May 15, 2011

On This Date: May 15th, 1911

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On this date in 1911, the United States Supreme Court dissolved Standard Oil (under the Sherman Antitrust Act). Was that a yawn? It shouldn't be a yawner.  It was yet another victory for progressivism over American business. Check out some of the doings of this supposedly 'evil' big business, and the results it suffered from simply seeming to be too big.

In 1897, John Rockefeller retired from the Standard Oil Company of New Jersey, the holding company of the group, but remained a major shareholder. Vice-president John Dustin Archbold took a large part in the running of the firm. At the same time, state and federal laws sought to counter this development with "antitrust" laws. In 1911, the US Justice Department sued the group under the federal antitrust law and ordered its breakup into 34 companies. 
Standard Oil's market position was initially established through an emphasis on efficiency and responsibility. While most companies dumped gasoline in rivers (this was before the automobile was popular), Standard used it to fuel its machines. While other companies' refineries piled mountains of heavy waste, Rockefeller found ways to sell it. For example, Standard created the first synthetic competitor for beeswax and bought the company that invented and produced Vaseline, the Chesebrough Manufacturing Company, which was a Standard company only from 1908 until 1911.
One of the original "muckrakers" was Ida M. Tarbell, an American author and journalist. Her father was an oil producer whose business had failed due to Rockefeller's business dealings. After extensive interviews with a sympathetic senior executive of Standard Oil, Henry H. Rogers, Tarbell's investigations of Standard Oil fueled growing public attacks on Standard Oil and on monopolies in general. Her work was published in 19 parts in McClure's magazine from November 1902 to October 1904, then in 1904 as the book The History of the Standard Oil Company.
The Standard Oil Trust was controlled by a small group of families. Rockefeller stated in 1910: "I think it is true that the Pratt family, the Payne-Whitney family (which were one, as all the stock came from Colonel Payne), the Harkness-Flagler family (which came into the Company together) and the Rockefeller family controlled a majority of the stock during all the history of the Company up to the present time".
These families reinvested most of the dividends in other industries, especially railroads. They also invested heavily in the gas and the electric lighting business (including the giant Consolidated Gas Company of New York City). They made large purchases of stock in US Steel, Amalgamated Copper, and even Corn Products Refining Company.
Hmm, doesn't sound too evil to me. What's worse, the company was exporting to China big time;
Standard Oil's production increased so rapidly it soon exceeded US demand and the company began viewing export markets. In the 1890s, Standard Oil began marketing kerosene to China's large population of close to 400 million as lamp fuel. For its Chinese trademark and brand Standard Oil adopted the name "Mei Foo", translating roughly as beautiful and trustworthy or beautiful confidence. Mei Foo also became the name of the tin lamp that Standard Oil produced and gave away or sold cheaply to Chinese peasants, encouraging them to switch from vegetable oil to kerosene. Response was positive, sales boomed and China became Standard Oil's largest market in Asia. Prior to Pearl Harbor, Stanvac was the largest single US investment in SE Asia.
Free market distortions courtesy of government and activist intervention. The message then, as now, don't get too big - only the government can do that.  Just think of the foregone opportunity - An American company whose sole raison d'etre was to find oil and sell it.  If it had been allowed to continue perhaps the United States could still be in a position to be self sufficient as Standard Oil explored and sold oil both domestically and abroad.


  1. And what a slippery slope this has led to. Well written!!

  2. Thanks Joe. Most of the writing credit goes to Wikipedia in this case, but it is so worthwhile to recognize the importance of historical events.


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