief natural resources. The evidence points in a different direction entirely. In 1906 Rockefeller said to a reporter:
I believe the power to make money is a gift from God…to be developed and used to the best of our ability for the good of mankind. Having been endowed with the gift I possess, I believe it is my duty to make money and still more money to use the money for the good of my fellow man according to the dictates of my conscience.
If this is rationalization it must have operated deep within him, for the obsession to acquire money and then to dole it out for causes which he considered worthy—and to insist that the whole process had been divinely inspired—had been with him from his earliest youth, from the time of his cherished personal ledger, to have been, in fact, his psychological inheritance from his providentially mixed parentage.
Rockefeller was the eldest son of a quack doctor, later a successful speculator in real estate who made a game of lending his gifted son investment capital at 10 per cent interest. His mother was a strict and uncomplaining Baptist who, throughout the latter part of her life, bore in silence the fact that her flamboyant husband had become a bigamist with a second wife in New York. The pity is that Abels does no more than acknowledge these details while ignoring the links between Rockefeller’s curious childhood and the religious mania that was to dominate his subsequent life, a mania so persistent that to the present day there hangs over his heirs in their granite towers the same gloomy determination to purge, through the unending accumulation and bestowal of money, some ancient nameless guilt. One’s objection, of course, is not to the money itself but to its sanctification by this peculiar family which sits glumly and righteously atop its golden mountain and so suggests a style for a worshipful and greedy nation to emulate. Abels applauds the subsequent Rockefeller generations for guarding the stewardship which they inherited while the sons of the other great American pirates were wasting their substance on pleasure and foolishness. But one wonders: are there no other possibilities for our great American fortunes beyond degeneracy and the contrived image of solemn priggishness which Abels finds so admirable in the present Rockefeller generations? If we are to believe Abels (and one does more or less believe him, despite the occasional public lapses of one or another contemporary Rockefeller) the Rockefellers are as much trapped and deadened by their billions as so many of their fellow citizens are ruined and made miserable by their poverty. The cases, of course, are hardly of comparable poignancy. Yet one finishes this book rather saddened to be reminded that the bounty which the old man tore from this land has given his children, to say nothing of the rest of us, so much less of life and beauty and freedom than one would have expected from such bright beginnings. In any case, one looks in vain in these pages for humanizing moments. The closest one comes is in the discovery that there are 40,000 beetles in David Rockefeller’s collection.
The Rockefeller history is as good a source as we have for the American epic that may one day be written. That Abels lacks the tragic imagination to see what it really means is unfortunate, but he is hardly alone in this inadequacy. At least he has told the early part of the story with enough candor and energy so that he might inspire another writer to carry the story farther or deeper. In a curious way too he has given us reason to hope that the outcome may not be so tragic after all. Shrunken and in his nineties, Rockefeller, Abels writes, was sitting on the porch of his home in Ormond Beach when a young man passed by. Rockefeller called out to him: “Look, no money, no money,” whereupon he asked the young man to search his pockets. And indeed they were empty. Abels writes that “Apparently the old Croesus was tickled to be found penniless.” In this, if our country lives so long, there may be a grain of hope.