John Wiley & Sons, Inc. • 2001 • 274 pages • $27.95
Reviewed by John Hood
Television can be not only entertaining but educational, as long as you are not seeking great depth or elaborate argumentation. That means that it’s possible to adapt excellent writing for television but not the reverse. In Money & Power: The History of Business, author Howard Means has adapted a CNBC documentary into a book that provides little of value to one seeking a serious treatment of business history. The breezily written book manages to be insubstantial and infuriating at the same time.
Means attempts to tell the history of business through a series of essays on famous individuals or episodes. The choice of subjects is predictable; the Medicis, the tulip bubble, J.P. Morgan, John D. Rockefeller, and so on. Unfortunately, so is the sorry economic analysis. Means indulges in the usual demonization of entrepreneurial effort, characterizing innovation as “cutthroat competition” and employing loaded terms like “robber baron” with little regard for fine distinctions or economic rationality. It’s the kind of book that has been misleading Americans about the role and nature of business for generations.
The essay on Rockefeller is particularly galling. Means indulges in various tirades about Rockefeller’s “ruthlessness and unsentimentality” (meaning his relentless efforts to reduce the price of oil, that scalawag!) and his corrupt “buying” of the politicians of the day. These were the same politicians who had erected the trade restrictions that Rockefeller’s trusts and other innovations were meant to evade. Paying intrusive or tyrannical politicians to leave him alone probably seemed to Rockefeller to be a perfectly reasonable expenditure of his and his shareholders’ money. Means can only see corruption, missing entirely the fact that the evasion of anticompetitive regulations was economically beneficial.
If Means had really wanted to tell the story of the history of business, he might have explained Rockefeller’s dilemma in greater detail. Before inventing the modern trust, he had already amassed a considerable fortune by refining and marketing oil more efficiently than anyone else. One secret to his success was a waste-not strategy that sought to use every by-product of the refining process. His chemists came up with 300 different uses for a barrel of oil. Rockefeller also pioneered vertical integration. His partnership with Henry Flagler and Samuel Andrews not only refined oil but also harvested and dried timber, transported it to factories, and then produced the barrels necessary to haul the oil.
Five years after the founding of their refining plant in 1865, the price of kerosene had dropped by 50 percent. Rockefeller’s ceaseless pursuit of lower prices drove other refiners out of business, many of which he then acquired. By 1880, his company controlled 80 percent of the kerosene business. Contrary to the predictions of those with a simplistic view of markets, such as Means, Rockefeller could not then rest on his laurels and run a high-priced monopoly. Kerosene itself had competitors, including whale oil and electricity. Furthermore, there was always the possibility of new entrants to the kerosene market. So Rockefeller pushed on. By the time the company reached 90 percent of market share five years later, it had driven prices down another 69 percent, to 8 cents a gallon.
Although hardly helpful to Rockefeller’s competitors, his business acumen was immensely beneficial to industry as a whole and to the American (and world) consumer. But does Means undermine his attack by mentioning the fact that Standard Oil made life much better for the consumer? Of course not.
On the other hand, Means seems to vindicate him only by reporting what, to Means at least, was a puzzling contradiction: Rockefeller’s philanthropy. The implicit message is that making lots of money is bad, but at least it can then be given away.
Means does the same for Henry Ford, whom he badly maligns, by explaining that the Ford Foundation’s “general support for a variety of liberal and social-welfare programs (causes Ford himself might well have loathed) would help buff the image of the automaker.”
Are we to understand that an entrepreneur who created his great fortune by serving humanity well, through innovation and hard work, needed his image improved by having his fortune squandered by others, against his expressed wishes, on left-wing projects of dubious merit?
Anyone who would suggest such a thing lacks the insight necessary to explain the history of business. Others have performed the task far better, including Gerald Gunderson’s excellent The Wealth Creators and Larry Schweikart’s The Entrepreneurial Adventure: A History of Business in the United States.
Read those books and skip the disinformative Wealth and Power.
John Hood is president of the John Locke Foundation, a public-policy think tank in North Carolina. His books include The Heroic Enterprise: Business and the Common Good (The Free Press, 1996) and Investor Politics (Templeton Foundation Press, 2001).