The New NationPaxson, Frederic L. (Frederic Logan)
History
The New Nation
Paxson, Frederic L. (Frederic Logan)
United States -- History -- 1865-1921
The first trust to arouse public notice was concerned in the
transportation and manufacture of petroleum and its products. Commercial
processes for refining petroleum became available in the sixties,
enabling improvements in domestic illumination that insured an
increasing market for the product. The industry was speculative by
nature because of the low cost of crude petroleum at the well and the
high cost of delivering it to the consumer. Slight rises in price caused
the market to be swamped by overproduction, and threw the control of the
industry into the hands of those who controlled its transportation.
Once above ground, the cheap and bulky oil had to be hauled first to the
refiner and then to the consumer. The receptacles were expensive, and
the methods of transportation that were cheapest in operation had the
greatest initial cost. Barrels were relatively cheap to buy, but were
costly to handle. Tank-cars were more expensive, but repaid those who
could afford them. Pipe-lines were beyond the means of the individual,
but brought in greater returns to the corporations that owned them.
It was inevitable that some of the dealers who competed in the
oil-fields of Ohio, Pennsylvania, and West Virginia in the sixties
should realize the strategic value of the control of transportation and
profit by it. John D. Rockefeller happened to be more successful than
others in manipulating transportation. His refineries grew in size, as
they bought out or crushed their rivals, until by 1882 most of the
traffic in petroleum was under his control. Economy and sagacity had
much to do with the success, but were less significant than
transportation. Railway rates were yet unfixed by law and every road
sold transportation as best it could. Rockefeller learned to bargain in
freight rates, and through a system of special rates and rebates gained
advantages over every competitor. His lobby made it difficult to weaken
him through legislative measures, while his attorneys were generally
more skillful than his prosecutors before the courts. The recognition of
the existence of rebates did much to hasten the passage of the
Interstate Commerce Law. The group of corporations that flourished
because of them became the greatest of the trusts. By 1882 the
affiliated Rockefeller companies were so numerous and complicated that
they were given into the hands of a group of trustees to be managed as a
single business.
The Whiskey and Sugar Trusts, formed in 1887, had to do with commodities
in which transportation was not the controlling element. These
industries suffered from overproduction and ruinous competition, to
eliminate which the distilleries and sugar refineries entered into trust
agreements like that of the Standard Oil companies. Other lines of
manufacture followed as best they could. Before Cleveland was
inaugurated the trend was noticed and attacked.
Public-domain text, read in full here on John Shaqi.
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