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Investigating the Business Tactics of Rockefeller and Their Relationship to Modern-Day Capitalism

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During the late 19th century, the Gilded Age marked a period of rapid economic growth, especially in the Northern and Western United States. The Gilded Age gets its name from the many great fortunes created during this period and the way of life this wealth supported. Many rich multi-millionaires during this time period include Carnegie, Rockefeller, and Vanderbilt, who established major enterprises in the steel, oil, and railroad industries. However, deep-rooted controversy has remained whether individuals like Rockefeller were really “captains of industry” (business leaders who contributed positively to their country in some way using their personal fortunes) or “robber barons” (American businessmen who were accused of using unscrupulous methods to get rich, or expand their wealth). While Rockefeller displayed respectable qualities through his ability to learn from mistakes, faith, intelligence, efficiency, love of his family, and his knowledge of the oil industry, he still was a ruthless and shrewd businessman that took advantage of a capitalist economy by making secret deals with others, threatened other individual and companies, and illegally set the prices of his products to be extremely low, in order to eliminate all other competition.

Rockefeller often took unethical, short-cuts in order to rapidly expand his business, such as through making secret business trusts with others or attempting to bribe government officials. Initially, he tried to follow a vertical integration approach in order to expand his oil business into different stages of the same production or same distribution path. However, he tried to accomplish this goal through secret (and now illegal) deals. For example, Rockefeller had realized the importance of railroads for transporting his refined products to markets, especially to those in the eastern United States. However, in 1871, after three railroads merged to form the Southern Improvement Company, its president, Thomas A. Scott, partnered with Rockefeller in a secret deal. According to the terms of this deal, the railroad company would receive regular oil shipments, thus ending price wars and ensuring its profit. Additionally, Standard Oil (as well as other refineries in the deal) would receive rebates on their railroad shipments in return for a guaranteed volume of shipments. Meanwhile, the refineries not in the deal would be required to pay higher rates for their railroad shipments. This led to Standard Oil having an unfair advantage over its competitors. When details of this secret detail emerged, the “Oil Wars” broke out, as many members of the public were enraged when learning about this decision. For example, rioters painted skulls and crossbones on Standard Oil signs, and Rockefeller received several death threats. Fortunately, after independent refineries protested against this scheme, it never went to effect, but nonetheless, this secret deal had a significant harmful impact on Rockefeller’s reputation.

Additionally, Rockefeller tried to use his immense wealth to bribe political candidates, in order to protect Standard Oil from antitrust laws. In the late 1880s, the U.S. Government had rightfully challenged the Standard Oil Trust. During this time period, after many states passed antitrust laws, members of the U.S. Congress proposed numerous antitrust bills. Rockefeller was most concerned about the bill proposed by the U.S. Senator, John Sherman. In 1885, Rockefeller had tried to influence Sherman’s proposal by donating $600 to his re-election campaign. Fortunately, Sherman rebuffed Rockefeller’s attempt, and successfully passed the Sherman Antitrust Act, which aimed to protect a competitive marketplace that protects consumers from predatory business practices and monopolies.

Secondly, Rockefeller often made threats to either other individuals or companies, in order to further his Standard Oil Company. Rockefeller now attempted to follow a horizontal integration strategy, in which the Standard Oil Company could either acquire or merge with one of more companies that produce the same goods or offer the same services. However, he used a carrot-and-stick approach. With this tactic, he used the “carrot” aspect to persuade other businesses by stating, “Take Standard Oil Stock, and your family will never know want.” However, the stick was to drive the refineries into bankruptcy if their owners did not take the offer. Additionally, Tarbell had mentioned that Rockefeller was willing to pursue special and unfair privilege. For example, Standard Oil had utilized unethical espionage practices in order to keep a monitor of additional oil refinery companies. Additionally, Rockefeller also employed blackmailing tactics, in which he would demand money from a person for not revealing comprising information about that person. Thus, through these threats and spying practices towards other companies, Rockefeller himself emerged as a money-hungry tycoon.

Additionally, Rockefeller often suppressed his competition by sometimes illegally setting prices extremely low in an attempt to stifle competition. During the 1880s, the Standard Oil Trust was losing its dominance over the oil refinery business as competition from Russia and Asia increased. Moreover, the use of kerosene lighting waned as electrical lighting became available. Yet, as per Ron Chernow’s words, Standard Oil continued to be “an infallible moneymaker,” as the Rockefeller employed predatory pricing (which included setting prices low in an attempt to stifle competition). In states where the practice was outlawed, the ban of this practice was often difficult to enforce. Per Tarbell, these price wars ultimately enhanced competition in which companies cut prices in order to increase their share of the market. Tarbell ultimately reasoned that she had no complaint against corporate profit if it was fairly earned in open competition. However, Rockefeller’s reputation as a businessman included to be more than willing to make business deals, crush competition, and demand rebates follow him to his death.

Therefore, Rockefeller displayed a lot of qualities representative to those of a “Robber Barron,” as he established secret business trusts with others, made threats towards other companies, and employed predatory pricing in order to rid of his competition. Ultimately, Rockefeller took advantage of the U.S. capitalist economy, as he employed these unethical practices, through his personal fortune and privilege, rather than by actually improving the Standard Oil company itself, in terms of competition. In order for a capitalist economy to truly succeed, monopolies cannot really exist, as competition between several private companies help with rapid innovation and advances. This topic is quite meaningful today, considering the rise of corporations that are invading in many sectors of our capitalist business economy, like Amazon.

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