Wealth against commonwealth

by Henry Demarest Lloyd

"At a limited profit; a very small profit on an extremely large volume of business."[99]

When its secretary was before Congress, he was asked about the operations of himself and his associates in these years, 1876, 1877, of wonderful profits. He had been participating during that time in not only this profit of $2.05 a barrel, but in divided profits rising to $3,000,000 in a year on $3,000,000 of capital, and in undivided profits which rolled up $3,500,000 of capital into $70,000,000 in five years. But he said:

"The business during those years was so very close as to leave scarcely any margin of profit under the most advantageous circumstances."[100]

The effect on the consumer appears from the statement in this case of one of the best-known producers and refiners in the oil regions, one intimately associated with the members of the combination. He showed that oil which was selling at twenty cents a gallon retail could be sold at a large profit at twelve cents a gallon.

As to the effect on the working-man, the demand for labor declined, wages went down, and the number of unemployed increased.

When there was competition in Cleveland the great company could not afford to have its skilled workmen idle, because they would seek employment with the other refineries; but now, having the refining business all in its own hands, when it was temporarily to its advantage to refine oil in Pittsburg, Oil City, or other points, in preference to Cleveland, it could with impunity let its hands remain idle in Cleveland, knowing that when it wanted them it could easily secure them, as there are no other refineries in Cleveland to employ them, and "that has been a very serious injury to working-men."[101]

There was no pretence that the design of this contract was not to make oil scarce—i.e., dear.

In the affidavit which was made in support of the injunction the principal reconciler showed that his company had restricted itself as much as it restricted these competitors. He urged as the reason why the contract had been made and why the courts should sustain it, that "the capacity of all the refineries in the United States is more than sufficient to supply the markets of the world, and if all the refineries were run to their full capacity they would refine at least twice as much oil as the markets of the world require; that this difference between the capacity of refineries and the demands of the market has existed for at least seven years past, and during that period the refineries" of his company "have not been run to ... exceed one-half of their capacity."

When these surviving independents of Cleveland were forced into this adventure, in 1876, the source of the power which could compel "free" citizens in this age of individualism to execute such a bond was not known. The appalling mortality among the independents showed that something was seriously wrong. There was something, however, in this "Agreement for an Adventure" which pointed straight to it. That was a clause which guaranteed those who became vassals that they should have the same freight rates and get back the same rebates as the monopoly.[102] "Had the monopoly the power," said the Hon. Stanley Matthews, "to procure freights on better and more advantageous terms than the rest of the public engaged in the same business?... And if they had such power, how did it get it?... If this or any other corporation is allowed to exalt itself in this way and by these means above competition, it is also exalted above the law."

The great lawyer, who soon afterwards became a justice of the Supreme Court of the United States, could not answer the questions he raised. The facts were hidden in secret contracts with the railroads. As regards Cleveland, they did not come out until five years later, in 1885. It then became an adjudicated fact that in 1875, the year before this "Agreement for an Adventure," the Lake Shore Railroad had made a contract with the oil combination to drive these very competitors and all others out of business, just as the same road had done for the South Improvement Company in 1872. When they escaped from their "reconciler," they brought this railroad and the contract into court. The case was fought up to the Supreme Court.