Category: John D. Rockefeller

 

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When Ink Trumped Oil. Muckraking Writer Ida Tarbell’s Expose Outraged America and Helped Break Up the Monopoly Power of John Rockefeller’s Standard Oil Trust. Plain Dealer 12/12/2004

Courtesy of Plain Dealer

When ink trumped oil. Muckraking writer Ida Tarbell’s expose outraged America and helped break up the monopoly power of John Rockefeller’s Standard Oil Trust.

Plain Dealer, The (Cleveland, OH) – Sunday, December 12, 2004

Author: Jennifer Scott Cimperman, Plain Dealer Reporter


As influential as Microsoft’s Bill Gates, as famous as businessman-turned-TV star Donald Trump, as ethical as former Enron chief Kenneth Lay. That was John D. Rockefeller – at least the one serialized in the pages of McClure’s Magazine beginning in late fall 1902. 

 

Readers devoured journalist Ida M. Tarbell’s tales of secretive late-night contracts, lies told under oath, strong-arm tactics meant to drive out competitors of Rockefeller’s Standard Oil Co. He even cheated a widow. The public was outraged. So, too, was the U.S. Supreme Court, which eventually forced the company’s breakup after declaring it a monopoly. 

 

Even 100 years after publishers converted Tarbell’s serial into a two-volume book, “The History of the Standard Oil Co.,” in November 1904, the work’s significance remains, say academics, authors and consumer advocates. It highlighted unethical – yet, at the time, largely legal – business practices. It prompted government scrutiny of monopolies. It elevated business journalists to the role of watchdogs and celebrities. It brought the boardroom to the public’s living rooms. 

 

It’s not a perfect work. Tarbell’s research, while impressive in scope, sometimes makes for clunky prose. Long passages quote prices down to the penny when describing railroad rebates afforded “the Standard.” And some historians say Tarbell was plain wrong about some of the book’s most incendiary incidents, including the story of the cheated widow. 

 

Flaws aside, the work still garners praise. Longtime consumer advocate and former presidential candidate Ralph Nader first read it in high school. 

 

“It was really inspiring,” Nader said. In the days before the Securities and Exchange Commission, “she showed you could really piece together a lot of information. . . . You have hundreds of [business] books today, and they don’t have the effect that book had.” 

 

Ron Chernow, author of “Titan: The Life of John D. Rockefeller Sr.,” said Tarbell’s work represented “a new maturity for American journalism.” 

 

“Everyone from President Roosevelt on down was reading the series and cheering Ida Tarbell on,” Chernow said. 

 

Tarbell “writes the series with a tone of throbbing moral indignation. It’s very hard to read the book to this day without getting very angry at Rockefeller and Standard Oil.” 

 

Cleveland was hub 

 

The first commercially viable oil well was successfully drilled in Titusville, Pa., in 1859. Within a decade, the nation’s refining capital was Cleveland. Lured by well-connected railways and Lake Erie — both ideal for shipping to the nation’s Northeast — about 50 refineries called the city home. 

 

Rockefeller invested $4,000 with his partner in a fledgling refinery owned by Samuel Andrews. Within three years, Rockefeller sold his share of his previous business and started the oil firm Rockefeller and Andrews. The firm quickly opened another refinery, then a sales office in New York. 

 

In June 1870, Rockefeller combined those ventures and others into a new company, Standard Oil. As the area’s largest refinery, it quickly won favorable shipping rates from local railroads — rates that enabled it to beat even its most nimble competitors. 

 

It didn’t stop there, though. Within years, it had a stranglehold on refining, production, pipelines, virtually all aspects of the industry. 

 

Tarbell exposed the company’s practice of hiring “spies” — railroad clerks who wrote down competitors’ shipments, businessmen who gleaned gossip about Standard foes, even employees of competitors who exchanged loyalty for cash. 

 

She exposed its back-room partnerships with shippers, pipeline companies and others who, to the world, appeared independent. 

 

She hammered Standard’s practice of withholding oil deliveries to small companies, which eventually withered to the point that Standard could buy them for a song. 

 

One such company, lubricants maker Morehouse and Freeman, built a plant on encouragement from Standard, which agreed to supply Morehouse 85 barrels of oil byproduct daily. After the plant was built, Standard cut its shipments to 12 barrels and raised prices. 

 

The plant had cost $41,000 to construct. It was sold to Standard for $15,000. 

 

Resist and suffer 

 

Tarbell came by such detail through a web of professional and family connections. 

 

She was raised near Titusville, center of a 50-mile strip in northwest Pennsylvania known as the “Oil Regions.” Her father, a carpenter and teacher, found economic security building oil barrels. When barrels were replaced by iron tanks, the elder Tarbell moved to refining. 

 

His success was short-lived — due, in part, to Rockefeller’s South Improvement Co., a secret 1872 scheme to consolidate several refiners and shippers, then secure special freight rates and kill off small independent producers that tried to compete. 

 

The consolidation died quickly, victim of public outrage and oil producers’ outcries, but Standard continued to swallow smaller companies. 

 

“The people who agreed to throw in their success with him often stayed in their positions and managed their companies,” said Barbara Zolli, director of the Drake Well Museum in Titusville, which is home to Ida Tarbell’s Standard Oil papers. “People who resisted the buyout . . . many people suffered.” Those included Tarbell’s father and brother. 

 

And while she never had access to Rockefeller, acquaintance Mark Twain helped arrange a meeting with Standard Oil insider Henry Rogers, a former refiner who was brought into the Standard fold and ascended to the position of director for the entire Standard Oil Trust. The two met off and on for two years, until one of Tarbell’s articles soured the relationship. Academics surmise that Rogers’ goal was to deflect blame to Rockefeller from himself. 

 

“Did he mislead her? Probably in some areas,” said Paula Treckel, history professor at Allegheny College in Meadville, Pa., Tarbell’s alma mater and home to a collection of her personal papers. “But did he supply her with some good detail? Yes, he did.” 

 

Widow Backus 

 

Tarbell’s connections color views of her work. On the one hand, her inside knowledge yielded rich details. On the other, it affected her objectivity. 

 

“Today, she would never have gotten away with this,” Chernow said. Treckel’s take: “Personally, I think she despised him [Rockefeller].” 

 

That may explain why one of her most scathing accusations proved unfounded: the infamous “Widow Backus” story. 

 

By Tarbell’s account, Rockefeller cheated Mrs. Fred M. Backus (referred to by Tarbell simply as “Mrs. B.”). Though Rockefeller had been friendly with her late husband, once a bookkeeper at Rockefeller’s office and a Sunday school teacher at the church both attended, he paid her next to nothing for her Cleveland lubricating plant in 1878. That’s Tarbell’s version. 

 

According to Chernow, the widow actually insisted on an inflated sum — up to $200,000 — for an outdated plant she inherited when her husband died of consumption. Rockefeller, who dealt directly with the widow due to their close connections, paid $79,000, including an additional $10,000 thrown in on top of the fair value assessed by appraisers. 

 

Chernow called Tarbell’s book “one of the most brilliant pieces of journalism of all time,” but said, “in the last analysis, it doesn’t stand up as an enduring piece of history.” 

 

Still, New York University Professor Richard Sylla said, the work provides a snapshot of Rockefeller and his critics. 

 

While Sylla doesn’t recommend the book to current MBA students, “business historians would want to read it and economic historians would want to read it,” said the economist and history professor of financial institutions and markets. “It’s part of our history.” 

 

Spying in church 

 

Why didn’t Rockefeller challenge Tarbell’s inaccuracies? Because if he publicly defended one part of the book, he would have been forced to defend it all, Chernow said. Instead, Rockefeller said nothing. 

 

Even after the book, Tarbell continued to follow the reclusive tycoon, even secretly attending his Euclid Avenue church one Sunday and writing a two-part character sketch for McClure’s describing his features as reptilian. 

 

The latter bruised the reclusive Rockefeller more than the 19-month series. Yet it proved to be her parting shot. The eventual breakup of Standard Oil in 1911, prompted by Tarbell’s work, only contributed to Rockefeller’s wealth. 

 

Instead of stock in one large enterprise, he held shares in more than two dozen, each yearning to tap the next great gusher. 

 

To reach this Plain Dealer reporter: jcimperman@plaind.com, 216-999-4871 

 

BOX 

 

Splitting Standard Oil 

 

In 1911, the U.S. Supreme Court dissolved the Standard Oil monopoly. Here’s how some offshoots fared. 

 

Standard Oil of Ohio: Known as Sohio. British Petroleum Co. bought 25 percent in 1970, owned all by 1987. Merged with Amoco Corp., 1998. 

 

Standard Oil of California: Began Chevron brand in 1930s. Consolidated in 1977, changed name to Chevron USA Inc. Bought Gulf Corp. in 1985; changed name to Chevron Corp. Acquired Texaco Inc. in 2001, forming ChevronTexaco Corp. 

 

Standard Oil of Indiana: Merged with Pan American Petroleum and Transport Co. in 1954 to form American Oil Co. (Amoco). Merged with BP in 1998. 

 

Standard Oil of New Jersey: Known as Esso, changed name to Exxon Corp. in 1972. Merged with Mobil Oil Corp. in 1999, forming Exxon Mobil Corp. 

 

Standard Oil of New York: Socony merged with Vacuum Oil Co. (another former Standard company) in 1931, forming Socony-Vacuum. Changed to Socony Mobil Oil Co. in 1955; to Mobil Oil Corp. a decade later. Merged with Exxon, 1999. 

 

Atlantic Petroleum Storage Co.: Merged with Richfield Oil Corp. in 1966 to form Atlantic Richfield Co., ARCO for short. Acquired by BP in 2000. 

 

Continental Oil and Transportation Co.: Merged with Marland Oil Co. in 1928 to form Continental Oil Co. Subsidiary of DuPont,1981 to 1998; became Conoco Inc. Merged with Phillips Petroleum Co. in 2002 to form ConocoPhillips Co. 

 

Ohio Oil Co.: Bought Transcontinental Oil Co. in 1930, gaining Marathon brand. Changed to Marathon Oil Co., 1962. Became subsidiary of U.S. Steel Corp., 1982; spun off in 2002.

Excerpts from Ida Tarbell’s Reporting. Plain Dealer 12/12/2004

 

Excerpts from Tarbell’s reporting
Plain Dealer, The (Cleveland, OH) - Sunday, December 12, 2004
Author: The Plain Dealer

Ida M. Tarbell’s “The History of the Standard Oil Company” packs two volumes with examples of the company’s business practices and the tenacity of its founder. Some passages, by topic: 

Advantages 

“Its chief competitors began to suspect something. John Rockefeller might get his oil cheaper now and then, they said, but he could not do it more often. . . . Where was his advantage? There was but one place where it could be, and that was in transportation. He must be getting better rates from the railroads.” 

“It was the [railroad] rebate which had made the Standard Oil Trust, the rebate, amplified, systemized, glorified into a power never equaled before or since by any business of the country. The rebate had made the trust, and the rebate, in spite of ten years of combination, Petroleum Associations, Producers’ Unions, resolutions, suits in equity, suits in quo warranto, appeals to Congress, legislative investigations – the rebate was still Mr. Rockefeller’s most effective weapon.” 

Competition 

“A few of the refiners contested before surrendering. Among them was Robert Hanna. . . . The Standard Oil Company asked an interview with him and his associates. . . . ‘But we don’t want to sell,’ objected Mr. Hanna. ‘You can never make any more money, in my judgment,’ said Mr. Rockefeller. ‘You can’t compete with the Standard. We have all the large refineries now. If you refuse to sell, it will end in your being crushed.’ ” 

“Other refiners burst into the market and undersold for a day; but when Mr. Rockefeller began to undersell, he kept it up day in and day out, week in and week out, month in and month out, until there was literally nothing left of his competitor.” 

Spies 

“A Cleveland refiner, John Teagle, testified [to a congressional committee] . . . that one day in 1883 his bookkeeper came to him and told him that he had been approached by a brother of the secretary of the Standard Oil Co. at Cleveland, who had asked him if he did not wish to make some money. . . . 

“For twenty-five dollars down and a small sum per year he was to make a transcript of Mr. Teagle’s daily shipments with net price received for the same; he was to tell what the cost of manufacturing in the refinery was; the amount of gasoline and naphtha made and the net price received for them; what was done with the tar; and what percentage of different grades of oil was made; also how much oil was exported. This information was to be mailed regularly to Box 164 of the Cleveland post-office.” 

Contradictions 

“Mr. Rockefeller was ‘good.’ There was no more faithful Baptist in Cleveland than he. . . . He was simple and frugal in his habits. He never went to the theatre, never drank wine. He gave much time to the training of his children, seeking to develop in them his own habits of economy and charity. 

“Yet he was willing to strain every nerve to obtain for himself special and unjust privileges from the railroads which were bound to ruin every man in the oil business. . . . Religious emotion and sentiments of charity, propriety and self-denial seem to have taken the place in him of notions of justice and regard for the rights of others.” 

Contracts 

“The contract was signed at night at Mr. Rockefeller’s house on Euclid Avenue in Cleveland, where he told the gentlemen that they must not tell even their wives about the new arrangement, that if they made money they must conceal it – they were not to drive fast horses, ‘put on style,’ or do anything to let people suspect there were unusual profits in oil refining. That would invite competition. They were told that all accounts were to be kept secret. Fictitious names were to be used in corresponding, and a special box at the post-office was employed for these fictitious characters.” 

Perceptions 

“Scores of boys and girls grew up in the Oil Regions in those days with the same feeling of terrified curiosity toward those who had ‘sold to the Standard’ that they had toward those who had ‘been in jail.’ ” 

“Years of war with a humiliating outcome had inspired the producers with the conviction that fighting was useless, that they were dealing with a power verging on the superhuman – a power carrying concealed weapons, fighting in the dark, and endowed with an altogether diabolic cleverness. Strange as the statement may appear, there is no disputing that by 1884 the Oil Regions as a whole looked on Mr. Rockefeller with superstitious awe. Their notion of him was very like that which the English common people had for Napoleon.”
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