Why the world's most famous capitalist hated the free market

Share
Related Topics
WATCHING Bill Gates defend himself hours after the Justice Department dropped its long-awaited anti-trust shoe on his software behemoth, Microsoft, last Monday, you were struck by a serenity in his demeanour. Through his boyish visage, there shone a conviction that he, not the government, is on the side of the angels.

The lawsuit, which accuses Microsoft of manoeuvring to extend its crushing grip on the software industry to the newly discovered terrain of the Internet, was dismissed in indignant tone by Mr Gates as "a step backwards for America, for consumers and for the PC industry, which is leading our nation's economy into the 21st century". If Microsoft is guilty of anything, it is of innovating for the good of all of us.

To fend off the devils of a bad conscience, tycoons have always armed themselves with rationalisations of their tactics. Today, thanks to the scholarship of the business biographer Ron Chernow, we have the chance to view the psychology of Mr Gates against an especially illuminating historical backdrop - the story of that other icon of American enterprise who fell foul of Washington, John D Rockefeller Sr.

With fortuitous timing, for readers and author, Mr Chernow has just given us Titan, an opus appreciation of Rockefeller that is being greeted as the most insightful and compelling read ever written about the man who created Standard Oil. He was helped especially by the discovery of 1,700 pages of notes of interviews conducted with Rockefeller himself for an authorised biography that never saw the light.

Has Mr Gates read it? He should. While comparisons between himself and Rockefeller should be taken only so far, the echoes from the days of Standard Oil - from its founding by Rockefeller in 1880 to its break-up by order of the US Supreme Court in 1911 - to the predicament of Microsoft today are, at the very least, uncanny.

It was, for example, largely as a result of Rockefeller's ruthless reign that the Sherman Antitrust Act was signed into law in 1890. It is on that same act, still the Magna Carta of US government supervision of free competition, that the Justice Department bases its action against Microsoft today.

And the two men are tied in this fashion: both stumbled at young ages upon a new element that was to revolutionise society. For Rockefeller it was oil, that first gushed from the Pennsylvania sod in 1859, and for Gates it was the birth of the computer. Moreover, each managed to gain a near-90 per cent of the market in their chosen commodities, kerosene for the one and PC operating systems for the other.

What Rockefeller committed to win that dominance, however, was surely more wicked than anything Gates could now be charged with. He crushed almost all his refining rivals by a combination of predatory pricing, industrial espionage, the secret ownership of companies that pretended to be rivals and, above all, the securing of hidden rebates from railroad companies for every barrel they shipped, not just of his oil but of oil produced by his competitors also.

One small illustration offered by Chernow: grocery stores offering kerosene from independent refiners were liable to find that, suddenly, a competing store would open across the street in which everything, not just kerosene, would be suspiciously cheap.

Most infamously, in 1872, shortly after Rockefeller did his rail deal, he perpetrated the "Cleveland Massacre", in one stroke taking over 22 of his 26 rivals in the city. The result of the Rockefeller strategy of buy out or crush was the trust - or, more accurately, the monopoly - that Standard Oil quickly became. Or the "Octopus", as contemporary reporters took to calling it.

At the heart of Chernow's book is the description of a man, who, not unlike Gates, believed that, whatever others cared to say, his achievements were ultimately all for the greater good of society. Indeed, it was many years before public distrust of Rockefeller gained politically viable momentum.

And for good reason. Rockefeller seemed to embody the qualities, beloved by Americans, of buccaneering enterprise and personal advancement. Moreover, Standard Oil cut the average price of refined oil from 23 cents a gallon to 7 cents.

Similar dynamics have applied to Mr Gates. While Mr Gates has earned enemies in his own industry, as Rockefeller did in his, for many ordinary Americans he remains a hero rather than a villain.

Most astonishing, however, is the logic that Rockefeller espoused in justifying the cruelty of his methods. Read Chernow and you wonder if the man we have considered the greatest capitalist of them all was actually a disciple of Karl Marx.

He concluded in his own mind that the free market, so keenly espoused by the new liberal thinkers of the time, was instead a pestilence that had almost crippled Standard Oil, when, in its earliest days, it had faced the intrusions of johnny-come-lately refiners rushing for their share of the oil boom. He fulminated against the "chaotic conditions in which virtuous academic Know-Nothings about business ... were doing what they construed to be God's service in eating each other up".

God, thought Rockefeller, a devout baptist, would surely have blessed his model of doing business. He genteelly called it one of "co-operation" between players on the same field; we, today, might prefer terms like cartel or monopoly. "What a blessing it was," he opined, "that the idea of co-operation, with railroads, with telegraph lines, with steel companies, with oil companies came in and prevailed."

Critics who charged him with destroying competition, had misunderstood his saintly mission. He referred once to Standard Oil as "the Moses who delivered them [the refiners] from their folly which had wrought such havoc in their fortunes". He went on: "It was not a process of destruction and waste; it was a process of upbuilding and conservation of all the interests ... in our efforts most heroic, well meant - and I would say, reverently, Godlike - to pull this broken-down industry out of the Slough of Despond."

Was Rockefeller perhaps a little crackers? How, in one personality, could two such disparate instincts be combined: the God-fearing figurehead, who, as Chernow amply illustrates, was a fine and devoted husband and father, and the ruthless conniver who knew no greater drive than the appetite for money?

"I believe it is my duty to make money," Rockefeller said, "and still more money". In the same breath: "And to use the money I make for the good of my fellow man according to the dictates of my conscience." And, indeed, the largesse of Rockefeller, also detailed in "Titan", rightly established him as one of the greatest philanthropists America has ever produced.

The singular legacy of Rockefeller, however, was surely the Standard Oil ruling of 1911. It resolved the competition-vs-"co-operation" argument by setting in stone the equation of a free market governed at the same time by strict rules of fair play. And it established the right of the federal government to act to make sure those rules are obeyed.

What words might John D impart to Gates if he were alive today? He would advise first against underestimating the power of the Sherman Act. And he would also note this irony: the dismantling of Standard Oil made him far richer than he had ever been before.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

BI Manager - £50,000

£49000 - £55000 per annum + competitive: Progressive Recruitment: My client is...

BI Project Manager - £48,000 - £54,000 - Midlands

£48000 - £54000 per annum + Benefits package: Progressive Recruitment: My clie...

VB.Net Developer

£35000 - £45000 per annum + competitive: Progressive Recruitment: If you're pa...

SAP Business Consultant (SD, MM and FICO), £55,000, Wakefield

£45000 - £55000 per annum + competitive: Progressive Recruitment: SAP Business...

Day In a Page

Read Next
 

The law is too hard on sexting teenagers

Memphis Barker
 

Obama must speak out – Americans are worried no one is listening to them

David Usborne
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
Climate change threatens to make the antarctic fur seal extinct

Take a good look while you can

How climate change could wipe out this seal
Should emergency hospital weddings be made easier for the terminally ill?

Should emergency hospital weddings be made easier?

Some couples are allowed emergency hospital weddings, others are denied the right. Kate Hilpern reports on the growing case for a compassionate cutting of the red tape
Man Booker Prize 2014 longlist: Crowdfunded novel nominated for first time

Crowdfunded novel nominated for Booker Prize

Paul Kingsnorth's 'The Wake' is in contention for the prestigious award
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned

Vladimir Putin employs a full-time food taster

John Walsh salutes those brave souls who have, throughout history, put their knives on the line
Tour de France effect brings Hollywood blockbusters to Yorkshire

Tour de France effect brings Hollywood blockbusters to Yorkshire

A $25m thriller starring Sam Worthington to be made in God's Own Country
The 10 best pedicure products

Feet treat: 10 best pedicure products

Bags packed and all prepped for holidays, but feet in a state? Get them flip-flop-ready with our pick of the items for a DIY treatment
Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

Noel Fielding's 'Luxury Comedy'

A land of the outright bizarre
What are the worst 'Word Crimes'?

What are the worst 'Word Crimes'?

‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
Can Secret Cinema sell 80,000 'Back to the Future' tickets?

The worst kept secret in cinema

A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Facebook: The new hatched, matched and dispatched

The new hatched, matched and dispatched

Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
Why do we have blood types?

Are you my type?

All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for