Envy is frequently the penalty of success. Whoever fails in any pursuit likes to blame somebody else for his misfortune. This trick is as old as the race. Adam started it in Eden, Eve tried to ring in the serpent and their posterity take good care not to let the game get rusty from disuse! Its aggregation of capital renders the Standard, in the opinion of those who have “fallen outside the breastworks,” directly responsible for their inability to keep up with the procession. Sympathizers with them deem this “confirmation strong as proof of Holy Writ” that the Standard is an unconscionable monopoly, fostered by crushing out competition. Such reasoning forgets that enterprise, energy, experience and capital are usually trump-cards. It forgets that “the race is to the swift,” the battle is to the mighty and that “Heaven is on the side with the heaviest artillery.” Carried to its logical conclusion, it means that improved methods, labor-saving appliances and new processes count for nothing. It means that the snail can travel with the antelope, that the locomotive must wait for the stage-coach, that the fittest shall not survive. In short, it is the double-distilled essence of absurdity.
Any advance in methods of business necessarily injures the poorest competitor. Is this a reason why advances should be held back? If so, the public could derive no benefit from competition. The fact that a man with meagre resources labors under a serious disadvantage is not an excuse for preventing stronger parties from entering the field. The grand mistake is in confounding combination with monopoly. By combination small capital can compete successfully with large capital. Every partnership or corporation is a combination, without which undertakings beyond individual reach would never be accomplished. Trunk railroads would not be built, unity of action would be destroyed, mankind would segregate as savages and the trade of the world would stagnate. Combinations should be regulated, not abolished. Rightful competition is not a fierce strife between persons to undersell each other, that the one enduring the longest may afterwards sell higher, but that which furnishes the public with the best products at the least cost. This is not done by selling below cost, but by diminishing in every way possible the cost of producing, manufacturing and transporting. The competition which does this, be it by an individual, a firm, a corporation, a trust or a combination, is a public benefactor. This kind of competition uses the best tools, discards the sickle for the cradle and the cradle for the reaper, abandons the flail for the threshing-machine and adopts the newest ideas wherever and whenever expenses can be lessened. To this end unrestricted combination and unrestricted competition must go hand-in-hand. A small profit on a large volume of business is better for the consumer than a large profit on a small business. The man who sells a million dollars’ worth of goods a year, at a profit of five per cent., will become rich, while he who sells only ten-thousand dollars’ worth can get a bare living. If the builder of a business of one-hundred-thousand dollars deserve praise, why should the builder of a business of millions be censured? Business that grows greater than people’s limited notions should not for that cause be fettered or suppressed. When business ceases to be local and has the world for its market, capital must be supplied to meet the increasing demand and combination is as essential as fresh air. Thus large establishments take the place of small ones and men acting in concert achieve what they would never attempt separately. The more perfect the power of association the greater the power of production and the larger the proportion of the product which falls to the laborer’s share. The magnitude of combinations must correspond with the magnitude of the business to be done, in order to secure the highest skill, to employ the latest devices, to pay the best wages, to invent new appliances, to improve facilities and to give the public a cheaper and finer product. This is as natural and legitimate as for water to run down hill or the fleet greyhound to distance the slow tortoise.
How has the Standard affected the consumer of petroleum-products? What has it done for the people who use illuminating oils? Has it advanced the price and impaired the quality? The early distillations of petroleum were unsatisfactory and often dangerous. The first refineries were exceedingly primitive and their processes simple. Much of the crude was wasted in refining, a business not financially successful as a rule until 1872, notwithstanding the high prices obtained. Methods of manufacture and transportation were expensive and inadequate. The product was of poor quality, emitting smoke and unpleasant odor and liable to explode on the slightest provocation. In 1870 a few persons, who had previously been partners in a refinery at Cleveland, organized the Standard Oil-Company of Ohio, with a capital of one-million dollars, increased subsequently to three-and-a-half millions. For years the history of refining had been mainly one of disaster and bankruptcy. A Standard Oil-Company had been organized at Pittsburg by other persons and was doing a large trade. The Cleveland Standard Refinery, the Pittsburg Standard Refinery, the Atlantic Refining Company of Philadelphia and Charles Pratt & Co. of New York were extensive concerns. Because of the hazardous nature and peculiar conditions of the refining industry, the need of improved methods and the manifold advantages of combination, they entered into an alliance for their mutual benefit. Refineries in the oil-regions had combined before, hence the association of these interests was not a novelty. The cost of transportation[transportation] and packages had been important factors in crippling the industry. Crude was barreled at the wells and hauled in wagons to the railroads prior to the system of transporting it by pipes laid under ground. Railroad-rates were excessive and irregular. Refiners who combined and could throw a large volume of business to any particular road secured favorable rates. The rebate-system was universal, not confined to oil alone, and possibly this fact had much to do with the combination of refiners afterwards known as the Standard Oil-Company.
Very naturally the Standard endeavored to secure the lowest transportation-rates. Quite as naturally railroad-managers, in their eagerness to secure the traffic, vied with each other in offering inducements to large shippers of petroleum. The Standard furnished, loaded and unloaded its own tank-cars, thereby eliminating barrels and materially cheapening the freight-service. This reduction of expense reduced the price of refined in the east to a figure which greatly increased the demand and gave oil-operations a healthy stimulus. Still more important was the introduction of improvements in refining, which yielded a larger percentage of illuminating-oil and converted the residue into merchantable products. Chemical and mechanical experts, employed by the combined companies to conduct experiments in this direction, aided in devising processes which revolutionized refining. The highest quality of burning-oil was obtained and nearly every particle of crude was utilized. Substances of commercial value took the place of the waste that formerly emptied into the streams, polluting the waters and the atmosphere. In this way the cost was so lessened that kerosene became the light of the nations. Consumers, whose dime now will buy as much as a dollar would before the “octopus” was heard of, are correspondingly happy.
Since consumers have fared so well, how about refiners outside the Standard? That smaller concerns were unable to compete with the Standard under such circumstances was no reason why the public should be deprived of the advantages resulting from concentration of capital and effort. Many of these, realizing that small capital is restricted to poor methods and dear production, either sold to the Standard or entered the combination. In not a few cases wide-awake refiners took stock for part of the price of their properties and engaged with the company, adding their talents and experience to the common fund for the benefit of all concerned. Others, not strong enough to have their cars and provide all the latest improvements, made such changes as they could afford to meet the requirements of the local trade, letting the larger ones attend to distant markets. Some continued right along and they are still on deck as independent refiners, always a respectable factor in the trade and never more active than to-day. Those who would neither improve, nor sell, nor combine, sitting down placidly and believing they would be bought out later on their own terms, were soon left far behind, as they deserved to be. Let it be said positively that the Standard, in negotiating for the purchase or combination of refineries, treated the owners liberally and sought to keep the best men in the business. A number who put up works to sell at exorbitant[exorbitant] prices, failing in their design, howled about “monopoly” and “freezing out” and tried to pass as martyrs. It is true hundreds of inferior refineries have been dismantled, not because they were frozen out by a crushing monopoly, but because they lacked requisite facilities. The refineries in vogue when the Standard was organized could not stay in business a week, if resurrected and revived. A team of pack-mules might as well try to compete with the New York Central Railroad as these early refineries to meet the requirements of the petroleum-trade at its present stage of perfection. They were “frozen out” just as stage-coaches were “frozen out” by the iron-horse or the sailing-vessel of our grandfathers’ time by the ocean-liner that crosses the Atlantic in six days. Every labor-saving invention and improvement in machinery throws worthy persons out of employment, but inventions and improvements do not stop for any such cause. Business is a question of profit and convenience, not a matter of sentiment. The manufacturer who, by an improved process, can save a fraction of a cent on the yard or pound or gallon of his output has an enormous advantage. Must he be deprived of it because other manufacturers cannot produce their wares as cheaply? Refining petroleum is no exception to the ordinary rule and a transformation in its methods and results was as inevitable as human progress and the changes of the seasons.
Over-production is justly chargeable with the low price of crude that wafted many producers into bankruptcy. Regardless of the inexorable laws of supply and demand, operators drilled in Bradford and Butler until forty-million barrels were above ground and the price fell to forty cents. Time and again the wisest producers sought to stem the tide by stopping the drill, which started with renewed energy after each brief respite. With the stocks bearing the market the dropping of crude to a price that meant ruin to owners of small wells was as certain as death and taxes. Gold-dollars would be as cheap as pebbles if they were as plentiful. Forty-million barrels of diamonds stored in South Africa would bring the glistening gems to the level of glass-beads. The Standard, through the National-Transit Company, erected thousands of tanks to husband the enormous surplus, which the world could not consume and would not have on any terms. Hosts of operators were kept out of the sheriff’s grasp by this provision for their relief, using their certificates as collateral during the period of extreme depression. The richest districts were drained at length, consumption increased and production declined, stocks were reduced and prices advanced. Then a number of oil-operators, foremost among whom were some of the men whom the Standard had carried over the grave crisis, thought the National-Transit was making too much money storing crude and tried to secure legislation that was hardly a shade removed from confiscation. The legislature refused to pass the bills, the company voluntarily reduced its charges and the agitation subsided. Thousands of producers sold or entered large companies, into whose hands a good share of the development has fallen, mainly because of the great expense of operating in deep territory and the wisdom of dividing the risk attendant upon seeking new fields. Operators who had to retire were “frozen out” by excessive drilling, nothing more and nothing less!
The highest efficiency in all fields of economical endeavor is obtained by the greatest degree of organization and specialization of effort. To attack large concerns as monopolies, simply because they represent millions of dollars under a single management, is as stupid and unjust as the narrow antagonism of ill-balanced capitalists to organized labor. If organized capital means better methods, greater facilities and improved processes, organized labor means better wages, greater recognition and improved industrial conditions. Hence both deserve to be encouraged and both should work in harmony. The Standard Oil-Company established agencies in different states for the sale of its products. As the business grew it organized corporations under the laws of these states, to carry on the industry under corporate agencies. Manufactories were located at the seaboard for the export-trade. It was easier and cheaper to pipe crude to the coast than to refine it at the sources of supply and ship the varied products. Thus the refining of export-oil was done at the seaboard, just as iron is manufactured at Pittsburg instead of at the ore-beds on Lake Superior. The company aimed to open markets for petroleum by reducing the cost of its transportation and manufacture and bettering its quality. It manufactured its own barrels, cans, paints, acids, glue and other materials, effecting a vast saving. On January second, 1882, the forty persons then associated in the Standard owned the entire capital of fifteen corporations and a part of the stock of a number of others. Nine of these forty controlled a majority of the stocks so held, and it was agreed on that date that all the stocks of the corporations should be placed in the hands of these nine as trustees. The trustees issued certificates showing the extent of each block of stock so surrendered, and agreed to conduct the business of the several corporations for the best interests of all concerned. This was the inception of the Standard Oil-Trust, the most abused and least understood business-organization in the history of the race.
The Standard Trust, which demagogues lay awake nights coining language to denounce, did not unite competing corporations. The corporations were contributory agencies to the same business, the stock owned by the individuals who had built up and carried on the business and held the voting power. These individuals had combined not to repress business, but to extend it legitimately, by allying various branches and various corporations. The organization of the Trust was designed to facilitate the business of these corporations by uniting them under the management[management] of one Board of Trustees. This object was business-like and laudable. It had no taint of a scheme to “corner” a necessity of life and elevate the price at the expense of the masses. On the contrary, it was calculated to enlarge the demand and supply it at the minimum of profit. For ten years the Standard Trust continued in existence, dissolving finally in 1892. During this term its stockholders increased from forty to two thousand. Many of the most skillful refiners and experienced producers joined the combination and were retained to manage their properties. Each corporation was managed as though independent of every other in the Trust, except that the rivalry to show the best record stimulated them to constant improvement. Whatever economy one devised was adopted by all. The business was most systematic and admirably managed in every detail, running as harmoniously as the different parts of a watch. Clerks, agents and employés who could save a few hundred dollars purchased Trust Certificates and thus became interested in the business and gains. If it is desirable to multiply the number who enjoy the profits of production, how can it be done better than through ownership of stock in industrial associations? The problem of co-operation and profit-sharing can be solved in this way. The Standard Trust was a real object-lesson in economics, which illustrated in the fullest measure the benefits of an association in business that affected consumers and producers of a great staple alike favorably.
Misrepresentation is as hard to eradicate as the Canada thistle or the English sparrow. Once fairly set going, it travels rapidly. “A lie will travel seven leagues while Truth is pulling on its boots.” The Standard is the target at which invidious terms and bitter invective have been hurled remorselessly, often through downright ignorance. Although reputable editors might be misled, in the hurry and strain of daily journalism, to give currency to deliberate falsehoods against corporations or capitalists, reasonable fairness might be expected from the author of a pretentious book. Henry D. Lloyd, of Chicago, last year published “Wealth Against Commonwealth,” an elaborate work, which is devoted mainly to an assault upon the Standard Oil-Company. The book, notable for its distortion of facts and suppression of all points in favor of the corporation it assails, caters to the worst elements of socialism. The author views everything through anti-combination glasses and, like the child with the bogie-man, sees the monopoly-spook in every successful aggregation of capital. He confounds the South-Improvement Company with the Standard and charges to the latter all the offenses supposed to lie at the door of the organization that died at its birth. One thrilling story is cited to show that the Standard robbed a poor widow. The narrative is well calculated to arouse public resentment and encourage a lynching-bee. It has been repeated times without number. Within the past month two Harrisburg ministers have referred to it as a startling evidence of the unscrupulous tyranny of the Standard millionaires. To make the case imposing Mr. Lloyd informs mankind that the husband of this widow had been “a prominent member of the Presbyterian church, president of a Young Men’s Christian Association and active in all religious and benevolent enterprises.” After his death she continued the business until she was finally coerced into selling it to the Trust at a ruinously low price—a mere fraction of its actual value. Mr. Lloyd states her hopeless despair as follows:
“Indignant with these thoughts and the massacred troop of hopes and ambitions that her brave heart had given birth to, she threw the letter—a letter she had received from the Standard regarding the sale of her property—into the fire, where it curled up into flames like those from which a Dives once begged for a drop of water. She never reappeared in the world of business, where she had found no chivalry to help a woman save her home, her husband’s life-work and her children.”