greed on the part of all. One major reason for the exportation of industrial work like manufacturing is that much of it requires no more than an 8 hour shift to learn the job. This means there are far more people that can do the job so the pay falls. Enter the union. Now, that minimum wage job gets $20 an hour. Up went the expenses. Now the union wants a paid-in-full medical package for their entire family. more greed, more expenses for the company.

While I believe America should come first, greed is not just on the part of the board - the employees are just as guilty.

But aren't entrepreneurs start businesses to provide jobs to others?

Far from it. a completely free market will ultimately produce monopolies - the only way to prevent it is government. Standard Oil is an example. The company essentially influenced all legislation to prevent monopolies.

On that note, I think anti-trust is the only purpose of a government in the free market. Regulation and intervention leads to problems. A free-running market repairs itself because when a company on top screws up and falls, those below it can buy up their assets, take over their clients, and grow to take the top spot. It's a cycle. I've said it before: bailing out those failing at the top only perpetuates a losing philosophy and ultimately delays the inevitable.

...And, if a company can influence the legislation, you call that a free market?

I thought that a free market is where a legislation can not influence the markets, hence they are "free"?

correct, but prior to anti-trust regulations and the creation of related government agencies, it was a completely free market. that bred Standard Oil that was essentially 90%+ of the market. The congress realized this was a bad thing and passed legislation (yes, effectively making the free market no longer).

Free market is one that is not regulated by an outside party (the gov). Deals made within that market do not change the fact it's a free market. An example would be Standard Oil's deals with the railroads that essentially went "you either discount our rate or we will ship with someone else who will." In the end, that gave them a further unfair advantage and allowed them to expand further.

EDIT:
and I don't mean influence as in lobby for it (it was, after all, against them) but the company served as an example of what the legislation was trying to prevent.

I am interested as to what is an "unfair advantage".

And, in your own example, even Standard Oil did not reach the status of monopoly. Of course, to that end you'd argue that it didn't precisely due to the influence of the government, while I would say that in absence of such influence, the Standard Oil would not be able to take 100% of the oil market.

I understand that when you show 90%+, you mean "of oil business".

perhaps you are unclear on the definition of monopoly (and I say that with no disrespect). A monopoly is not a 100% share of the market, but rather a large enough portion of the market share than they may on their own determine or at least have heavy influence on the market price. Standard Oil controlled enough production that they could make deals with railroads for volume discounts that others could not attain. This allowed for a lower price on the market and essentially control of the market price (because who would buy high if they had to). other businesses had to lower prices to match and could not meet the bottom line.

Well, Andrew, you did not say what is an "unfair advantage" in your opinion.

You do mention volume discounts, so, then in your opinion, we should outlaw the lowering of prices by supermarkets, when a customer buys more than one item? This is nothing, but a volume discount.

Further, you do not show, how it the fact that the Standard Oil had achieved higher efficiency in their business, harmed the consumer?

There is a certain part of your explanations on Standard Oil, that makes me wonder. In one case you say that the SO (Standard Oil), has achieved the possibility of raising their prices, and then in another you say that the problem was that the prices were too low. Which was it?

It appears, that sometimes people take their lessons from reading a propagandist materials, such a Wikipedia, who are nothing more than an instrument of those seeking to corrupt America further.

I would like to offer a competing view, that lays out the history of Standard Oil, and shows "what really happened".

I will post in in a separate post below.

Now, obviously, to anyone of you with brains, there will be a question: how do I know which is propaganda, and which is history?

May I offer an advice?

The history is said to teach us a lesson. This is true. Therefore, when you read the relevant topic on any of the modern propaganda sites, such as Wikipedia, and compare it to the one that I will present to you below, ask yourself this:


Which one has to be the truth, in order for this country to arrive at the condition that we are seeing today?

If Wikipedia is correct, then we should be thriving today, and anyone of you would not be talking of our "dependence on foreign oil".

If an article below is the truth, then it is no wonder, that we are where we are today.

Make up your own mind.

Oily Characters?


A prime example of a market entrepreneur whom generations of writers and historians have inaccurately portrayed — indeed, demonized — is John D. Rockefeller. Like James J. Hill, Rockefeller came from very modest beginnings; his father was a peddler who barely made ends meet. Born in 1839, he was one of six children, and his first job on graduating from high school at age sixteen was as an assistant bookkeeper for fifteen cents a day (under ten dollars a day today, even accounting for nearly 150 years of inflation).

Rockefeller was religious about working and saving his money. After working several sales jobs by age twenty-three he had saved up enough to invest four thousand dollars in an oil refinery in Cleveland, Ohio, with a business partner and fellow church member, Samuel Andrews.

Like James J. Hill, Rockefeller paid meticulous attention to every detail of his business, constantly striving to cut his costs, improve his product, and expand his line of products. He also sometimes joined in with the manual laborers as a means of developing an even more thorough understanding of his business. His business partners and managers emulated him, which drove the company to great success. As economist Dominick Armentano writes, the firm of Rockefeller, Andrews, and Flagler, which would become Standard Oil,
prospered quickly in the intensely competitive industry due to the economic excellence of its entire operations. Instead of buying oil from jobbers, they made the jobbers' profit by sending their own purchasing men into the oil region. They also made their own sulfuric acid, barrels, lumber, wagons, and glue. They kept minute and accurate records of every item from rivets to barrel bungs. They built elaborate storage facilities near their refineries. Rockefeller bargained as shrewdly for crude as anyone has before or since; and Sam Andrews coaxed more kerosene from a barrel of crude than the competition could. In addition, the Rockefeller firm put out the cleanest burning kerosene and managed to profitably dispose of most of the residues, in the form of lubricating oil, paraffin wax, and Vaseline.

Rockefeller pioneered the practice known as "vertical integration," or in-house provision of various inputs into the production process; that is, he made his own barrels, wagons, and so on. This is not always advantageous — sometimes it pays to purchase certain items from specialists who can produce those items at very low cost. But vertical integration has the advantage of allowing one to monitor the quality of one 's own inputs. It has the further advantage of avoiding what modern economists call the "hold-up problem." If, say, an electric power plant contracted with a nearby coal mine for coal to fuel its generating plant, the coal mine might effectively break its contract at one point by demanding more money for its coal. In such instances the power plant has the choice of paying up, engaging in costly litigation, or going without the coal and closing down. None of these options is attractive. But if the power plant simply buys the coal mine, all of these problems disappear. That is what Rockefeller, the compulsive micromanager, did with many aspects of the oil-refining business. He reduced his costs and avoided hold-up problems through vertical integration.
Rockefeller also devised means of eliminating much of the incredible waste that had plagued the oil industry. His chemists figured out how to produce such oil byproducts as lubricating oil, gasoline, paraffin wax, Vaseline, paint, varnish, and about three hundred other substances. In each instance he profited by eliminating waste.

Just as James J. Hill spent the extra money to build the highest quality railroad lines possible, Rockefeller did not skimp in building his refineries. So confident was he of the safety of his operations that he did not even purchase insurance.

Rockefeller also made the oil-refining industry much more efficient. There had been vast overinvestment in the oil industry in its first decades, as everyone had wanted to get rich quick in the business. Northwestern Pennsylvania, where the first oil well had been drilled, was littered with oil derricks and refineries of all sizes, many of which were operated by men who really should have been in another line of work.

Rockefeller purchased many of these poorly managed operations and put their assets to far better use. There was never any threat that these "horizontal mergers" — the combination of two firms that are in the same business — would create a monopoly, for Standard Oil had literally hundreds of competitors, including such oil giants as Sun Oil, not to mention its many large competitors in international markets.
One of Rockefeller's harshest critics was journalist Ida Tarbell, whose brother was the treasurer of the Pure Oil Company, which could not compete with Standard Oil's low prices. She published a series of hypercritical articles in McClure's magazine in 1902 and 1903, which were turned into a book entitled The History of the Standard Oil Company, a classic of antibusiness propaganda.

Tarbell's writings are emotional, often illogical, and lacking in any serious attempt at economic analysis. But even she was compelled to praise what she called the "marvelous" economy of the entire Standard Oil operation. In a passage describing one aspect of Standard Oil's vertical integration she wrote:
Not far away from the canning works, on Newtown Creek, is an oil refinery. This oil runs to the canning works, and, as the newmade cans come down by a chute from the works above, where they have just been finished, they are filled, twelve at a time, with the oil made a few miles away. The filling apparatus is admirable As the newmade cans come down the chute they are distributed, twelve in a row, along one side of a turn-table. The turn-table is revolved, and the cans come directly under twelve measures, each holding five gallons of oil — a turn of a valve, and the cans are full. The table is turned a quarter, and while twelve more cans are filled and twelve fresh ones are distributed, four men with soldering cappers put the caps on the first set…. The cans are placed at once in wooden boxes standing ready, and, after a twenty-four-hour wait for discovering leaks are nailed up and carted to a nearby door. This door opens on the river, and there at anchor by the side of the factory is a vessel chartered for South America or China … waiting to receive the cans…. It is a marvelous example of economy, not only in materials, but in time and footsteps [emphasis added].

Because of Standard Oil's superior efficiency (and lower prices), the company's share of the refined petroleum market rose from 4 percent in 1870 to 25 percent in 1874 and to about 85 percent in 1880.

As Standard Oil garnered more and more business, it became even more efficient through "economies of scale" — the tendency of per-unit costs to decline as the volume of output increases. This is typical of industries in which there is a large initial "fixed cost" — such as the expense involved in building an oil refinery. Once the refinery is built, the costs of maintaining the refinery are more or less fixed, so as more and more customers are added, the cost per customer declines. As a result, the company cut its cost of refining a gallon of oil from 3 cents in 1869 to less than half a cent by 1885. Significantly, Rockefeller passed these savings along to the consumer, as the price of refined oil plummeted from more than 30 cents per gallon in 1869 to 10 cents in 1874 and 8 cents in 1885.

Because he could refine kerosene far more cheaply than anyone else could, which was reflected in his low prices, the railroads offered Rockefeller special low prices, or volume discounts. This is a common, ordinary business practice — offering volume discounts to one's largest customers in order to keep them — but Rockefeller's less efficient competitors complained bitterly. Nothing was stopping them from cutting their costs and prices and winning similar railroad rebates other than their own inabilities or laziness, but they apparently decided that it was easier to complain about Rockefeller's "unfair advantage" instead.

Cornelius Vanderbilt publicly offered railroad rebates to any oil refiner who could give him the same volume of business that Rockefeller did, but since no one was as efficient as Rockefeller, no one could take him up on his offer.
All of Rockefeller's savings benefited the consumer, as his low prices made kerosene readily available to Americans. Indeed, in the 1870s kerosene replaced whale oil as the primary source of fuel for light in America. It might seem trivial today, but this revolutionized the American way of life; as Burton Folsom writes, "Working and reading became after-dark activities new to most Americans in the 1870s." In addition, by stimulating the demand for kerosene and other products, Rockefeller also created thousands upon thousands of new jobs in the oil and related industries.

Rockefeller was extremely generous with his employees, usually paying them significantly more than the competition did. Consequently, he was rarely slowed down by strikes or labor disputes. He also believed in rewarding his most innovative managers with bonuses and paid time off if they came up with good ideas for productivity improvements, a simple lesson that many modern corporations seem never to have learned.

Of course, in every industry the less efficient competitors can be expected to snipe at their superior rivals, and in many instances sniping turns into an organized political crusade to get the government to enact laws or regulations that harm the superior competitor. Economists call this process "rent seeking"; in the language of economics, "rent" means a financial return on an investment or activity in excess of what the activity would normally bring in a competitive market. This sort of political crusade by less successful rivals is precisely what crippled the great Rockefeller organization.

The governmental vehicle that was chosen to cripple Standard Oil was antitrust regulation. Standard Oil's competitors succeeded in getting the federal government to bring an antitrust or antimonopoly suit against the company in 1906, after they had persuaded a number of states to file similar suits in the previous two or three years.

The ostensible purpose of antitrust regulation is to protect consumers, so on the face of it the government's case against Standard Oil seems ludicrous. Because of Standard Oil's tremendous efficiencies, the price of refined petroleum had been plummeting for several decades, generating great benefits for consumers and forcing all other competitors to find ways to cut their costs and prices in order to survive. Product quality had improved, innovation was encouraged by the fierce competition, production had expanded dramatically, and there were hundreds of competitors. None of these facts constitutes in any way a sign of monopoly.

As happens in so many federal antitrust lawsuits, a number of novel theories were invented to rationalize the lawsuit. One of them was so-called predatory pricing. According to this theory, a "predatory firm" that possesses a "war chest" of profits will cut its prices so low as to drive all competitors from the market. Then, when it faces no competition, it will charge monopolistic prices.

It is assumed that at that point no other competition will emerge, despite the large profits being made in the industry. Journalist Ida Tarbell did as much as anyone to popularize this theory in her book on Standard Oil, in a chapter entitled "Cutting to Kill." To economists, however, predatory pricing is theoretical nonsense and has no empirical validity, either. It has never been demonstrated that a monopoly has ever been created in this way. Certainly predatory pricing was not a tactic used by Standard Oil, which was never a monopoly anyway.

In a now-classic article on the topic in the prestigious Journal of Law and Economics, John S. McGee studied the Standard Oil antitrust case and concluded not only that the company did not practice predatory pricing but also that it would have been irrational and foolish to have attempted such a scheme. And whatever else may be said about John D. Rockefeller, he was no one's fool.

McGee was quite right about the irrationality of predatory pricing. As an investment strategy, predatory pricing is all cost and risk and no potential reward. The would-be "predator" stands to lose the most from pricing below its average cost, since, presumably, it already does the most business. If the company is the market leader with the highest sales and is losing money on each sale, then that company will be the biggest loser in the industry.

There is also great uncertainty about how long such a tactic could take: ten years? twenty years? No business would intentionally lose money on every sale for years on end with the pie-in-the-sky hope of someday becoming a monopoly. Besides, even if that were to occur, nothing would stop new competitors from all over the world from entering the industry and driving the price back down, thereby eliminating any benefits of the predatory pricing strategy.

Finally, there is a logical contradiction in the theory. The theory assumes a "war chest" of profits that is used to subsidize the money-losing strategy of predatory pricing. But where did this war chest come from? The theory posits that predatory pricing is what creates a war chest of "monopoly profits," but at the same time it simply assumes that these profits already exist!

After examining some eleven thousand pages of the Standard Oil case's trial record, McGee concluded that there was no evidence at all presented at trial that Standard Oil had even attempted to practice predatory pricing. What it did practice was good old competitive price cutting, driven by its quest for efficiency and customer service.

The antitrust case against Standard Oil also seems absurd because its share of the petroleum products market had actually dropped significantly over the years. From a high of 88 percent in 1890, Standard Oil's market share had fallen to 64 percent by 1911, the year in which the US Supreme Court reaffirmed the lower court finding that Standard Oil was guilty of monopolizing the petroleum products industry.
The court argued, in essence, that Standard Oil was a "large" company with many divisions, and if those divisions were in reality separate companies, there would be more competition. The court made no mention at all of the industry's economic performance; of supposed predatory pricing; of whether industry output had been restrained, as monopoly theory holds; or of any other economic factors relevant to determining harm to consumers. The mere fact that Standard Oil had organized some thirty separate divisions under one consolidated management structure (a trust) was sufficient reason to label it a monopoly and force the company to break up into a number of smaller units.

In other words, the organizational structure that was responsible for the company's great efficiencies and decades-long price cutting and product improving was seriously damaged. Standard Oil became much less efficient as a result, to the benefit of its less efficient rivals and to the detriment of consumers. Standard Oil's competitors, who with their behind-the-scenes lobbying were the main instigators of the federal prosecution, are (along with "muckraking" journalists like Ida Tarbell) the real villains in this story. They succeeded in using political entrepreneurship to hamstring a superior market entrepreneur, which in the end rendered the American petroleum industry less competitive.

The prosecution of Standard Oil was a watershed event for the American petroleum industry. It emboldened many in the industry to pay less and less attention to market entrepreneurship (capitalism) and more to political entrepreneurship (mercantilism) to profit.

During World War I the oil industry became "partners" with the federal government ostensibly to assure the flow of oil for the war effort. (Of course, in such arrangements the government is always the "senior partner.") As Dominick Armentano writes:
The Oil Division of the U.S. Fuel Administration in cooperation with the War Services Committee, was responsible for determining oil production and for allocating crude supplies among various refiners. In short, these governmental organizations, with the coordinating services of leading business interests, had the legal power to operate the oil industry as a cartel, eliminating what was described as "unnecessary waste" (competition), and making centralized pricing and allocative decisions for the industry [i.e., price fixing] as a whole. Thus, the wartime experiment in "planning" (i.e., planning by political agents to satisfy political interests rather than by consumers, investors, and entrepreneurs to meet consumer demand) created what had previously been unobtainable: a government sanctioned cartel in oil.

After the war, oil industry executives favored extending this government-sanctioned and -supervised cartel. President Calvin Coolidge created a Federal Oil Conservation Board that enforced the "compulsory withholding of oil resources and state prorationing of oil," a convoluted way of saying "monopoly."

The newly formed American Petroleum Institute, an industry trade association, lobbied for various regulatory schemes to restrict competition and prop up prices; it did not even pretend to be in favor of capitalism or free enterprise. The institute even endorsed the use of National Guard troops to enforce state government production quotas in Texas and Oklahoma in the early l930s.

During the 1930s even more teeth were put into government oil industry cartel schemes. The National Recovery Act empowered the federal government to support state oil production quotas to assure output reductions and higher prices. Interstate and foreign shipments of oil were strictly regulated so as to create regional monopolies, and import duties on foreign oil were raised to protect the higher-priced American oil from foreign competition.

In 1935 Congress passed the Connally Hot Oil Act, which made it illegal to transport oil across state lines "in violation of state proration requirements." In the l950s the government placed import quotas on oil, creating an even greater monopoly power. All of this, you will recall, came on the heels of the government's antitrust crusade against the Standard Oil "monopoly." Clearly, the purpose of the political persecution of Standard Oil had been to begin stamping out competition in the oil industry. That process was continued with a vengeance with forty years of squalid political entrepreneurship. By the middle of the twentieth century, real capitalism had all but disappeared from the oil industry.

Yes well if OBAMA & co. didn't force banks to make loans to people who couldn't pay them...ah well... no sense in stating facts people already know. They voted for him anyway.

Don't be fooled...there's PLENTY of blame to go around. I still believe in the free enterprize system... it goes hand in hand with a free nation.

I just got laid off from a job where there are a ridiculous amount of illegals working,It makes my blood boil that they will keep them and let us hard working americans go

And... they do it because they LOVE illegals? Or may this be because illegals work harder than even "the hardworking Americans"?

<inviting sh!tstorm>

its because they'll work at half the pay. They dont work any harder

Or maybe they don't have to pay them as much. Or maybe they don't have to pay unemployment insurance, sick or vacation time, or health benefits for them. And, yes, I do know that they work hard.

wow

that was really long

.


If you do the same for half the pay, this means you do twice as much for the full pay.

Non sence is right. Those facts that seem to elude you! The banking mess started way before Obama even made it to congress. You blamed Slick Willie in one post and Obama in another??? Wow that blame just jumped 15 plus years!! Slick Willie had a republican controlled congress the last 6 years who deserves just as much credit and Bush and his republican congress knew the impending trouble and failed to do anything...

not unless you work twice the hours (and they won't)

and most illegals have to be massively supervised and takes twice as much management attention