A Monopoly Isn’t the Same as Legitimate Greatness

Competent monopolists aren’t good monopolists

Ida Tarbell’s uses her writing to kindle a fire on a tree labelled “Standard Oil Traditional Policy of Silence.” A panicked John D Rockefeller peers out of a squirrel-hole, screaming in alarm.

If you do much reading about antitrust, you’re sure to come across Ida Tarbell, the campaigning investigative journalist whose masterful 1904 book, The History of the Standard Oil Company (free ebook, free audiobook), brought down John D. Rockefeller and his monopolistic Standard Oil Company, which was broken up in 1911. It split into seven companies, many of which are still with us—or were, until recent mergers (think: Exxon, Mobil, Esso, Chevron, Texaco, and Amoco).

After repeatedly reading about Tarbell’s remarkable work, I decided I should read it for myself. I’d just finished Amy Klobuchar’s somewhat overlong Antitrust (do yourself a favor and skip it, trying either Zephyr Teachout’s Break ’Em Up or David Dayen’s Monopolized for a more disciplined and invigorating read, though if you see a copy of Antitrust in a bookstore, do peruse its excellent selection of trustbuster-era editorial cartoons) and decided it was past time for me to read Tarbell’s work.

Anti-Rockefeller editorial cartoon depicting him as a vast serpent about to devour an Oz-style tin-man identified as the Tide Water Pipe Line.

It’s a fantastic book. Tarbell was a sprightly writer with a talent for understatement as she unraveled the grifts of Rockefeller and his cronies, which makes her conclusions all the more devastating. Tarbell was a self-trained writer — she came from a political family and grew up watching her father and his friends in the Pennsylvania oil fields get crushed by Rockefeller’s dirty tricks — and had a gift for speaking and organizing. She toured the nation with her book, speaking out against monopolies and building momentum for a political attack on the richest, most powerful man the world and his cronies.

Ida Tarbell, 1890.
Ida Tarbell, 1890.

Tarbell’s work has real applicability today. Her account of Rockefeller’s tactics to corner the world’s energy supply has infinite parallels to today’s tech robber barons. Equally important is the context of her work: Tarbell was self-trained and made no pretense about objectivity. She was a campaigner and an activist, independent and unlicensed—to the extent that if she belonged to any professional organizations, they were organizations she helped found.

Remember that the next time someone tells you the answer to political disinformation is to license journalists, demands from them a nonsensical objectivity, and requires them to adhere to a professional code of conduct administered by large media companies with a history of deferring to the powerful.

I was especially struck by this passage from Tarbell’s History (emphasis mine):

Something besides illegal advantages has gone into the making of the Standard Oil Trust. Had it possessed only the qualities which the general public has always attributed to it, its overthrow would have come before this. But this huge bulk, blackened by commercial sin, has always been strong in all great business qualities — in energy, in intelligence, in dauntlessness. It has always been rich in youth as well as greed, in brains as well as unscrupulousness. If it has played its great game with contemptuous indifference to fair play, and to nice legal points of view, it has played it with consummate ability, daring and address. The silent, patient, all-seeing man who has led it in its transportation raids has led it no less successfully in what may be called its legitimate work. Nobody has appreciated more fully than he those qualities which alone make for permanent stability and growth in commercial ventures. He has insisted on these qualities, and it is because of this insistence that the Standard Oil Trust has always been something besides a fine piece of brigandage, with the fate of brigandage before it, that it has been a thing with life and future.

If one attempts to analyse what may be called the legitimate greatness of Mr. Rockefeller’s creation in distinction to its illegitimate greatness, he will find at the foundation the fact that it is as perfectly centralised as the Catholic church or the Napoleonic government. (Volume 2, Chapter 17)

This is Tarbell at her best, killing Rockefeller with kindness. After hundreds of pages detailing every kind of dirty trick — lying to a German oil buyer so he quits the business rather than buying competing oil, sending railroad goons to beat up workers who try to connect a rival pipeline, bribing state lawmakers, lying in court, and worse — Tarbell concedes that Rockefeller is really good at being crooked and that this is part of his overall competence in all things.

Here, Tarbell is striking at the heart of the monopoly problem: that a competent dictator isn’t the same thing as a benevolent dictator. Tarbell devotes several pages after this passage to explaining the incredible progress Rockefeller brought to the industry; for example, he kept careful stats on the efficiency of refiners in the Standard Oil Trust, and if one refiner started to pull ahead of the rest, he’d send committees from all the other refineries to learn how to replicate their success.

This kind of cooperativism is behind the calls by some leftists to nationalize (rather than break up) monopolists. Books like Paul Mason’s Postcapitalism and Leigh Phillips and Michal Rozworski’s People’s Republic of Walmart take up Marx’s vision for a society industrialized by capitalism and democratized by socialism.

These firms are often remarkably efficient and operate as planned economies already. When you go to work at Amazon, for example, a market doesn’t decide where you sit and what job you do — rather, Party Secretary Bezos delegates a commissar to deploy your work in service to the execution of a five-year plan. Why not just put them into public ownership?

Tarbell’s meticulous research and brilliant storytelling complicate this proposition. No one who reads her History would conclude that Rockefeller’s empire represented the best oil company — rather, it represented the best oil company for the likes of John D. Rockefeller.

Sometimes, the “best Rockefeller oil company” was synonymous with “the best oil company,” but many times it wasn’t. Rockefeller made a practice of buying and shutting down refineries that were too far from railheads or pipelines to operate profitably—an economically and socially rational prospect—but then he’d abandon them, leaving them as toxic blights on destroyed communities, which hurt the public interest but benefited Rockefeller.

The monopolist’s ability to be “illegitimately great” means that it’s hard to tell when a large firm grew because it found a better way to do things and when it grew because it got away with cheating.

I have an old friend who was an exec at one of the two big consumer packaged goods monopolies in Canada. The Unilever/Procter & Gamble duopoly play exceptionally dirty with one another—and even dirtier with smaller companies that try to enter the market.

My friend’s stories always stuck with me as examples of how monopolists are able to ensure that their most profitable products dominated, rather than the best ones. For example, all the grocery stores would periodically fill end caps with massive, teddy bear–shaped Kraft Peanut Butter jars.

Kraft 1988 Teddy Bear Glass Jar Red Lid Made Into Bank, eBay listing by newtons_cupboard. https://www.ebay.com/itm/373188364630?_trkparms=ispr%3D1&amdata=enc%3AAQAFAAAAkNATOkPjElIotAOeKJMJQVbHjPlgrDUF%2BSIdJCdlYKQg1Lwc%2BJxMBjXhbc4oTdGt7C%2BHRaRqKKmc5KP3CrfjktqJ45fqZxYwUeklTCReezefdztxaQ%2FqsaDwFGiF0piZjvF5EViLBA1fd9KRQ0Ti962YkcbGhv%2F5GyZU6YuPYKGAr0rJemv4Htp%2FmAFKQhun%2BQ%3D%3D&chn=ps&norover=1&mkevt=1&mkrid=711-117182-37290-0&mkcid=2&itemid=373188364630&targetid=1262375642056&device=c&mktype=
A 1988 Kraft teddy bear glass jar made into a bank. Photo: eBay listing by newtons_cupboard

These bear jars were highly sought after because they were exceptionally good bargains—cheaper by volume than the cylindrical jars—and they made great decorative jars that were much prized as piggy banks.

Given all that, it’s weird that they weren’t always for sale. My friend explained: Kraft would offer these for sale only when the company got wind that Procter & Gamble was planning to try to launch its U.S. peanut butter super-seller Jif in Canada. Kraft would flood the market with these below-cost, highly desirable jars ahead of the Jif launch, ensuring that every peanut butter customer would already have a six-month supply of Kraft in teddy bear jars when Jif hit shelves. Even if Canadian grocery shoppers were curious about Jif, they already had all the peanut butter they needed.

This kind of predatory pricing is rampant in grocery sales. My friend described how P&G workers were expected to take a certain route when commuting to downtown Toronto in order to observe whether the detergent stacks at the Unilever plants were running. This, combined with other signals—such as responses to pretextual RFPs to packaging companies about the availability of card stock and production lines—allowed P&G’s “competitive intelligence” unit to build a picture of when Unilever was about to launch a new detergent. P&G would beat them to market with below-cost, jumbo-sized bargain boxes of Tide, which would satisfy all the market demand for detergent for the next six months, strangling the new detergent in the cradle.

Kraft peanut butter and Tide aren’t necessarily the best products; they’re just the ones that have been most successfully promoted through “illegitimate greatness.” We don’t know if people would prefer rival products, because the rival products were dirty-tricked out of the market.

Today, big-business boosters and skeptics alike are apt to praise the tech monopolies for their legitimate greatness: the leadership of Facebook’s social interactions, Google’s search, Amazon’s logistics, Apple’s curation. Business boosters say this greatness is evidence that the monopolists deserve their place; skeptics say this greatness militates for turning these companies into utilities.

But it’s impossible to know where the legitimate greatness ends and the illegitimate greatness starts. The competence of the leadership of our tech monopolies isn’t in question — but their benevolence is. There were times when Rockefeller did the world a favor, finding new and efficient ways to make energy cheap and reliable. There were also times when Rockefeller inflicted harm on all but his cadre of shareholders, by polluting, corrupting, and immiserating.

As for me, I think the lesson of the Standard Oil breakup and Tarbell’s crystal-clear analysis is that we must shatter the unaccountable tyranny of the board room, not just because doing so is a prerequisite for democratic control over our lives, society, and planet, but also because billionaires’ illegitimate greatness makes it impossible to know which of their achievements are legitimately great.

And as for Tarbell, you really should read her! Her seminal books are free and in the public domain, and there are even free audiobooks. Tarbell broke all kinds of barriers, earning a university science education at a time when women were excluded from the sciences.

Tarbell was praised in her day for her ability to make complex, technical issues both accessible and urgent to wide audiences. That shines through more than a century later — and provides a methodological example for the rest of us.