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ABOUT IT: CORRUPTED DEMOCRACY, ROGUE STATE RUSSIA, AND THE RICHEST, MOST
DESTRUCTIVE INDUSTRY ON EARTH
Big Oil
and Gas Versus Democracy—Winner Take All
In 2010, the words “earthquake swarm” entered the lexicon in Oklahoma.
That same year, a trove of Michael Jackson memorabilia—including his iconic
crystal-encrusted white glove—was sold at auction for over $1 million to a guy
who was, officially, just the lowly forestry minister of the tiny nation of
Equatorial Guinea. And in 2014, Ukrainian revolutionaries raided the palace of
their ousted president and found a zoo of peacocks, gilded toilets, and a
floating restaurant modeled after a Spanish galleon. Unlikely as it might seem,
there is a thread connecting these events, and Rachel Maddow follows it to its
crooked source: the unimaginably lucrative and equally corrupting oil and gas
industry.
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| Rachel Maddow |
Blowout is a call to contain the lion: to stop subsidizing the wealthiest
businesses on earth, to fight for transparency, and to check the influence of
the world’s most destructive industry and its enablers. The stakes have never
been higher. As Maddow writes, “Democracy either wins this one or disappears.”
EXCERPT
Chapter
One.
Splendor and Fragrance
If you had
to point to a beginning, to the exact location of the big bang from which
American industrial and economic power began its astounding and sometimes
reckless expansion, it would be at the end of a percussion-driven, blunt-force
drill bit, lowered through a cast-iron pipe, powered by a six-horsepower steam
engine, slamming down and down and down into the earth on a farm in northwest
Pennsylvania. At a depth of sixty-nine and a half feet, the operators of the
drill struck what they had been looking for, and on August 28, 1859, the crude
yet sublime substance—“rock oil,” as it was called at the time—presented itself
on the earth’s surface.
That discovery,
like the big bang itself, is but a subatomic pinhole in space compared with all
that has followed. Edwin Laurentine Drake and his hired man, “Uncle Billy”
Smith, pulled the equivalent of maybe twenty forty-two-gallon barrels of crude
oil from the ground on a good day. The inhabitants of our planet weren’t
exactly starving for more in 1859, or at least didn’t yet know they were. The
first commercially viable gas-powered engine, and the ensuing addiction, were
still a few generations away.
Today’s drillers
produce an average of more than ninety million barrels of oil worldwide every
day, and a lot of natural gas, too, which fuels cars, jets, freight trains,
ocean liners, power plants, factories, and farm machinery, as well as the
economies of republics, monarchies, and dictatorships around the globe. Nearly
a hundred countries, representing six continents, are in the oil and gas game,
and many have been in it for a century or more. But the United States got there
first (Russia was a very distant second), and only the United States can lay
claim to having shaped the industry’s prevailing culture: the tools of its
trade, its financing, its administration, its ethic, and its reach. “The
organization of the great business of taking petroleum out of the earth, piping
the oil over great distances, distilling and refining it, and distributing it
in tank steamers, tank wagons, and cans all over the earth,” the president
emeritus of Harvard noted in 1915, “was an American invention.”
In fact, it
could be argued, the oil business as we know it today was the invention of one
particular American, John D. Rockefeller. Rockefeller was there almost from the
beginning. He created and husbanded the exemplar of the industry, Standard Oil,
and along the way he helped to popularize the idea of America as the testing
ground where the extravagant possibilities and the outsized benefits of
free-market capitalism have been proven. Rockefeller, a junior partner in a
Cleveland merchant commission house trading in grain, hay, meat, and miscellany
when Edwin Drake made his strike in 1859, watched the oil business unfold up
close. When he entered the field in 1863, at age twenty-three, he understood
his best bet was to concentrate on refining the crude oil and to leave to
others the rather messy and costly process of actually getting it out of the
ground.
Within ten
years, Rockefeller had managed to get control of nearly all of the oil
refineries in Cleveland, which had established itself as the nation’s main
refining center. Rockefeller’s new corporation, Standard Oil, shipped a million
barrels of refined oil in a single year. By 1875, thanks to the fire sale that
followed the first frightening financial panic and depression in industrialized
America, Rockefeller had taken control of every major refining center in the
country. “We were all in a sinking ship,” he would later explain, “and we were
trying to build a lifeboat to carry us all to shore. . . . The Standard was an
angel of mercy, reaching down from the sky, and saying ‘Get in the ark. Put in
your old junk. We’ll take the risks!’ ”
Standard
Oil’s main product at the time was kerosene, which proved a welcome innovation
in illumination. It was efficient, effective, plentiful, and reasonably priced.
The most widely used lighting oil at the time, which was struck from soft coal,
was dirty; whale oil was hard to get (see Moby-Dick) and dwindling in supply;
kerosene from petroleum—or rock oil—was just the thing to illuminate the clean,
bright new future. “Rock oil emits a dainty light,” promised the new industry.
“The brightest and yet the cheapest in the world, a light fit for Kings and
Royalists and not unsuitable for Republicans and Democrats.” Farmers and city
dwellers could afford to read well into the night. Factory owners could afford
to keep their works open around the clock. Rockefeller’s magic potion was a
worldwide phenomenon; in 1875, before any European-based company was producing
kerosene in bulk, 75 percent of the output from Rockefeller’s American
refineries was loaded up and shipped overseas. Cash flowed back across the
Atlantic. Standard’s production capacity grew year after year. The efficiencies
that followed—economies of scale—allowed Rockefeller to cut the cost of
refining by more than 85 percent and to cut the cost to the consumer by 70
percent. Demand swelled, and so did revenues.
Rockefeller’s
company, meanwhile, just kept eating would-be competitors. About 90 percent of
America’s crude flowed through Standard Oil by the end of the 1890s. The
company had money and means to produce its own crude, and refine it, and get it
shipped to market on its own (always favorable) terms. Standard was capable of
controlling the price of oil and railroad freight rates and had cash in the
bank to pay off the state and federal legislators who wrote laws governing the
industry. “John D. and his colleagues regarded government regulators as
nuisances to be bypassed wherever possible,” says Rockefeller’s estimable
biographer, Ron Chernow. “He felt that politicians were basically parasites who
would shake down businessmen. I mean, all of this bribery he saw as extortion;
that is, the politicians shaking him down, rather than his paying off the
politicians. . . . I think he regarded these payments really as a business
expense.”
Standard
Oil eventually grew into “the largest business empire on earth,” according to
Chernow. “I don’t know that the business world has ever seen an agglomeration
of wealth and power on the scale of Standard Oil.” This was the era of
consolidation, of the Big Trust, which was nineteenth-century parlance for
monopoly—the Sugar Trust, the Beef Trust, the Steel Trust, the Tobacco Trust,
the Rope-and-Twine Trust. But the Rockefeller-controlled Oil Trust was the
first, the biggest, the most powerful, and easily the most talked-about trust
in the country. Rockefeller himself stood with Andrew Carnegie (steel), Philip
Armour (meat products), and James Buchanan Duke (cigarettes) as the richest and
most powerful commodity producers on the continent. They sat on mounds of private
wealth unimaginable in the young republic at the time of Rockefeller’s own
birth. John D. died nearly fifty years before the debut of the Forbes 400, the
annual listing of the wealthiest private individuals in the country. But when
the editors of a book timed to coincide with the twenty-fifth-anniversary
edition of that list made some calculations, they declared Rockefeller the
richest single individual in the history of America. They figured his peak net
worth at $305 billion (in 2006 dollars), which means that if John D. were to be
magically reanimated today, with his peak fortune still intact, his personal
wealth would roughly triple that of the whippersnapper who sat atop the Forbes
list in 2019.
Millions of
barrels of ink have been expended in trying to explain the reasons for
Rockefeller’s spectacular achievement, to reveal the cardinal (and perhaps
replicable) tactic, to pinpoint the specific innate genius that made it all
happen. Theories abound. Take, for instance, what could be called the Bung
Theory. A bung is the stopper once used to seal up a barrel of oil, and
Rockefeller’s intense interest in this unromantic industrial cog, his keen
watch on the monthly bung count, offers a tantalizing lead on the secret to his
success. “Your March inventory showed 10,750 bungs on hand,” Rockefeller once
wrote to one of his foremen. “The report for April shows 20,000 new bungs
bought, 24,000 bungs used, and 6,000 bungs on hand. What became of the other
750 bungs?” Maybe the key was pinching every penny! John D. Rockefeller wasted
nothing, see, so he could push his costs down, undercut all competitors on
price, and drive them out of the business, or at least into Standard Oil’s
angel of mercy ark.
Then there
is the well-traveled Great Monster Theory. “Run, children, or Rockefeller’ll
get you,” was a threat that could strike terror in the Pennsylvania oil patch
in the late nineteenth century. The Great Monster Theory gained much currency
in the popular mind after Ida Tarbell’s remarkable series of investigative
articles published in McClure’s Magazine beginning in 1902, “The History of the
Standard Oil Company.” Tarbell, who grew up in the patch, itemized the more
than thirty years of Rockefeller’s underhanded, corrupt, predatory behavior
that constituted his effort to wipe the field of competitors. He was, in
Tarbell’s rendering, a rapacious and devious villain. Widows and orphans,
beware. It didn’t hurt that Rockefeller, aged sixty-three at the time of
publication, looked ready to inhabit the villain role by then. He was already
growing thin and pinched—and worse. “He suffered from something called
alopecia. In 1901, he lost not only all the hair on his head; he lost all body
hair,” Chernow explains. “Ida Tarbell came along a year later, did this series
portraying him as a monster. And since he was hairless and suddenly looked
old—and ghoulish—his appearance seemed to ratify what she was saying in the
series, so that the timing was particularly unfortunate for Rockefeller.”
There is
also the Man of His Times Theory. Rockefeller, this theory posits, was simply
playing by the very loose set of rules of his day, just like everybody else
was. The boundaries of capitalism and democracy in America were still being
chalked, the rules of the game still being written. The prevailing ethic was
best summed up by one of Rockefeller’s early partners, Henry M. Flagler, who
kept a copy of this little ditty on his desk: “Do unto others as they would do
unto you—and do it first.” The point of the free market was not to compete but
to win. “The most serious charge that can be laid at [Standard’s] door is that
it has succeeded,” wrote an oilman who felt compelled to sell out to
Rockefeller in the 1880s or suffer the consequences. “It has outwitted its
competitors who sought to play the same game but had not so thoroughly mastered
the art. . . . In the business battle, the extremity of one is the opportunity
of the other. . . . It is the rule of our competitive life that the time when
the business rival is on the downward road—when creditors are pressing him
hard, when banks are clamoring that he shall meet his paper, when the sheriff
is threatening to close his doors—this is the opportunity for the other rival
to strike the finishing blow and make merchandise out of the misery of his
fellow-man.” Rockefeller’s eldest son and heir offered an exceedingly aromatic
metaphor to justify this need to (occasionally, of course) rely on cutthroat
tactics. “The American Beauty Rose can be produced in the splendor and
fragrance which bring cheer to its beholder only by sacrificing the early buds
which grow up around it,” John D. junior sermonized. “This is not an evil
tendency in business. It is merely the working-out of a law of nature and a law
of God.”
Rockefeller
himself had a number of pet theories about his spectacular rise. A devout and
puritanical Baptist, John D. was certain there was a higher being at work. “I
believe the power to make money is a gift from God,” he explained to one
writer, “just as are the instincts for art, music, literature, the doctor’s
talent, the nurse’s, yours—to be developed and used to the best of our ability
for the good of mankind. Having been endowed with the gift I possess, I believe
it is my duty to make money and still more money, and to use the money I make
for the good of my fellow man according to the dictates of my conscience.”
These
various theories, and the many others in circulation, are not mutually
exclusive. The whole truth of John D. Rockefeller is complicated and involves
pieces of them all. But the rock-bottom fact on which everything else rests is
actually quite simple: Standard Oil just kept turning out the finest product on
the market, at the lowest price to the consumer. Ka-ching!
Excerpted
from Penguin Random House promotional material, including where to purchase: Click here.
ABOUT RACHEL MADDOW
Rachel Maddow is host of the Emmy
Award–winning Rachel Maddow Show on MSNBC, as well as the author of Drift: The
Unmooring of American Military Power, a #1 New York Times bestseller. Maddow
received a bachelor’s degree in public policy from Stanford University and earned
her doctorate in political science at Oxford University. She lives in New York
City and Massachusetts.
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