Friday, February 8, 2008

John D. Rockefeller, Standard Oil Company

"In most fields no single innovation was as decisive as Swift's refrigerator car. But other entrepreneurs did share Swift's insight that the essential step was to identify a mass market and then develop a national enterprise capable of serving it. In the petroleum industry John D. Rockefeller built the Standard Oil Company partly by taking over rival firms, but he also built a distribution system to reach the enormous market for kerosene for light and heating homes" (America, p.512).

After the civil war, with the United States' population spread across the whole of what is now the lower continental 48 states, large-scale enterprise began to form in order to reach a wider market. With the mass-immigration and rise in birth rates, the population of the U.S. shot up from approximately 40 million in 1870 to over 60 million in 1890. John D. Rockefeller was one of the pioneers of large-scale enterprise, and is a legendary figure in the history of U.S. business. He created an oil empire that was rivaled only by the largest monopolies in the country. Rockefeller used both Vertical Integration (owning companies that can create a product from start to finish -- i.e. refineries, storage, transport, etc.) and Horizontal Integration (buying out competing businesses in order to reduce competition) in order to create one huge monopoly.

By creating an oil company that was efficient, as well as getting into the industry at the right time--kerosene was in high demand for heating and lamps, and gasoline & diesel fuels were becoming more and more demanded--he was able to grow his business tremendously. Rockefeller's company, the Standard Oil Company, negotiated with the Railroad industry to get rebates, not only for his use of the rail, but also his competitors'. To get around laws of the time which made it hard to operate your company outside of it's home state, Rockefeller's Standard Oil Company created the "Standard Oil Trust" in 1882. This allowed Rockefeller and his partners to merge all of their businesses from around the country under one "trust," which was essentially a large corporation. In 1911, the Supreme Court found The Standard Oil Company to be a monopoly and the company was divided up into over thirty smaller companies. By this time, Rockefeller had become the richest man in the U.S., and the first Billionaire, and he retired from the Oil Industry. Rockefeller then used his enormous wealth to help others. He is one of the great Philanthropists of our time and gave most of his fortune back through Philanthropy, donating large sums of money into education, health care and various other public domains.

The Rockefeller Archive Center

PBS: The Rockefellers
The Rockefeller Foundation

1 comment:

A. Mattson said...

A very good post. You touch on a couple of key issues: the rise of a mass, national market and the increasing vertical and horizontal integration of many growing national corporations.

The growth of giant corporations which began to approach monopoly power was a big political issue of the day. Many Americans were frightened that these economic giants would dominate both the economic and political systems.