1 John D. Rockefeller, Oil Tycoon

In 1861, as the Civil War began, the United States was not primarily an in­dustrial nation. It lagged far behind Britain, France, and Germany in in­dustry. A country df small towns and small businesses, the United States concerned itself mainly with agricul­ture and westward expansion.

But by 1890, just 30 years later, pro­duction in the United States almost equaled the industrial output of Brit­ain, France, and Germany combined. How did this change happen so fast?

The Civil War provides some answers to this question. Northern armies needed quantities of guns, ammuni­tion, uniforms, and food. New indus­tries began and old ones expanded to fill these needs. After the South se­ceded from the Union, Congress could easily pass whatever legislation it wanted to benefit the North and West. As a result, Congress set up high pro­tective tariffs to keep out foreign goods and provide money for rail­road building. Railroads made it easier to get raw materials to factories, food to consumers, and homesteaders (set­tlers) to unsettled land. -New inven­tions and manufacturing processes used more of the country's large sup-

322

plies of natural resources. A growing population, boosted by more and more immigrants, provided workers to build the railroads, mine the re­sources, and run the machines.

Of course, business expansion re­quired huge sums of money. To meet this need, business people formed corporations. A corporation is a type of business especially suited to large­scale operation. It can raise money by selling shares of stock (portions of the business). The buyers of stock, called stockholders, become joint owners of the corporation.

Business firms began to grow large, and competition in many industries became fierce. Sometimes a strong firm would try to drive one that made a similar product out of business. It would do this by cutting prices. Some­times several companies joined to­gether to destroy competitors. A few groups of companies were so success­ful that they drove out all their com­petition. Then they were free to charge higher prices. They might also join to­gether into one giant corporation.

A firm or group of firms that has no effective competitors is called a mo­nopoly. Many monopolies developed

The Industrial Revo1ution Comes of Age 323

in the United States in the decades their power to influence government after the Civil War. Such businesses as in ways that would advance their oil, steel, sugar, and railroads were interests. controlled by monopolies. One of the wealthiest business lead-

The men who ran monopolies and ers was John D. Rockefeller, head of other large corporations became ex- the Standard Oil Company. How did tremely wealthy. And with wealth Rockefeller become rich? How did he came political power. Leading busi- make his company one of the largest nessmen and corporations tried to use and most important in the nation?

Florida, May, 1937

You are John D. Rockefeller, and you believe that one should al­low nothing to stand in the way of success.

At age seven you raised turkeys, sold the~, and made a profit. Your mother taught you to give part of your profit to charity. You never forgot this lesson.

At 16 you were a clerk in a food company. You worked hard, lis­tened, learned, saved your money, and invested it. By the time you were 20 you owned a food company.

When you made a profit, you put most of that money back into your food business. You also borrowed money and put that into the business. As the business grew, you became rich. But you wanted more money. Your food business was not enough for you. So in the 1860's, during the Civil War, you invested in a business that was still brand new in America~oil. You saw that oil could be used instead of candles for light and that it could be used for fuel.

You bought crude oil as it came from the ground. Then you re­fined (processed) ''the oil to turn it into such products as lamp oil

erosene). Crude oil was cheap, but lamp oil was expensive, so you made a good profit. Y04 wasted nothing. The best parts of the crude oil you turned into kerosene. The rest you turned into products such as paraffin (wax) and petroleum jelly.

In 1870 you started the Standard Oil Company. The firm grew rapidly. You wanted to control all parts of your oil business, so you built your own wagons and oil barrels. You began to build pipelines. Vou made deals with railroads to get special rates for shipping your oil.

Your deals made it harder for other refiners to get railroad cars and send their products to market. That was just what you wanted. You raId rivals that you would buy their oil and handle it for them. Of course, you offered to pay a low price. You wanted to make sure that you-not they-made the most profit.

In time many refining companies were losing money and found ~emselves in deep trouble. You bought many firms, including some f)f your largest competitors. You hired their top men. If firms would

324 Enjoying American History

not sell out to you, you cut your prices so low that you took away their customers and drove them out of business. You would not take "no" for an answer.

In 1879 you organized the Standard Oil Trust. The trust gave you control of more than 90 percent of the oil refined in the entire coun­try. Under your trust agreement, the stockholders of competing oil companies turned over their shares of stock to you. This gave you control of their companies. In return, you gave the stockholders a share of the profits of the new giant trust. Other industries, such as steel, sugar, and toba~co, followed your lead and formed trusts.

But your efforts to get rid of competitors ran into problems with the government and the courts. For years some Americans had ar­gued that Congress should pass laws against trusts and monopolies. Owners of smaller businesses were among those seeking such laws. , They said the laws were needed to protect free competition. Others­like you-disagreed. You argued that government should keep its hands off business. Such a hands-off policy is sometimes called laissez­faire (pronounced LESS say FARE), from French words meaning "let alone. "

Congress tended to favor laissez-faire policies. But pressure for change built up, and in 1890 Congress passed the Sherman Anti­Trust Act. The act said it' was illegal to form trusts or monopolies that interfered with trade that crossed state boundaries. The act didn't worry you at the time. T~ wording was vague, and you figured the government and the courts would do little to enforce the act. For several years it ap~ared that you were right.

Then in 1911 came a blow. The U.S. Supreme Court decided that your main firm, known by then as the Standard Oil Company of New Jersey, was acting against the Sherman Anti-Trust Act. The Court said your firm was competing with other oil companies in an illegal way. Standard Oil had to be split up into 34 separate companies.

It would take mbre than one court decision to undo your business empire. Yall were already the richest man in the United States. After 1911 you retired from active direction of your companies. But the companies went right on making money for you. You were proud of what you had accomplished. As you saw it, you had brought order to the oil industry by doing away with wild competition.

You continued to live in an expensive house and own fine horses. But you dressed simply, ate little, and took care not to spoil your four children. (When they were young, they had to share one bicycle).

What interested you most was your business. Lopg after you had earned more money than you could ever hope to spend, you contin­ued to be at your desk by six every morning. Even at home, you talked of little else except business.

After you retired, you spent your days raising roses, playing golf, and giving away a great deal of money. You gave more than $750 million to charities. l\1any people began to think of you as a kind-

The Industrial Revolution Comes of Age 325

hearted old man. But many others remembered less pleasant things about you. They thought of you as a ruthless man, driven by greed.

Now, at the age of 97, you are known as one of the geniuses of the modern business world. And that is no surprise. You have rarely al­lowed anything to stand in the way of your success.

Homework Questions

1. How did the Civil War pave the way for the industrial growth of the North?

2. How did John D. Rockefeller gain control of his competitors' businesses?

3. Why did Rockefeller form the Stan­dard Oil Trust?

4. Which other industries formed trusts like the one formed by Standard Oil?

5. What effect did the Sherman Anti­Trust Act have on the Standard Oil Company?

I

Understanding the Stqry

:.1.. Write T for each statement that is true and F for each statement that is false. , l. In 1861 Britain was ahead of the

United States In industrial production.

2. In 1890 'Germany was in first place in industrial production.

3. Rockefeller became the richest man in the United States.

4. Rockefeller became an oil refiner.

S. Rockefeller wanted everyone in the oil business to make a large profit.

6. Rockefeller could not control the oil refining industry.

7. Because of a ruling by the Su­preme Court, the Standard Oil Company had to be broken up.

8. Rockefeller retired early because he was a failure in business.

B. List the numbers of the statements that apply to John D. Rockefeller. 1. He became very rich. 2. He organized the Standard Oil

Company. 3. He invested most of his money

in coal mines. 4. He sold refined oil at a great

profit. S. He lived in a simple house. 6. He refused to give money to

charities. 7. He was mainly interested in his

business. 8. He was penniless in his last

years.

c. Two views of John D. Rockefeller are presented in this chapter. One is of a ruthless and greedy man. The other is of a kindhearted and generous man. With which view do you agree? Why?

Activities and Inquiries

l. List the personal qualities and eco­nomic conditions you feel are neces­sary for success in business.

2. Visit your library and do research to find out how another American be­came very rich. Some suggestions are: Andrew Carnegie, J. P. Morgan, Cornelius Vanderbilt, E. H. Harri­man, or George Eastman.

3. Re-read the story. Make a list of the things Rockefeller did that you liked. List things you did not like.