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"The Rise of the Octopus": John D. Rockefeller

9/17/2015

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Source: Emily Arnold McCully. Ida Tarbell: The Woman Who Challenged 
                                     Big Business, And Won (2014).
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     In Cleveland, Ohio, 1855, John Davidson Rockefeller earned $25/month ($626 today) as a grocery store bookkeeper. Rockefeller was the son of a con man, and he had startlingly opposite traits from his father, such as personal discipline, determination, religious conviction, and sky-high ambition. To Rockefeller, acquiring wealth meant that he had to gain strict and total control of himself, and the market (which would eventually mean a monopoly . . . in something). 
     The only characteristic passed on from his father was a willingness to take gigantic risks. Rockefeller felt superior in his virtue, and came to despise men that thought they were better than him. Once he got the upper-hand, sudden vengeance would belong to Rockefeller.
     Rockefeller arrived in "Oil Country" in 1860. "Oil Country" (in terms of drilling for oil) was Northwest Pennsylvania, and the center of region was Titusville, a city of 10,000+. Rockefeller almost immediately saw that refining oil to make money involved little expense and high potential profits compared to drilling for oil. 

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     Soon, there were fifty refineries crowded around Cleveland, Ohio, including a refinery owned by John D. Rockefeller, and his partner Henry Flagler. Consistent with his belief of strict control over a market (to increase efficiency, production, and, of course, profits), Rockefeller started to absorb his rival refiners (in this "horizontal monopoly", Rockefeller gave his rivals a choice: sell for some level of profit, or be forced out of business). 
     The other key to controlling the refining market was transportation of the refined product (initially kerosene, a.k.a. coal oil), which meant dealing with the railroads. A transportation monopoly existed in the Oil Region, in that the Erie, Central, and Pennsylvania Railroads were in collusion with each other. In an effort to extract even more control over the oil industry, these three railroad behemoths created the South Improvement Company. (Pictured: oil derricks in close proximity in NW PA in the 1860s).
     Through this new company, this railroad Combination increased freight rates by 250%. However, the Combination let it be known that if an oil refiner joined the SIC, then that refiner would get a "rebate" (discount) on freight charges (they were pledged to secrecy, since it was against the law) . . . among the few refiners that joined the SIC was John D. Rockefeller (he also helped create the SIC). The 250% rate increase hit the refiners living in Titusville, Pennsylvania between the eyes, and these independent refiners made sure that the SIC was exposed to the daylight of public awareness. 

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     The Oil City Derrick newspaper printed the names of the refiners that had joined the South Improvement Company, and Rockefeller's name was on the list. Franklin Tarbell (Ida Tarbell's father), a partner in one of the independent refining companies, became a changed man: he stopped whistling, no longer played his harmonica, and stopped making jokes. Franklin even joined vigilante groups that wrecked SIC railroad tank cars. More effective (for a short while) was the embargo against Rockefeller's Standard Oil, in which Franklin Tarbell enthusiastically participated. 
     Franklin personally turned down Rockefeller's offer to buy a full year's output from his refinery (which was a way to start the process of "absorbing" a rival refinery). Franklin simply dismissed Rockefeller's strategy/tactics as morally wrong; both Franklin Tarbell and John D. Rockefeller believed they were on the side of "right". Rockefeller believed that Standard Oil had rescued the oil industry, and had emerged as the "fittest" company ("Social-Darwinism" was in the nation's bloodstream by that time in history); the term that Rockefeller used to describe his intervention (and collusion with the railroads) was "Cooperation". Franklin Tarbell believed that the railroads were to serve the public (as did most Americans), not a select group, such as the Southern Improvement Company.
                  
                 
               
              (Pictured: an "Oil Town")

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     To Ida Tarbell (Franklin's daughter), the dispute over the SIC hit home very hard, seeing how it had affected her father. In her mid-teens, Ida developed a hatred of the "Privileged Class", the unchecked wealthy and powerful that had negatively altered her life and that of her family. It became obvious to the independent refiners (and a young Ida Tarbell) that if the SIC controlled the transportation of oil, they were soon to be forced out of business. 
     On 25 March, 1872, the Railroad Combination (Erie, Central, PA) conceded defeat, and canceled the SIC contract. In their euphoria from (a perceived) victory, the independent refiners did their best to exclude and ostracize Rockefeller, since he was the alleged (and actual) leader of the SIC. Little did they know at the time that the fall of the SIC wasn't going to slow down Rockefeller in the least. He already controlled 22 of the 26 refineries in the Oil Region, which meant that Rockefeller (pictured above in 1875) was in a position to keep making secret deals with the railroads. To Ida Tarbell, her father represented the "Noble Underdog" who was overwhelmed by the "Evil Empire" . . . and Rockefeller was her Darth Vader. 
(When times were good for Franklin Tarbell, he moved his family to a better location. He purchased an abandoned hotel in a nearby oil ghost town for $600 ($10k today) and had it transported piece-by-piece to a plot of land he had just purchased . . . below, you see the new Tarbell home, which was completely reassembled in the early-1870s in Titusville, Pennsylvania)

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     For the rest of her life, Ida Tarbell viewed many Combinations as malevolent, and John D. Rockefeller was at the top of her "list". By 1868, Rockefeller owned the largest oil refinery in the world, and by 1877, Rockefeller controlled 90% of the nation's oil production. In 1882, Rockefeller established the Standard Oil Trust (his Oil Combination was made "legal"), which was designed to determine (fix) prices in the industry. Those that succumbed to Rockefeller were offered stock in the Standard Oil Trust, or the cash equivalent (the smart ones chose the stock option); Franklin Tarbell refused to join Rockefeller's Oil Combination, and he struggled financially for the rest of his life (he died in 1905). Ida Tarbell (pictured) would expose the shenanigans of Rockefeller in her 19 part series titled The History of the Standard Oil Company (1902 - 1904).
(Below: a visual representation of Rockefeller's wealth since 
 the inception of the Standard Oil Trust in 1882)

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George Washington: The Whiskey Rebellion and the Jay Treaty

9/4/2015

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                Source: Ron Chernow. Washington: A Life (2010)
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     In June 1793, The Royal Navy started intercepting neutral ships heading towards France (the French Revolution had started, and once again Britain was at war with France). Also, Great Britain started the practice of Impressment; in the process of boarding US ships looking for those (suspected / supposed) AWOL from the Royal Navy, British ships also kidnapped US sailors. A political firestorm swept across the U.S. as a result of these British actions.
     Yet Congress resisted creating a national standing army, again relying on state militias for collective security. President George Washington needed to send an emissary to Britain to try reduce the escalating tensions between the two nations through negotiations. GW's first choice was his Secretary of the Treasury, Alexander Hamilton, but he lacked the necessary credibility in order to be sent (he had paid a tremendous political cost in working most of his economic plan through Congress). GW then selected John Jay, the nation's first Chief Justice, and his selection was greeted with much hostility and opposition . . . but Washington stuck by Jay.

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    On 20 August 1794, the Battle at Fallen Timbers (near Toledo, Ohio) occurred; General "Mad Anthony" Wayne and 3500 troops soundly defeated a coalition of Native tribes (among them, a young Tecumseh). The U.S. victory largely ended Britain's influence with the dominant tribes in the region, ebbing (not ending) their power in the American Frontier. The reason Fallen Timbers needs to be mentioned is that General Wayne and his troops WERE the American standing army, and they had orders from President Washington to remain in the frontier. 
     In 1794, the Whiskey Rebellion occurred, which was not only the largest domestic uprising before the Civil War, but also the first time a federal law was enforced. Western Pennsylvanians were beyond-incensed with SecTreas Hamilton's excise tax on whiskey, but far-more so with the investigative powers of the new federal government. 6000 Whiskey Rebels mobilized at Braddock's Field (site of the Battle of Ft. Duquesne in the F&I War) in order to organize and launch their revolt. 
     GW urged the Pennsylvania government to deal with the rebellion, but Governor Thomas Mifflin refused to use his militia (Mifflin had been a thorn in General Washington's side during the Revolution as well). As a result, GW federalized 13,000 men, mostly from the Virginia, New Jersey, and Pennsylvania militias, and he sent his Attorney General west with the lead troops. GW's SecWar, Henry Knox, was unable to accompany GW to Western Pennsylvania in that he had huge estate problems in what is now the state of Maine. Washington then made SecTreas Hamilton his Acting SecWar in Knox's absence.

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       Although Washington was hoping for a diplomatic non-violent solution to the rebellion in Western Pennsylvania, he agreed that a show of force was necessary. On 25 September 1794, GW issued his final warning to the Whiskey Rebels to stop their insurrection; then, at the age of 62, GW became the only President to not only organize, but also to supervise troops in a combat situation. GW planned to supervise troops as far west as Carlisle, Pennsylvania, and then to survey the situation in terms of the rebellion. 
     Washington was irked that SecWar Knox hadn't yet returned . . . he hadn't even written to let his Commander-in-Chief know his whereabouts or his situation. Therefore, it was SecTreas / Acting SecWar Alexander Hamilton that took charge as the federal commander of the assembled militias at Carlisle so GW could settle back and focus on supervision. SecWar Knox finally returned to Philadelphia, and waiting for him was a letter from GW which told him to stay put; the letter was a rather harsh rebuke. 
     GW believed that the Whiskey Rebels were defiant only when the army was distant; he wanted unequivocal proof of absolute submission before he ordered the federalized militia to stop marching. Therefore, GW decided to keep going west of Carlisle with the troops, often running point on horseback.

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     On 21 October 1794, Washington issued instructions that civilian authorities had command of the federalized militias, which meant that Hamilton was placed in charge so GW could return to Philadelphia. Soon after his return, GW addressed Congress; he clearly asserted his belief that the "Democratic-Republican Societies" were the main cause for the Whiskey Rebellion. Virginia representative James Madison, a former supporter & confidant of GW, started to openly condemn his former mentor. To Madison (the de facto leader of the House) and former SecState Thomas Jefferson, Washington was now the open leader of the Federalist Party. 
     The Whiskey Rebellion ended when the rebels themselves voted (using private ballots) to accept President Washington's offer of amnesty (a Presidential pardon for a group). Soon after the Whiskey Rebellion ended, Hamilton resigned as SecTreas effective January 1795. GW was very sorry to see Hamilton leave; he was the only Cabinet member that never let him down. Also, the 20+ year relationship between Washington and SecWar Henry Knox was over; Knox resigned on 28 December 1794, and GW made no effort to keep Knox in his administration. GW's new Cabinet was a truly Federalist Cabinet, with Oliver Wolcott the new SecTreas, and Timothy Pickering the new SecState . . . but why did GW need to find a new Secretary of State . . . the Jay Treaty caused a firestorm in American politics.

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      The Jay Treaty arrived on Washington's desk in March 1795; it was a very one-sided agreement that favored Great Britain. There was no mention of stopping Impressment, yet British imports were given Most-Favored-Nation status; reciprocation was not an overall theme in the treaty. That being said, Britain did agree to evacuate ports on the Great Lakes, and the West Indies were once again open to US shipping (only small ships were allowed; Britain didn't want true competition). Overall, the Jay Treaty's only true accomplishment was that it stopped the inevitable drift towards war with Britain. 
     The Senate ratified the Jay Treaty by the slimmest of margins (20-10); the 2/3's majority was only reached due to a crucial adjustment in the clauses related to trade in the West Indies (Southerners desperately wanted no limit on the size of ships sailing the Caribbean). Washington reached out to Hamilton for advice as to whether-or-not to sign the Jay Treaty . . . Hamilton responded by crafting a 53 page analysis supporting the treaty.

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      As the mostly negative reaction to the Jay Treaty in America increased, Washington found himself without any trustworthy advisors (not counting Martha); finally, he turned to his Vice-President, John Adams for political advice (whom he had largely ignored). Ironically, it was also during this period that Washington recognized the talents of a young John Quincy Adams. Washington was beyond-irritated in that he couldn't find suitable replacements for those that left the Cabinet, mostly because, by this time, no one of significance was willing to serve GW in that capacity. The replacements that Washington eventually found were mediocre at best, and they also made up the Cabinet of President John Adams; they served both Presidents poorly, focusing mainly on party politics
     Washington even turned to Hamilton to be the next Chief Justice of the Supreme Court after John Jay resigned. Hamilton turned down Washington's offer, mostly because the position was not yet prestigious. After the controversial success of putting down the Whiskey Rebellion, and the furor over the Jay Treaty, Washington was the most politically isolated he had ever been, whether as General or as President . . . he couldn't wait to get free of the shackles of the Presidency, which wouldn't occur until March 1797 . . . 

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      On 1 July 1795, the Aurora (a Jefferson/Madison Republican newspaper) published the entire Jay Treaty, and other Republican newspapers followed suit; Republican paranoid fantasies (e.g. Monarchy; Anglophobia) exploded on the American political landscape. In addition to the Republican vitriol over the Jay Treaty, Washington had an additional problem: his SecState, Edmund Randolph. In effect, prominent Federalists accused Randolph of treason, which was a common charge to make in that era on those that had opposing political beliefs. 
     Randolph wasn't guilty of treason, but it turned out that he wasn't as loyal to Washington as he portrayed himself to be, and that he had definite Republican political leanings; so therefore, treason was the "default" charge. When confronted (ambushed is a better description) by Washington and those prominent Federalists, Randolph, the Narcissistic Egomaniac, surfaced (yet again) . . . the overall theme of his defense was "How Dare You Question Anything I Do". SecState Edmund Randolph was the first Cabinet member to leave the Cabinet involuntarily. Randolph, as a private citizen, savaged Washington in a very public defense of his actions. In short, Randolph betrayed Washington, in particular after he left the Cabinet, in that GW was the main reason for Randolph's ascent, relevance, and influence in the new federal government. 

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