The impact of Gen. David Petraeus, in four takes

Gen. David H. Petraeus, the most recognized military officer of his generation, retires from the Army today after roughly four decades in uniform and a career like no other.

With that in mind, we invited four defense experts to reflect on his record. Some of them have known the general up close, others from afar. To each the question was the same: What is his legacy and how has he shaped the U.S. armed forces?

For some, Petraeus will be remembered as the model statesman-soldier — commander of two wars launched by the United States and chief intellectual author of a counterinsurgency doctrine that advances American interests. But for others, Petraeus will be remembered less for his remarkable accomplishments — which are almost universally admired — than for his association with a U.S. foreign policy that, in their view, is costly, misguided and not always effective.

In other words, the story of Gen. David Petraeus is in many ways the story of America’s wars.

The experts’ submissions — mini-essays of sorts — are below.

Celeste Ward Gventer on separating the myth from the man

Michael O’Hanlon on an overachieving superstar

Christopher A. Preble on the chief strategist for unnecessary wars

John Nagl on a soldier, teacher, mentor and commander

Celeste Ward Gventer, associate director at the Robert S. Strauss Center for International Security and Law at the University of Texas

Nearly 50 years ago, historian Daniel J. Boorstin argued in an eerily prophetic book that authentic experiences in American life were increasingly being supplanted by manufactured images and “pseudo-events.” Boorstin lamented this “age of contrivance,” in which heroes are replaced by celebrities and American ideals by images.

In this environment it is difficult to separate the man Gen. Petraeus, who doubtless possesses many virtues and has accomplished much, from the constructed totem of the same name. Over the last half-decade, reporters and commentators have seemed to know no bounds in gushing over the general’s intellectual brilliance, physical prowess and even his ability to perform miracles, allegedly waking a young soldier from a coma. As one adoring article put it, “General Petraeus: Bringing Myth Back to the Military.”

Myths provide comfort and solidarity in times of difficulty, but they also mask hard realities and choices that we might better face. The widely repeated cavalry tale that figuratively places Gen. Petraeus on horseback, riding with counterinsurgency manual in hand to snatch victory in Iraq from the jaws of defeat, has allowed the public and policymakers to sidestep the most important questions about the war in Iraq, as well as the one in Afghanistan.

What is the real strategic payoff to the United States from these conflicts? What do these wars tell us about U.S. interventions abroad? What are America’s fundamental national security interests, the best means to pursue them, and at what cost?

Our myths have swaddled these hard questions in comfortable homilies and snug maxims, assuring us that there is a formula for success: The right general plus the right manual equals “victory.” They also place extravagant expectations on human beings who possess virtues and vices, experience moments of success and failure, and who act both brilliantly and foolishly. Neither the public nor the object of its acclaim is well served.

Gen. Petraeus is clearly an exceptional person and a fine military officer who will continue to serve his country honorably. But perhaps even he would agree that we must separate the man from the lore, and face head-on the strategic challenges before us.

As Boorstin wrote in the preface to his book, “The Image: or What Happened to the American Dream,” dispelling the “thicket of unreality” we have created “will not give us the power to conquer the real enemies of the real world ... [b]ut it may help us discover that we cannot make the world in our image.”

Michael O’Hanlon, a senior fellow at the Brookings Institution

Bob Costas once said about the greatest basketball player ever to live that “Michael Jordan is not just a superstar, he’s an overachieving superstar.” That is the best way I can describe Gen. Petraeus, a good friend and former graduate school classmate.

What Costas meant, of course, was that in addition to being perhaps the most gifted player ever to step on the court, Jordan also wanted to succeed more than almost anyone else around. Perhaps there were a handful of other players who were equally tenacious, but not more than that, and the combination of talent with drive made Jordan one of a kind.

It is hard to capture a whole career in a short essay, and to add new insights about a public figure who has been so closely watched and avidly studied for half a decade. But perhaps the best thing I can add to the commentary about Petraeus is this: He is most striking to me for his sheer doggedness, his consistency and his positive energy.

Some might wonder how he could be so brilliant as to have figured out Iraq and made the “surge” work. Yes, he is brilliant. But he didn’t spend a lot of time wondering whether the Sunni Awakening, or the Sadr militia’s ceasefire, or the buildup in Iraqi forces, or the greater cooperation from Prime Minister Maliki and a new crop of subordinate leaders, or the increase in U.S. forces together with improved military tactics was the key to success, above all the others. Many of us back home debated such things.

P4, as he is often known, didn’t waste time on such matters. He just tried to make all of the above factors work as well as they could, all the time, with incessant energy and effort.

Petraeus also empowered subordinates. He has the attention to detail of a micromanager, but in fact he is not a micromanager. He encouraged junior officers and others in the field to be “pentathletes,” handling everything from military tactics to unit leadership to political relations with Iraqis and later Afghans with élan and initiative.

If we succeeded as a nation, particularly in Iraq, it is largely because he encouraged and helped those under his command to succeed.

Christopher A. Preble, vice president for defense and foreign policy studies at the Cato Institute

Gen. David Petraeus has served honorably, and well, for roughly four decades, and he is generally recognized as one of the finest officers of his generation.

In contemplating his legacy and how it has shaped the force, two key episodes stand out: his initial doubts about the Iraq invasion and his eventual enthusiasm for more Iraq-style nation-building missions as reflected in the Army and Marine Corps counterinsurgency doctrine that bears his imprimatur.

It is easy to forget that Gen. Petraeus was first introduced to millions of Americans long before he took command in Iraq. As he prepared to lead the 101st Airborne Division across the border separating Kuwait from Iraq in March 2003, then-Maj. Gen. David Petraeus turned to Washington Post reporter Rick Atkinson and asked quizzically, “Tell me how this ends.”

It was a good question because it leads to others, most of which the Bush administration failed to ask, let alone answer. What political end is our invasion supposed to achieve? Does that end advance U.S. security? Can we accomplish it at reasonable cost?

Our experience in Iraq shows that achieving even a modicum of stability exacts a cost to our security far greater than its benefit. Among the most important lessons drawn from the war in Iraq is that we should leave the problem of repairing weak and failing states to the people living in them. But Washington came mostly to a different conclusion, and for that David Petraeus deserves much of the credit or the blame, depending upon one’s perspective.

Rather than continuing to ask how a particular war was likely to end, and therefore testing the proposition that it was worth fighting in the first place, Petraeus perfected the art of fighting unnecessary wars. If Iraq was likely to end badly, the solution was better planning, more money and more time. And if Iraq ultimately could be made to work, then the model could be replicated elsewhere. Armed nation-building was an often thankless task, but Petraeus concluded that it was a vital one, and therefore one that the Army and Marine Corps must learn and perfect. This required more boots on the ground, and that the troops stay in country longer.

But the effort to perfect our ability to defeat insurgencies and order chaotic states has prevented us from noting how rarely these skills are needed.

I hope that Gen. Petraeus’s legacy leads to fewer foreign wars, and reflects the wisdom and caution that he revealed in a private moment before the start of the Iraq war. I worry that the opposite will be true, and that our brave men and women in uniform, following the doctrine that Petraeus drafted and promulgated, will fight more wars, in more places, but with precious little to show for it.

John Nagl, president of the Center for a New American Security

As the remarkable Army career of Gen. David Petraeus draws to a close, it is clear that he has affected the lives of countless individuals, reshaped the U.S. Army and changed the course of history.

Even before Petraeus captured national attention, he was known as a legendary professor at West Point, finishing his doctoral dissertation in two years while teaching full time and putting enormous efforts into mentoring young cadets. At the time, I was a cadet at West Point, and Petraeus was among my mentors. When I later returned to West Point to teach in a cohort of some 30 Army officers, half of them seemed to have interacted with Col. Petraeus.

Petraeus, of course, has gained recognition less for what he has done in the classroom than on the battlefield. In Iraq, sooner than most, he recognized that the hard part would come after Saddam fell, and when his suspicions of postwar chaos were confirmed, he was assigned the thankless task of rebuilding the Iraqi army, giving his command the moniker “Phoenix” to symbolize an army — and a country — rising from the ashes.

After getting the Iraqi army on its feet (if somewhat unsteadily), Lt. Gen. Petraeus was sent to Fort Leavenworth, Kan., in what was widely seen as exile for an officer whose profile was bigger than was good for him. He chose to see the assignment as a chance to reshape the way the Army thought about counterinsurgency, then still a bad word in the Pentagon. Later, as commander of Multi-National Command-Iraq during that war’s darkest hour, he implemented his doctrine.

I was asked at the time whether I thought it was too late for counterinsurgency to work in Iraq. I estimated the chances of success at one in six, but concluded, “If there’s a man on the planet who can make it work, it’s Petraeus.”

After turning the tide in Iraq, Petraeus was called to take command of another theater of war, replacing Gen. Stanley McChrystal in Afghanistan. Not hesitating to take a demotion from his current position at CENTCOM, and without informing his wife that he was going back to war, Petraeus demonstrated the kind of respect for civilian authority that is the essence of the United States Army.

Although it is too soon to say Petraeus was able to turn the tide in Afghanistan, it seems fair to suggest that he deserves to be mentioned with Grant and Eisenhower as American generals who have commanded successfully in two theaters of war.

By Jason Ukman | 10:15 AM ET, 08/31/2011

Vindicating Capitalism: The Real History of the Standard Oil Company (Part III: The Missing Context of Standard’s Rise to Supremacy)

The 1870s was a decade of gigantic growth for the Standard Oil Company. In 1870, it was refining fifteen hundred barrels per day—a huge amount for the time. By January 1871, it had achieved a 10 percent market share, making it the largest player in the industry. By 1873, it had one-third of the market share, was refining ten thousand barrels a day and had acquired twenty-one of the twenty-six other firms in Cleveland. By the end of the decade, it had achieved a 90 percent market share.

Such figures are used as ammunition by those who believe in the dangers of acquisitions and high market share. These critics believe that Standard’s growth and its ability to acquire so many companies so quickly “must have” come from some sort of “anticompetitive” misconduct—and they point to Standard Oil’s participation in two cartels during the early 1870s as evidence of Rockefeller’s market malice.

But the growing success of Standard did not flow from these attempted cartels—neither of which Standard initiated, and both of which failed miserably in very short order—but from the company’s enormous productive superiority to its competitors, and from the market conditions whose groundwork had been laid in the 1860s. Without understanding these conditions, one cannot understand Rockefeller’s exceptionally rapid rise.

Recall that in 1870 kerosene cost twenty-six cents a gallon, while three-fourths of the refining industry was losing money. A major cause of this was that refining capacity was at 12 million barrels a year, while there were only 5 million barrels to refine,46 a disparity that had an upward effect on the price of the crude that refiners purchased—and a downward effect on the price of the refined oil they sold.

Rationalizing Surplus Capacity

On November 8, 1871, a writer for the Titusville Herald estimated that “at present rates the loss to the refiner, on the average, is seventy-five cents per barrel.”47 Rockefeller’s firm, which was engineered to drastically lower production costs, could profit with such prices; few other firms could.

Even if there had not been a major excess of refining capacity, most of the refiners in America would have been unable to survive without drastically transforming their businesses. Rockefeller had raised the industry bar, and was expanding; anyone who hoped to compete with him would have to run a refining operation of comparable scale and efficiency.

Still, the excess capacity exacerbated the trouble for the lesser refiners—many of whom further exacerbated their own trouble by refusing to close or sell their failing businesses. In 1870, the Pittsburgh Evening Chronicle described the “very discouraging” tendency of the industry to increase refining capacity “ad infinitum” even during difficult times.48 One projection in 1871 put the rate of expansion at four thousand barrels per day.49

Refiners hoped that the old prices would come back. But the harsh reality for those refiners was that they could return to profitability only if they could restructure their businesses as modern, technological enterprises with the economies of scale on the order of those achieved by Standard. This reality became increasingly apparent over the decade as prices dropped from 26 cents a gallon in 1870, to 22 cents in 1872, to 10 cents in 1874.50

Trying Cartels

The failing refiners were neither the first nor the last businesses to be in such a situation. And, like many before and after them, they tried to solve their problems via cartels: agreements among producers to artificially reduce their production in order to artificially raise their prices.

Rockefeller, hoping for stability in prices and an end to the irrationality of others refining beyond their means, joined and supported two cartels. This move was disastrous—the worst of Rockefeller’s career.

Cartels are generally viewed as evil, destructive schemes because they are overt attempts by a group of businesses to increase revenues by raising consumers’ prices across an industry. In and of itself, however, seeking higher prices for one’s products is not evil; it is good. The problem with cartels is not that they seek higher profits, but that they shortsightedly attempt to generate them by non-productive means. So long as the economic freedom to offer competing or substitute products exists—as should be the case—such a scheme is bound to fail.

Cartels are more accurately viewed as ineffectual than evil. Cutting off supply in order to effect higher profits rewards those who do not participate in the scheme (as well as cheaters within the cartel) with the opportunity to sell more of their own products at inflated prices. And to attempt a cartel is to invite a boycott and long-term alienation from one’s customers. These truths were borne out by both the South Improvement Company (SIC) scheme and the Pittsburgh Plan.

South Improvement Company The Pennsylvania Railroad and its infamous leader, Tom Scott, a master manipulator of the Pennsylvania legislature, initiated the South Improvement Company (SIC) cartel. Railroads, like oil refiners, were struggling financially; they too had overbuilt given the market. Having less traffic than they had anticipated, they sought to solve the problem by charging above-market prices.

Here is the essence of their plan: The railroads would more than double the rates for everyone outside the cartel, including oil producers, to either bring all refiners into the SIC or drive them out of business. In turn, SIC refiners, which could constitute virtually all the refiners on the market, would impose strict limits on their output in order to raise prices. It seemed to be a “win-win” plan: The railroads would get higher rates and more revenue, and SIC refiners would raise prices and start profiting again.

This whole scheme, however, was delusional. For one, it presumed that the oil producers would accept catastrophic rate increases. They did not.

The oil producers—who were also the railroads’ consumers and the refineries’ suppliers—retaliated by placing an embargo on refineries associated with the South Improvement Company. The proposed rate increases were so dramatic and arbitrary that producers were strongly committed to the embargo—and it worked, cutting off Standard’s operations while benefiting those who did not participate. Writes Charles Morris in The Tycoons, “By early March, [1872] the Standard was effectively out of business, and up to 5,000 Cleveland refinery workers were laid off. . . . [In early April] the triumphant producers announced the end of their embargo.”51 The South Improvement Company never collected a rebate.

So much for Standard’s and the SIC’s “monopoly power.”

Pittsburgh Plan The other cartel in which Standard participated, the Pittsburgh Plan, was an agreement between oil producers and refiners to inflate their respective prices. While the 1870s began with high crude prices due to low crude supply and excess refinery capacity, a series of gushers soon reduced the price of crude to about $3.50 a barrel. Oil producers wanted to reverse this trend. Again, the idea was to artificially restrict production, raise prices, and reap the profits while competitors and consumers idly complied. The participants agreed that refiners would buy oil at the premium price of $5 a barrel (in some cases $4) so long as the producers substantially limited their production. Refineries, also, would limit production to raise their prices. The deal was wildly illogical; part of it stipulated that producers in the Oil Regions would simply cease new drilling for six months.

The plan dissolved in short order. Producers outside the cartel did not play their role of not trying to make a profit; instead, they expanded their production to make money—as did cartel members once this started happening. Prices fell—indeed, they fell immediately to the market rate, $3.25; within two months, following more crude discoveries, prices fell again, down to $2.52

Cartels and Free Markets

Historians try to outdo one another in denouncing the oil cartels as immoral. But given the desperation of many in the industry, and the relatively primitive understanding of how such arrangements pan out, it is more valuable to learn from the incidents, to gain a better understanding of the nature of cartels and other attempts to control markets under economic freedom.

Despite a huge percentage of refiners trying collectively to control market prices, they could not do so—because they had no means of forcing consumers to pay their prices or of forcing other producers not to compete by offering lower prices. The only thing they could control was their own production and whether it was the best it could be. Before the cartels, Rockefeller had relied solely on stellar production and efficiency to achieve great success; his participation in the cartels brought him failure and ire and was antithetical to his fundamental goal of expanding production.

In the wake of the South Improvement Company fiasco, Rockefeller claimed that he had never believed the cartel would work and that he had participated in it merely to show failing refiners that the only solution to their problems was to sell their businesses to him. Given his company’s prominent role in the SIC, this is likely overstated. But it is undeniable that while planning the cartel, Rockefeller began an aggressive policy of acquisition and improvement that continued throughout the decade.

Consolidation: 10 to 90 in Eight Years

Rockefeller had several motives for acquiring competitors. First, other refineries had talent and assets that he wanted—including facilities that produced not only kerosene, but a full range of petroleum products. Second, he wanted to eliminate the industry’s excess refining capacity and its accompanying instability as soon as possible, rather than ride out the storm as the other ships sank.

Rockefeller made his first acquisition in December 1871. He proposed a buyout to Oliver Payne of Clark, Payne & Company, which was his biggest competitor in Cleveland (and which featured the same Clark family that initially had been involved in business with Rockefeller). Payne, suffering from the depressive industry conditions and without much hope of timely relief, was open to the possibility of selling.

The decisive moment in the negotiations came when Rockefeller showed Payne Standard’s books. Payne was “thunderstruck” by how much profit the company was making under conditions in which others were flailing.53Rockefeller bought the company for $400,000 (a “goodwill” premium of $150,000 more than its then current market value).

After acquiring Clark, Payne & Company, Rockefeller increased his company’s capitalization to $3.5 million and went on an acquisition spree—later dubbed “The Conquest of Cleveland.” By the end of March 1872, he had proposed to buy out all of the other refiners in Cleveland, and twenty-one of twenty-six had already agreed. During 1872, Rockefeller also bought several refineries in New York, a crucial port, at which point he owned 25 percent of the refining capacity there.54

According to many analysts, the rapidity of acquisition “proves” that Rockefeller was involved in devious activities. But it proves nothing of the sort. The basic reason so many sold was that Rockefeller’s propositions made economic sense; if the second leading refiner in Cleveland was “thunderstruck” by the superiority of Standard’s efficiency, imagine the relative economic positions of the smaller, even less efficient refiners.

Another common view is that the “threat” of the proposed South Improvement Company frightened Cleveland refiners into selling to Rockefeller. But, if anything, as has been shown, the SIC provided incentive for refineries to remain independent.

A better explanation of why so many sold to Rockefeller is that they were eager to be bought out; in fact, a problem later surfaced with frauds trying to set up new refineries just to be bought out by Rockefeller. Of course, it took only a handful of acquisition targets, resentful of a market that had superseded them, to make a “devastating exposé” and gain a place in the anti-capitalist canon.

What if a company Rockefeller wanted to buy was not willing to sell? Accounts differ, but one plausible account is that he gave the competitor “a good sweating” (an expression attributed to Flagler) by lowering prices to a point where Standard remained profitable but the competitor would go out of business quickly. This practice is labeled “predatory pricing”—but it is no such thing. If predatory pricing is taken to mean lowering one’s prices below cost to drive a competitor out of business—and then raising those prices to artificially high levels once the competitor has been eliminated—then Rockefeller did not engage in “predatory pricing,” at least not to any significant extent.

If he had tried, he would have experienced the fact that, like cartels, this form of attempting to profit through unproductive measures fails. In general, large companies that attempt to profit by this means find that they lose money at alarming rates because they are selling more units at a loss than their “prey” is selling. If they do manage to destroy an existing company, they have weakened themselves in the process, thus providing an opportunity for more substantial, more able competitors to enter the market.

‘Predatory’ Pricing Revisited

Nothing is inherently wrong—either economically or morally—with temporarily selling at a loss in order to eliminate a rickety competitor. And the phrase “predatory pricing” is a misnomer in any event, because no force is involved in the practice of selling at a loss. But Standard Oil did not need to employ such measures to make its acquisitions. The company was so superior in its efficiency and economies of scale that it could price its product at a level at which it could profit but its competitors could not.

A study by John McGee published in 1958 shows that Standard generally did not lower prices below cost and take a loss; rather, it opted for temporarily smaller gains to demonstrate to unsustainable competitors that they were, indeed, unsustainable and would do well to join Standard and thrive.55 Here is Rockefeller’s description of how competitors came to see the situation:

The point is, that after awhile, when the people, or, at least, the intelligent, saw that we were not crushing or oppressing anybody, they began to listen to our suggestion for a pleasing meeting at which we could quietly talk over conditions and show them the advantage of entering our organizations. One after another they joined us.56

Scale Economies

Rockefeller used the Conquest of Cleveland to create the most impressive refining concern ever. He took twenty-four refineries and turned them into six state-of-the art facilities, selling the unusable parts for scrap. These refineries constituted a “complete” refining operation, which produced not only kerosene but several profitable by-products.

In 1873, these refineries produced 10,000 barrels a day.57 At this rate, which would only grow, Rockefeller would create nationwide markets for paraffin wax, petroleum jelly, chewing gum, various medicinal products (later found to be of dubious value), fuel oil, and many other products.

In answering a question about Lloyd’s characterization of him, Rockefeller contrasted Standard with other refiners: “Here were these refiners, who bought crude oil, distilled it, purified it with sulphuric acid, and sold the kerosene. We did that, too; but we did fifty—yes, fifty—other things beside, and made a profit from each one.”

And: “. . . every one of these articles I have named to you represents a separate industry founded on crude petroleum. And we made a good profit from each industry. Yet this ‘historian,’ Lloyd, cannot see that we did anything but make kerosene and get rebates and ‘oppress’ somebody.”58

In 1873, Rockefeller began vertically integrating the company to include the acquisition of gathering pipelines for crude oil. These pipelines connected new oil wells to transportation hubs. Managing these with its typical excellence, Standard made its stream of incoming oil more reliable and enabled drillers to quickly find a place to put newfound oil instead of letting it go to waste in an uncontrolled gusher.

An Integrated Giant

Standard was no longer just a kerosene company; it was a full-fledged, integrated oil-refining giant. And, after the Conquest of Cleveland in 1873, Rockefeller, age thirty-three, was still just beginning.

Starting in 1874, Rockefeller focused on acquiring competitors in the rest of the country. He began, as he had in Cleveland, with the major players: Charles Pratt in New York; Atlantic Refining in Philadelphia; and Lockhart, Waring, and Frew in Pittsburgh. He bought out the largest refiners in the Oil Regions, including the refinery of a man named John Archbold, who later became president of Standard when Rockefeller retired.

Rockefeller’s operation was so superior to others in every facet—from its marketing efforts, to its access to supplies of crude, to its ability to generate and profitably sell dozens of by-products—that the acquisitions occurred with relative ease, even when he was acquiring his most sophisticated competitors. Charles Morris writes of buying out the Warden interests in Atlantic Refining: “Warden’s son recalled that his father was invited to examine the Standard’s books and was astonished at its profitability, just as Oliver Payne had been in Cleveland a few years before.”59

The most difficult acquisitions for Rockefeller were in Pennsylvania. The difficulties were not initiated by the refiners but by the Pennsylvania Railroad and its subsidiary, the Empire Transportation Company (ETC).

ETC owned extensive gathering pipelines and tank cars in the region, and it attempted to freeze Standard out of the area and acquire a nationwide refining victory of its own by—of all things—lowering its prices and making transportation nearly free for its refiners. This attempt ended in disaster. Rockefeller, who had provided the Pennsylvania with two-thirds of its freight, first tried to convince the Pennsylvania’s Tom Scott to stop his scheme.

When that failed, he stopped shipping on the railroad and redirected his domestic and international traffic elsewhere. The Pennsylvania Railroad started hemorrhaging money and, facing terrified shareholders, Scott not only ended the scheme, but he sold ETC to Standard, making Standard’s onloading and offloading transportation network that much more extensive and efficient.

At this point, Rockefeller had earned a 90 percent market share—a 90 percent that was far different in nature than what 90 percent in 1870 would have meant. Rockefeller owned not a grab bag of mediocre operations, but an integrated, coordinated group of facilities in Cleveland, New York, Baltimore, and Pennsylvania, the likes of which had never been imagined. Near the end of the 1870s, he ran, to use the apt cliché, a well-oiled machine.

Standard housed millions of barrels of crude in its storage facilities, transported that crude to its refineries by gathering line and tank car, extracted every ounce of value from that crude using its state-of-the-art refining technologies, and shipped the myriad resulting petroleum products to Standard’s export facilities in New York—where its marketing experts distributed Standard products to every nook and cranny of the world.

Rockefeller oversaw all of this in conjunction with a team of great business minds (many of whom were obtained through the acquisitions) that understood every facet of the domestic and international oil market and that was always expanding and adjusting operations to meet demand.

Efficiency Unbound

It is important to note that as big as Standard was becoming, its leader’s obsession with efficiency remained unabated. Rockefeller had a rare ability to conceive and execute a grand vision for the future, while minding every detail of the present. A story told by Ron Chernow in Titan illustrates this well:

In the early 1870s, Rockefeller inspected a Standard plant in New York City that filled and sealed five-gallon tin cans of kerosene for export. After watching a machine solder caps to the cans, he asked the resident expert: “How many drops of solder do you use on each can?” “Forty,” the man replied. “Have you ever tried thirty-eight?” Rockefeller asked. “No? Would you mind having some sealed with thirty-eight and let me know?”

When thirty-eight drops were applied, a small percentage of cans leaked—but none at thirty-nine. Hence, thirty-nine drops of solder became the new standard instituted at all Standard Oil refineries. “That one drop of solder,” said Rockefeller, still smiling in retirement, “saved” $2,500 the first year; but the export business kept on increasing after that and doubled, quadrupled—became immensely greater than it was then; and the saving has gone steadily along, one drop on each can and has amounted since to many hundreds of thousands of dollars.60

Rockefeller and his firm were as active-minded and vigilant as could be, but in the late 1870s one development in the industry took it by surprise: long-distance pipelines.

A group of entrepreneurs successfully started the Tidewater Company, the first long-distance pipeline. This posed an immediate threat to the railroads’ oil transportation revenue, because pipelines are a far more efficient, less expensive means of transporting oil. With sufficiently thick or plentiful pipelines, enormous amounts of oil can be shipped at relatively low cost twenty-four hours a day.

Pipelining: National Transit Company

Initially, Rockefeller, the allegedly invincible “monopolist,” aided the railroads in fighting Tidewater (including using commonly-practiced political tactics that should have been beneath him) but failed. Realizing the superiority of pipelines, he entered the pipeline business in full-force himself, creating the National Transit Company.

Describing Rockefeller’s excellent pipeline practices, oil historian Robert L. Bradley Jr. writes:

Right-of-way was obtained by dollars, not legal force. Pipe was laid deep for permanence, and only the best equipment was used to minimize leakage. Storage records reflected “accuracy and integrity.” Innovative tank design reduced leakage and evaporation to benefit all parties. Fire-preventions reflected “systematic administration.” The pricing strategy was to prevent entry by keeping rates low. While these business successes may not have benefited certain competitors, they benefited customers and consumers of the final products.61

Free-Market ‘Monopolist’

By 1879, Rockefeller was the consummate “monopolist,” “controlling” some 90 percent of the refining market.

According to antitrust theory, when one “controls” nearly an entire market, he can restrict output and force consumers to pay artificially high prices. Yet output had quadrupled from 1870 to 1880. And as for consumer prices, recall that in 1870 kerosene cost twenty-six cents per gallon and was bankrupting much of the industry; by 1880, Standard Oil was phenomenally profitable, and kerosene cost nine cents per gallon.62

It had revolutionized the method of producing refined oil, bringing about an explosion of productivity, profit, and improvement to human life. It had shrunk the cost of light by a factor of 30, thereby adding hours to the days of millions around the world. This is the story Henry Lloyd and Ida Tarbell should have told.

The Real History of the Standard Oil Company (Part II: The Phenom)

The Standard story begins during the U.S. Civil War. In 1863, the first railroad line was built connecting the city of Cleveland to the Oil Regions in Pennsylvania, where virtually all American oil came from. Clevelanders quickly took the opportunity to refine oil—as had the residents of the Oil Regions, Pittsburgh, New York, and Baltimore. Cleveland had the disadvantage of being one hundred miles22 from the oil fields but the advantage of having far cheaper prices for materials and land (Oil Regions real estate had become extremely expensive), plus proximity to the Erie Canal for shipping.23

John D. Changes Industry

At this time, Rockefeller was running a successful merchant business with his partner, Maurice Clark, when a local man named Samuel Andrews approached the two. A talented amateur chemist, Andrews sought their investment in a refinery.

After investigating the industry, Rockefeller convinced Clark that they should invest four thousand dollars.24 Rockefeller was attracted to the substantial—and then stable—profits of the refining industry, in contrast to the production industry, which alternated between incredible booms and busts. (When producers struck a “gusher,” whole towns were built up to the height of 1860s luxury; when they dried up, those towns faded into abject poverty.) He was not, however, impressed with the efficiency with which refiners ran their operations. He believed he could do better.

And he did—immediately. Instead of setting up a shanty refinery, Rockefeller invested enough to create the largest refinery in Cleveland: Excelsior Works. From the beginning, he encouraged Andrews to expand and improve the refinery, which soon produced 505 barrels a day,25 as compared to some refineries in the Oil Regions that produced as few as five barrels a day.26

Additionally, in a highly profitable act of foresight, Rockefeller carefully bought the land for his refinery in a place from which it would be easy to ship by railroad and by water, thus putting shippers in competition for his business; his competitors simply placed their refineries near the new Cleveland rail line and took for granted that it would be their means of transportation.27

A Real Businessman

Rockefeller’s business background made him well-suited to run a highly efficient firm. His first interest in business had been accounting—the art of measuring profit and loss (i.e., economic efficiency). Rockefeller’s first job had been as an assistant bookkeeper, and for his entire career he revered the practice of careful financial record-keeping.

“For Rockefeller,” writes Ron Chernow, “ledgers were sacred books that guided decisions and saved one from fallible emotion. They gauged performance, exposed fraud, and ferreted out hidden inefficiencies.”28

Rockefeller was hardly the only man in the refining industry with a background in accounting or a concern with efficiency. But he was distinguished in this regard by his degree of focus on applying good accounting practices to his new business. Rockefeller, from a young age, exhibited an obsessive, laser-like concentration on whatever he chose as his purpose. At age sixteen he landed an accounting job after six weeks of repeated visits to top firms, shrugging off rejections until he finally convinced one of them, Hewitt and Tuttle, to hire him.29

Applied to the task of minimizing costs and maximizing revenues in his refining operation, Rockefeller’s focus brought Standard Oil phenomenal success.

While other refiners took any given business cost for granted—including the cost of barrels and the cost of crude—Rockefeller put himself and those who worked for him to the task of discovering ways to lower every cost while continuously seeking additional sources of revenue.

Consider the cost of transporting oil in barrels. Barrels were a major expense for everyone in the industry, and barrel makers were notoriously unreliable when it came to delivering barrels on time. Rockefeller at once slashed his costs and solved this reliability problem by having his firm manufacture its own barrels. He purchased forest land, had laborers cut wood, and—in a crucial innovation—had the wood dried in a kiln before using it to transport kerosene. (Others used green wood barrels, which were far heavier and thus more expensive to transport.)

With these and other innovations, Rockefeller’s barrel costs dropped from $2.50 a barrel to less than $1 a barrel—and he always had barrels when he needed them.30

More Cost-Cutting

Rockefeller further lowered his costs by eliminating the use of barrels altogether in receiving crude oil (barrels would remain in use for shipping refined oil to customers for some time). He did so by investing in “tank cars”—railroad cars fitted with giant tanks—shortly after they came on the market in 1865. By 1869, he owned seventy-eight of them, yielding huge cost savings over his competitors.31

Or consider the cost of buying crude, which most people took as entirely dependent upon current market prices. One way in which he cut this cost was by employing his own purchasing agents, which eliminated the need for paying “jobbers” (purchasing middlemen). A shrewd negotiator, Rockefeller trained his purchasing agents to obtain the best possible prices.

Further saving money and improving his negotiating position, Rockefeller built large storage facilities to keep crude in reserve, so that he would not have to pay exorbitant prices in the event of a spike in its price. Accordingly, his purchasing agents developed comprehensive, constantly updated knowledge of the industry so that they could determine the most opportune times to purchase crude.

These improvements, along with many others, reflected a practice that characterized Rockefeller’s firm for his thirty-five years at the helm: vertical integration—incorporating into a company functions that it had previously paid others to do. Time after time, Rockefeller found that, given his and his subordinates’ talent and innovative spirit, many facets of the business could be done more cheaply if his firm undertook them itself.

Rockefeller also lowered costs in the refining process itself. One particularly innovative form of cost-cutting in which he engaged was self-insurance against fires. In the early refining industry, the danger of fire was omnipresent. Even in the 1870s, when safety improved significantly, premiums “varied from 25 per cent down to 5 per cent of valuation. . . .”32 Rockefeller determined that he could save money by self-insuring. He regularly set aside income to handle fire damage, while implementing every safety precaution he and his men could think of. The practice saved the company thousands and, eventually, millions of dollars; over time, its insurance funds grew to the point where they could be used to pay large dividends to shareholders. (In later years, Rockefeller contained the risk of fire even more by multiplying refineries across the country, so that one disaster could do only so much damage.)33

Another refining cost that Rockefeller minimized was the chemical treatment of kerosene. Samuel Andrews was skilled at determining the right quantity of sulfuric acid needed to completely purify distilled kerosene. This was important because sulfuric acid was expensive. Rockefeller saved money by getting ideal results with 2 percent whereas competitors often used up to 10 percent.34

And in building his refineries, Rockefeller used the highest quality materials to get maximum longevity from equipment—thus avoiding the reliability issues of early stills—and he built large facilities so as to lower his labor costs per gallon refined.

Revenue Maximization

Rockefeller also worked to maximize the amount of revenue he could bring in, both by selling by-products of crude besides kerosene and by establishing marketing operations in major consumer states and overseas. Appalled at the idea of wasting the 40 percent of his crude that was not kerosene, Rockefeller extracted and sold the fraction naphtha, and he sold much of the remaining portion of the crude to other refiners who specialized in other non-kerosene fractions, such as paraffin wax and gasoline. (He also used fuel oil from crude to help power his plants, thereby saving money on coal.) Later, Rockefeller’s firm refined and sold all these fractions—becoming what is called a “complete” refinery—but even before that development, he let no cost-cutting or value-creating opportunity go to waste.

In the mid-1860s, Rockefeller set up an office in New York City to focus on overseas sales. The overseas market for kerosene was larger than the American market and presented a great opportunity to Rockefeller since nearly all the world’s known oil at the time was American. Recognizing the importance of having a steady stream of foreign demand, Rockefeller had his brother head the New York operation to keep tabs on the various markets and maximize sales.

These improvements in efficiency and marketing resulted in a company that was staggeringly more productive than most of its rivals, and well on its way to revolutionizing the oil refining industry.

Saving to Invest

Rockefeller’s obsession with cutting costs has been called “penny-pinching”35—a term that aptly describes his desire and ability to cut costs to the smallest detail. But insofar as it conjures an image of a miserly businessman, the term does not apply. Rockefeller, by disposition and in action, was anything but averse to spending money; he recognized that spending in the form of investingwas vital to the dramatic increases in efficiency he sought and achieved.

Many of Rockefeller’s penny-pinching methods requiredinvestments, often large ones. He knew that although these would cut into his cash in the short run, they would prove profitable in the long run—if the company simultaneously invested in its growth. The greater the firm’s output, the more it could leverage economies of scale, achieving greater efficiency by dispersing productivity-increasing costs over a greater number of units. By virtue of its size and output, Rockefeller’s firm was able, for example, to purchase, maintain, and replant forests in order to more efficiently produce barrels—a strategy that would be utterly unprofitable for a small refiner producing, say, fifty barrels a day.

The bigger the company, the more it can invest in efficiency-increasing measures—from tank cars to forests to purchasing agents to self-insurance—when it makes financial sense. Recognizing this, Rockefeller reinvested profits in the business at every opportunity. Whereas other oilmen in the booming 1860s spent almost all of their profits on the premise that current market conditions would endure and therefore future revenue would easily cover their future costs, Rockefeller reinvested as much of the firm’s profit as possible in its growth, efficiency, and durability.

Rockefeller also solicited large amounts of capital from outside the company. Early on, he borrowed money frequently, which he could do easily given his lifelong track record of perfect credit. Rockefeller’s penchant for borrowing turned out to be his path to assuming full leadership of the company. His business partner, Maurice Clark, routinely complained during the refinery’s first two years about Rockefeller’s borrowing, and in 1865 threatened to dissolve the firm. Rockefeller called his bluff, announced the dissolution in the paper, and agreed to bid with him for the refinery business. The 26-year-old Rockefeller won, for a price of $72,500 (the equivalent today of about $820,000).36 Clark thought he had gotten a bargain—but given what Rockefeller was to accomplish in the next five years, Clark would undoubtedly come to think twice.

Rockefeller, Andrews, and Flagler

In 1867, Rockefeller accepted an outside investment of several hundred thousand dollars from Henry Flagler and John Harkness.37 The investment turned out better than anyone could have hoped; Rockefeller gained not only vital capital, but also Flagler, who would be his beloved right-hand man for decades to come.

By 1870, the firm of Rockefeller, Andrews, and Flagler was, thanks to Rockefeller’s vision, a super-efficient refining machine, generating more than fifteen hundred barrels a day38—more than most refineries could produce in a week—at lower cost than anyone else. And in that year, the firm became the Standard Oil Company of Ohio—a joint-stock company, of the type used by railroads, that enabled Rockefeller to more easily acquire other refiners in the coming years.

Reflecting Rockefeller’s profitable investments in efficiency, the Company declared assets including “ . . . sixty acres in Cleveland, two great refineries, a huge barrel making plant, lake facilities, a fleet of tank cars, sidings and warehouses in the Oil Regions, timberlands for staves, warehouses in the New York area, and [barges] in New York Harbor.”39

But Standard’s most important asset was Rockefeller, followed by his close associates. Rockefeller’s ambition for the expansion of the business was only growing, and he talked with Henry Flagler morning, noon, and night about possibilities and plans. Reflecting on the company nearly fifty years later, Rockefeller recalled: “We had vision. We saw the vast possibilities of the oil industry, stood at the center of it, and brought our knowledge and imagination and business experience to bear in a dozen, in twenty, in thirty directions.”40

The days of indistinguishably inefficient refiners were over. And Rockefeller, barely thirty, was just scratching the surface of his productive potential.

Having explored this much of Rockefeller’s hard-earned success, let us turn to his most controversial form of cost savings and efficiency: railroad rebates.

Virtuous Rebates

Historians overwhelmingly attribute Rockefeller’s success to his dealings with the railroads, dealings that are almost universally viewed as “anticompetitive.”

Here is Ida Tarbell’s description of how Rockefeller advanced ahead of other refiners—as described from their perspective (with which Tarbell agrees).

John Rockefeller might get his oil cheaper now and then . . . but he could not do it often. He might make close contracts for which they [other refiners] had neither the patience nor the stomach. He might have an unusual mechanical and practical genius in [Samuel Andrews]. But these things could not explain all. They believed they bought, on the whole, almost as cheaply as he, and they knew they made as good oil and with as great, or nearly as great, economy. He could sell at no better price than they. Where was his advantage? There was but one place where it could be, and that was in transportation. He must be getting better rates from the railroads than they were.41

Tarbell’s prose unforgivably evades Rockefeller’s vast productive superiority over his competitors in the late 1860s. It is possible that some of Rockefeller’s competitors believed this in the 1860s—as Rockefeller, to the extent possible, kept his business methods and the scope of his operations secret—but for Tarbell to write this in the 1900s is absurd.

Also absurd is the implication of the success-by-rebates story: that railroads arbitrarily gifted Rockefeller with rebates so enormous he was able to bankrupt the competition. No seller of the era (or any era) gave Rockefeller or anyone unnecessary or unprofitable discounts—certainly not railroads, which were often struggling financially. Rockefeller earnedhis rebates, by devising ways to make his oil cheaper to ship and by setting shippers in competition with one another so that he could negotiate them down to the best price.

The story of Standard’s first known rebate illustrates the true nature of the phenomenon. In this case, Standard extracted a big discount by dramatically lowering a railroad’s shipping costs.

When the Lake Shore railroad built a connection to Cleveland in 1867, Flagler went to the railroad’s vice president and offered to pay 35 cents a barrel for shipping crude from the Oil Regions to Cleveland, and $1.30 a barrel for kerosene sent to New York (usually for export). In exchange for these discounts, Flagler offered the Lake Shore a major incentive: guaranteed, large, regular shipments.

This was a huge boon to the Lake Shore, and its vice-president James H. Devereux readily accepted the deal. As he explained:

[T]he then average time for a round trip from Cleveland to New York for a freight car was thirty days; to carry sixty cars per day would require 1,800 cars at an average cost of $500 each, making an investment of $900,000 necessary to do this business, as the ordinary freight business had to be done; but [research showed] that if sixty carloads could be assured with absolute regularity each and every day, the time for a round trip from Cleveland to New York and return could be reduced to ten days, . . . only six hundred cars would be necessary to do this business with an investment therefore of only $300,000.42

Devereux added: “Mr. Flagler’s proposition offered to the railroad company a larger measure of profit than would or could ensue from any business to be carried under the old arrangements. . . .”43

Guaranteed, large shipments were a landmark, cost-cutting innovation in oil transportation—identical in nature to Rockefeller’s use of tank cars or his cost-cutting in barrel production. As economic and antitrust historian Dominick Armentano summarizes, Standard also “furnished loading facilities and discharging facilities at great cost; . . . it provided terminal facilities and exempted the railroads from liability for fire by carrying its own insurance.”44

In addition to lowering railroads’ costs to obtain better prices, Rockefeller’s firm was expert at setting railroads against one another and cultivating alternative means of shipping, such as waterways, to further lower shipping costs. Having established the location of his first refinery near the Erie Canal and having built up a large capital position he was able to take advantage of the lower rates of shipping by water; because it was slower than shipping by land it required a company to have, in addition to water access, the capital to handle the larger delay between paying for crude and being paid for kerosene.

Of much of his competition, Rockefeller said: “The others had not the capital and could not let the oil remain so long in transit by lake and canal; it took twice as long that way. . . .”45

Rockefeller’s rebates, then, were an earned cost savings of the sort that any market competitor—and any consumer—should perpetually seek. The extent to which others could not match the low prices he was able to charge in the 1870s as a result of his many cost-cutting measures, including this one, is simply an instance of productive inferiority; nothing about it is coercive or “anticompetitive.”

To say that Rockefeller—by cutting his costs, thus enabling himself to sell profitably for lower prices and win over more customers—was rendering competitors “unfree” is like saying that Google is rendering its competitors unfree by building the most appealing search engine. To call Rockefeller’s actions “anticompetitive” is to say that “competition” consists in no one ever outperforming anyone else. Economic freedom does not mean the satisfaction of anyone’s arbitrary desires to succeed in any market regardless of ability or performance or consumer preferences; it means that everyone is free to produce and trade by voluntary exchange to mutual consent. If one cannot compete in a certain field or industry, one is free to seek another job—but not to cripple those who are able to compete.

Free-Market Discovery

True economic competition—the kind of competition that made kerosene production far cheaper—is not a process in which businessmen are forced by the government to relinquish their advantages, to minimize their profits, to perform at the norm, never rising too far above the mean. Economic competition is a process in which businessmen are free to capitalize on their advantages, to maximize their profits, to perform at the peak of their abilities, to rise as high as their effort and skill take them.

Rockefeller’s meteoric rise and the business practices that made it possible—including his dealings with the railroads—epitomize the beauty of a free market. His story provides a clear demonstration of the kind of life-serving productivity that is the hallmark of laissez-faire competition.

Vindicating Capitalism: The Real History of the Standard Oil Company

[Author’s Note: This year marks the 100th anniversary of the Supreme Court ruling that found Standard Oil guilty of violating the Sherman Antitrust Act. As punishment, the world’s largest and most successful oil company was broken into 34 pieces.

Ever since, Standard Oil has served as the textbook example of why we need antitrust law--in the business world in general and in the energy business in particular. The Court’s decision affirmed a popular account of Standard Oil’s success, first made famous by journalists Henry Demarest Lloyd and Ida Tarbell. In the absence of antitrust laws, the story goes, Standard attained a 90% share of the oil-refining market through unfair and destructive practices such as preferential railroad rebates and “predatory pricing”; Standard then leveraged its unfair advantages to eliminate competition, control the market, and dictate prices.

Within the oil and electricity industries in particular, the spectre of a coercive monopoly developing in the absence of government intervention was used to justify coercive, monopolistic behavior by the government in the “common good,” be it by the Texas Railroad Commission or by government electrical utilities. This article challenges the mythology of the Standard Oil case and, more broadly, the notion that a coercive monopoly can arise in the absence of government intervention. By implication, it illustrates that there is nothing standing in the way of a truly free, competitive energy market--an energy market free of antitrust law.]

Who were we that we should succeed where so many others failed? Of course, there was something wrong, some dark, evil mystery, or we never should have succeeded!1

—John D. Rockefeller

In 1881, The Atlantic magazine published Henry Demarest Lloyd’s essay “The Story of a Great Monopoly”—the first in-depth account of one of the most infamous stories in the history of capitalism: the “monopolization” of the oil refining market by the Standard Oil Company and its leader, John D. Rockefeller. “Very few of the forty millions of people in the United States who burn kerosene,” Lloyd wrote,

know that its production, manufacture, and export, its price at home and abroad, have been controlled for years by a single corporation—the Standard Oil Company. . . .

The Standard produces only one fiftieth or sixtieth of our petroleum, but dictates the price of all, and refines nine tenths. This corporation has driven into bankruptcy, or out of business, or into union with itself, all the petroleum refineries of the country except five in New York, and a few of little consequence in Western Pennsylvania. . . . the means by which they achieved monopoly was by conspiracy with the railroads. . . .

[Rockefeller] effected secret arrangements with the Pennsylvania, the New York Central, the Erie, and the Atlantic and Great Western. . . . After the Standard had used the rebate to crush out the other refiners, who were its competitors in the purchase of petroleum at the wells, it became the only buyer, and dictated the price. It began by paying more than cost for crude oil, and selling refined oil for less than cost. It has ended by making us pay what it pleases for kerosene. . . .2

Many similar accounts followed Lloyd’s—the most definitive being Ida Tarbell’s 1904 History of the Standard Oil Company, ranked by a survey of leading journalists as one of the five greatest works of journalism in the 20th century.3Lloyd’s, Tarbell’s, and other works differ widely in their depth and details, but all tell the same essential story—one that remains with us to this day.

Prior to Rockefeller’s rise to dominance in the early 1870s, the story goes, the oil refining market was highly competitive, with numerous small, enterprising “independent refiners” competing harmoniously with each other so that their customers got kerosene at reasonable prices while they made a nice living. Ida Tarbell presents an inspiring depiction of the early refiners.

Life ran swift and ruddy and joyous in these men. They were still young, most of them under forty, and they looked forward with all the eagerness of the young who have just learned their powers, to years of struggle and development. . . . They would meet their own needs. They would bring the oil refining to the region where it belonged. They would make their towns the most beautiful in the world. There was nothing too good for them, nothing they did not hope and dare.4

“But suddenly,” Tarbell laments, “at the very heyday of this confidence, a big hand [Rockefeller’s] reached out from nobody knew where, to steal their conquest and throttle their future. The suddenness and the blackness of the assault on their business stirred to the bottom their manhood and their sense of fair play. . . .”5

Driven by insatiable greed and pursuing his firm’s self-interest above all else, the story goes, Rockefeller conspired to obtain an unfair advantage over his competitors through secret, preferential rebate contracts (discounts) with the railroads that shipped oil. By dramatically and unfairly lowering his costs, he slashed prices to the point that he could make a profit while his competitors had to take losses to compete. Sometimes he went even further, engaging in “predatory pricing”: lowering prices so much that Standard took a small, temporary loss (which it could survive given its pile of cash) while his competitors took a bankrupting loss.

These “anticompetitive” practices of rebates and “predatory pricing,” the story continues, forced competitors to sell their operations to Rockefeller—their only alternative to going out of business. It was as if he was holding a gun to their heads—and the “crime” only grew as Rockefeller acquired more and more companies, enabling him, in turn, to extract ever steeper rebates from the railroads, which further enabled him to prey on new competitors with unmatchable prices. This continued until Rockefeller acquired an unchallengeable monopoly in the industry, one with the “power” to banish future competition at will and to dictate prices to suppliers (such as crude oil producers) and consumers, who had no alternative refiner to turn to.

The Shared Narrative

Pick a modern history or economics textbook at random and you are likely to see some variant of the Lloyd/Tarbell narrative being taken for granted.

Howard Zinn provides a particularly succinct illustration in his immensely popular textbook A People’s History of the United States. Here is his summary of Rockefeller’s success in the oil industry: “He bought his first oil refinery in 1862, and by 1870 set up Standard Oil Company of Ohio, made secret agreements with railroads to ship his oil with them if they gave him rebates—discounts—on their prices, and thus drove competitors out of business.”6

Exhibiting the same “everyone knows about the evil Standard Oil monopoly” attitude, popular economist Paul Krugman writes of Standard Oil and other large companies of the late 19th century:

The original “trusts”—monopolies created by merger, such as the Standard Oil trust, or its emulators in the sugar, whiskey, lead, and linseed oil industries, to name a few—were frankly designed to eliminate competition, so that prices could be increased to whatever the traffic would bear. It didn’t take a rocket scientist to figure out that this was bad for consumers and the economy as a whole.7

The standard story of Standard Oil has a standard lesson drawn from it: Rockefeller should never have been permitted to take the destructive, “anticompetitive” actions (rebates, “predatory pricing,” endless combinations) that made it possible for him to acquire and maintain his stranglehold on the market. The near-laissez-faire system of the 19th century accorded him too much economic freedom—the freedom to contract, to combine with other firms, to price, and to associate as he judged in his interest.

Unchecked, economic freedom led to Standard’s large aggregation of economic power—the power flowing from advantageous contractual arrangements and vast economic resources that enabled it to destroy the economic freedom of its competitors and consumers. This power, we are told, was no different in essence than the political power of government to wield physical force in order to compel individuals against their will.

In the free market, through unrestrained voluntary contracts and combinations, Standard had allegedly become the equivalent of a king or dictator with the unchallenged power to forbid competition and legislate prices at whim. “Standard Oil,” writes Ron Chernow, author of the popular Rockefeller biography Titan, “had taught the American public an important but paradoxical lesson: Free markets, if left completely to their own devices can wind up terribly unfree.”8

This lesson was and is the logic behind antitrust law, in which government uses its political power to forcibly stop what it regards as “anticompetitive” uses of economic power. John Sherman, the author of America’s first federal antitrust law, the Sherman Antitrust Act of 1890, likely had Rockefeller in mind when he said:

If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life. If we would not submit to an emperor, we should not submit to an autocrat of trade, with power to prevent competition, and to fix the price of any commodity.9

An Overdue Reconsideration

But Rockefeller was no autocrat. The standard lesson of Rockefeller’s rise is wrong—as is the traditional story of how it happened. Rockefeller did not achieve his success through the destructive, “anticompetitive” tactics attributed to him—nor could he have under economic freedom.

Rockefeller had no coercive power to banish competition or to dictate consumer prices. His sole power was his earned economicpower—which was no more and no less than his ability to refine crude oil to produce kerosene and other products better, cheaper, and in greater quantity than anyone thought possible.

It has been more than one hundred years since Ida Tarbell published her History of the Standard Oil Company. It is time for Americans to know the real history of that company and to learn its attendant and valuable lessons about capitalism.

Real vs. ‘Pure and Perfect’ Oil Refining Market

Any objective analysis of the nature of Rockefeller’s rise to dominance—Standard Oil had an approximately 90 percent market share in oil refining from 1879 to 189910—must take into account the context in which he rose. This means taking a thorough look at the market he came to dominate, before he entered it.

Traditional accounts of Rockefeller’s ascent, which began in 1863, portray the pre-Rockefeller market as a competitive paradise of myriad “independent refiners”—a paradise that Rockefeller destroyed when he drove his competitors out of business and wrested full “control” of the oil refining business for himself.

This idealized view of the early oil refining market appeals to most readers, who have been taught that a good, “competitive” market is one with as many viable competitors as possible, and that it is “anti-competitive” to have a market with a few dominant participants (“oligopoly”), let alone one dominant participant (“monopoly”). This view of markets was formalized in the 20th century as the doctrine of “pure and perfect” or “perfect” competition, which holds that the ideal market consists of as many distinct producers as possible, each selling equally desirable, interchangeable products.

Under “perfect competition,” no one competitor has any independent influence on price, and the profits of each are minimized as much as possible (on some variants of “perfect competition,” prices equal costs and profits are nonexistent). Although advocates of this view acknowledge (or lament) that it cannot exist in reality, they view it as a model market toward which we should at least strive.

By this standard, the early oil refining market was “perfect” in many ways. Many small, “independent,” practically indistinguishable refiners were in business. No one threatened to drive the others out of business, and the market was extremely easy to enter; those with no experience in refining could buy the necessary equipment for three hundred dollars and start making profits almost immediately.11 Some refiners recovered their start-up costs after one batch of kerosene.12

But the traditional perspective ignores the crucial aspect of markets relevant to their impact on human life: their productivity—how much it produces, the value of that which is produced, and the efficiency with which it is produced. By this standard, the oil refining market was anything but perfect—refiners were at an early, primitive stage of productivity, which happily ended.

This is not a moral criticism of the early oil refining industry. The first five years of that industry, along with the crude production industry, from 1859 to 1864, were full of great achievements. It is almost impossible to overstate the dramatic and near-immediate positive effect of a group of scientists and businessmen discovering that “rock oil,” previously thought to be useless, could be refined to produce kerosene—the greatest, cheapest source of light known to man.

In 1858, a year before the first oil well was drilled, only well-to-do families such as that of 11-year-old Henry Demarest Lloyd could afford sperm whale oil at three dollars per gallon to light their homes at night.13For most, the day lasted only as long as did the daylight. But by 1864, just five years into the industry, a New York chemist observed:

Kerosene has, in one sense, increased the length of life among the agricultural population. Those who, on account of the dearness or inefficiency of whale oil, were accustomed to go to bed soon after the sunset and spend almost half their time in sleep, now occupy a portion of the night in reading and other amusements; and this is more particularly true of the winter seasons.14

Still, the market’s primitive methods of production and distribution at this early stage made it impossible for it to have anywhere near the worldwide impact it would have by the time Lloyd’s famous essay damning Rockefeller was published.

A particularly problematic area was transportation, which was convoluted and extremely expensive. Oil was transported in 42-gallon wood barrels of spotty quality, costing $2.50 each. Each one had to be filled and sealed separately and piled onto a railroad platform (where barrels were prone to leak or fall off) or occasionally onto a barge (where barrels were prone to fall off and start fires).15The myriad small refiners each could ship only a handful of barrels at a time; this required the railroads to make many separate stops at different destinations for different refiners, which resulted in a lengthy and expensive journey for both railroads and refiners.

And for some time, this was the best aspect of the process. In the early days, to get barrels of crude oil from assorted oil spots in northwest Pennsylvania onto railways headed for the refineries, oil was transported by horse and wagon by teamsters, often through roadless territory and waist-high mud, with barrels perpetually bouncing and frequently breaking or falling out. (Because of government intervention, the teamsters had a huge influence in politics and for years prevented the construction of local pipelines—an incomparably superior form of oil transportation.)16

The refining process, the core of the industry, was also at a primitive stage. To refine crude oil is to extract from it one or more of its valuable “fractions,” such as kerosene for illumination, paraffin wax for candles, or gasoline for fuel. The heart of the refining process uses a “still”—a distillation apparatus—to heat crude oil at multiple, increasing temperatures to boil off and separate the different fractions, each of which has a different boiling point.

Distillation is simple in concept and basic execution, but to produce quality kerosene and other by-products requires precise temperature controls and various additional purification procedures. Impure kerosene could be highly explosive; death by kerosene was a common phenomenon in the 1860s and even the 1870s, claiming thousands of lives annually. In fact, the spotty quality of much American kerosene is what inspired John Rockefeller to call his company Standard Oil.17

Some refineries in the early 1860s, such as those of famed refiners Joshua Merrill and Charles Pratt, produced safe, high-quality kerosene, but most did not. Tarbell’s exalted “independent refiners” from the Oil Regions of Pennsylvania, incidentally, produced the worst quality kerosene.

“Deluded by petroleum enthusiasts as to the simplicity of refining,” write Williamson and Daum in their comprehensive history of the early petroleum industry, “individuals inexperienced in any form of distillation flocked into the new business. . . .” But, they note,

successful petroleum refining . . . called for the utmost vigilance. . . . Real separation of the various components of crude oil was no objective at all; their major purpose was simply to distill off the gases, gasoline and naphtha fractions as fast as heat and condensation could permit. All condensed liquid that conceivably could be fobbed off as burning oil . . . was recovered and the tar residue was thrown away. . . . Only in the provincial isolation of the Oil Region and nearby locations did such outfits receive serious designations as petroleum refineries.18

In a mature market, such operations, with their inferior, hazardous products, would never succeed. But in the early stages of the market, anyonecould succeed, because the overall refining capacity was insufficient to meet the enormous demand for kerosene.Even lower-quality kerosene was spectacularly valuable compared to any other illuminant Americans could buy.

The supply-and-demand equation of kerosene even made it possible for refiners with low efficiency to profit handsomely. In 1865, kerosene cost fifty-eight cents a gallon; at one-fifth the cost of whale oil this was a great deal for consumers—and it was a price at which anyone with a still could make money. Even if the still was very small, requiring much more manpower and other expenses per gallon of output than a larger still; even if the still refined only kerosene and failed to make use of the other 40 percent of crude; even if the still was low-quality and needed frequent repair or replacement—the owner could turn a healthy profit.19

This stage of the industry was necessarily temporary. As more and more people entered the refining industry, attracted by the premium profits, prices inevitably went down—as did profits for those who could not increase their efficiency accordingly.

Such a process, which began in the mid-1860s, was more dramatic than almost anyone expected. Between 1865 and 1870, refining capacity exploded relative to oil production, and prices plummeted correspondingly. In 1865, kerosene cost fifty-eight cents a gallon; by 1870, twenty-six cents.20 Refining capacity was increasing relative to the supply of oil; by 1871 the ratio of capacity to crude production was 2.5:1.21 At this point, those who expected to make a livelihood with three-hundred-dollar stills found the market very inhospitable.

A shakeout of the efficient men from the inefficient boys was inevitable. In the mid-1860s, no one imagined that the best of the men, by orders of magnitude, would turn out to be a 24-year-old boy named John Davison Rockefeller.

House GOP announces jobs plan focused on cutting regs, taxes - The Hill's On The Money

House GOP announces jobs plan focused on cutting regs, taxes - The Hill's On The Money

House Majority Leader Eric Cantor (R-Va.) on Monday laid out an ambitious anti-tax and anti-regulations agenda for the fall.

In a memo to rank-and-file Republicans, Cantor said the House will target 10 major regulations for elimination, and will also seek to enact one major tax cut for businesses.

Republicans are offering the agenda as a contrast to President Obama’s jobs plan, which is set for formal announcement next week and is expected to include stimulus spending.

“I think the administration has … already demonstrated that it is not interested in focusing on private sector growth,” Cantor said after announcing the plan on Fox News. “What our list demonstrates is: Washington now has gotten in the way, and we’ve got to make it easier, finally, for small business people to grow.”

Cantor’s proposals will face an uphill battle in becoming law, but could make their way into a package produced by the supercommittee of 12 lawmakers charged with recommending $1.5 trillion in deficit cuts by late November. Democrats want that package to focus on economic stimulus to create jobs.

The more far-reaching tax proposal outlined in Cantor’s memo would allow small business owners to deduct 20 percent of their income from their taxes.

This proposal is being offered as a contrast to the Obama administration effort to raise taxes on individuals making more than $200,000 per year, and families with annual income higher than $250,000. Many small businesses file taxes as individuals.

One key Democrat labeled Cantor’s agenda as a distraction meant to deflect attention from the fact that the GOP is blocking proposals to stimulate the economy, including through the extension of a payroll tax cut.

Sen. Chuck Schumer (D-N.Y.) said the agenda was “intended only to provide cover for blocking the kind of pro-growth proposals needed to make a difference.”

“House Republicans are struggling to play catch up on jobs after Fed Chairman [Ben] Bernanke called for more aggressive fiscal policies than they have supported so far,” Schumer said. “But when they even stall common-sense measures like continuing the payroll tax cut for the middle class, it’s clear Republicans are still putting politics ahead of our economic recovery.”

The 10 regulations targeted in the memo were identified by committee chairmen as the most harmful to the economy. The majority are issued by the Environmental Protection Agency, but labor and healthcare rules are also targeted.

A series of votes on repealing the regulations would begin in September and would be followed in late November or early December by a vote on separate legislation requiring that all major regulations get an up or down vote in Congress. The House will also vote on two bills changing the way regulatory impacts are analyzed, Cantor said in the memo.

The first regulation to be targeted is born out of Boeing’s conflict with the National Labor Relations Board.

Cantor said the House will consider legislation the week of Sept. 12 authored by Rep. Tim Scott (R-S.C.) that would forbid the NLRB from seeking to stop companies from moving work to new locations. The NLRB is alleging Boeing moved work to South Carolina to punish unionized workers in Washington state.

Later in September and in October, the House will consider rules meant to stop pollution that affect utilities, cement makers, coal companies and firms using boilers. In the winter, ozone rules and dust regulations will be considered before the House votes on legislation to prevent the EPA from regulating greenhouse gases to combat climate change.

Cantor’s jobs push also has a healthcare component aimed at ensuring that employers will still be able to offer employee coverage under Democrats’ healthcare reform law.

The three committees of jurisdiction — Ways and Means, Energy and Commerce and Education and Workforce — are charged with putting together legislation to repeal “restrictions” in the law that could make it prohibitively expensive for employers and health plans to continue offering coverage.

The legislation is scheduled to come up in the last two months of this year under Cantor’s proposal.

In the winter, the GOP plans to target a proposed NLRB regulation that Republicans say will give employers too little time to organize ahead of union elections.

Cantor is also prioritizing a second tax-law change that would end a rule, set to go into effect in 2013, that requires the federal government to withhold 3 percent of payments to contractors as a way to improve tax compliance.

The majority leader noted in his memo that the GOP expects Obama to submit pending trade agreements with Colombia, Panama and South Korea soon, and for the Senate to vote on a House-passed patent-reform bill that gives the United States a first-to-file system of patent approvals, rather than the current first-to-invent system.

Julian Pecquet and Pete Kasperowicz contributed to this story.

Taking the Alter Challenge on Obama’s Record

Taking the Alter Challenge on Obama’s Record - By Jim Geraghty - The Campaign Spot - National Review Online

Last night I appeared on the radio program of Tom Bevan, co-founder of RealClearPolitics, with Jonathan Alter – formerly of Newsweek, now with Bloomberg News, who has challenged readers to prove to him that Barack Obama has been a bad president.

Alter said he has received more than 1,000 responses, ranging from thoughtful to, er, probably what you would expect from a question that suggests that disappointment or disapproval of the president is a national egregious misjudgment. Before you berate him, at least credit Alter for concluding that Paul Krugman’s political advice to the president is cuckoo for Cocoa Puffs. (My words, not his.)

Tom’s radio program doesn’t run long enough to lay out every Obama policy mistake from a conservative perspective. And none of that is likely to be persuasive to a liberal who looks at the conservative worldview and concludes, “well, that’s just wrong.”

So instead, let’s look at Obama’s presidency through the lens of an apolitical independent who doesn’t think much about policy details. To this hypothetical voter, the single biggest problem has Obama’s failure to deliver – they’ve heard the president’s near-perpetual pledges that prosperity is just around the corner, followed by consistent disappointment.

Any president can botch a policy, but Obama compounded his mistake by constantly believing that the stimulus was working when the data throughout 2009 and 2010 indicated anemic economic growth and a jobs market that was stagnant at best. Obama, Biden, and the rest of the economic team behaved and spoke as if a real recovery was just around the corner, even running around with the slogan “Recovery Summer” when the signs of stagnation have been consistent over the past three years.

So why has recovery from this economic recession/depression been different from most others?

Right now, non-banking companies are sitting on piles of cash – Moody’s puts it at one and a quarter Trillion, with a T-R. These cash reserves have increased one half trillion since 2008. Why are they not using that cash to hire people? Different companies will give you different answers, but they have deep anxieties and uncertainty about what’s coming next out of Washington. The National Federation of Independent Businesses finds small business owners’ optimism plummeting again, with regulation and taxes ranking number two and three in these businesses’ lists of biggest problems (number one was low sales). (Collectively, taxes and regulation are listed as the top problem of 36 percent of small businesses, compared to 23 percent saying ‘low sales.’)

If you want businesses to start hiring at a faster pace, Washington needs to say to employers A) we will not raise your taxes B) we will not make you pay a ton more for your employees’ health insurance C) we will not make you pay a ton more for energy costs through either cap and trade or new EPA regulations on energy production.

Alter asks, “Does any president who presides over 9 percent unemployment deserve to lose?” Well, yeah, particularly if that 9 percent unemployment persists for four years or so.

For the entirety of the Bush years, despite hearing from our friends on the Left about how bad they were, unemployment was between 4 percent and 6 percent. Let’s face it, if unemployment were 5 percent, Obama would be near-certain for reelection.

Alter mentioned the now-tired point about the fact that the economy is at least now adding jobs. But as I said last night, we’re not adding jobs at the rate need to keep pace with normal workforce growth – usually 100,000 to 200,000 jobs per month. Secondly, millions of Americans have left the workforce during Obama’s term. If you throw them into the total, the unemployment rate is closer to 11 percent and this economy looks even crappier.

Alter writes:

When Obama took office, the economy was losing about 750,000 jobs a month and heading for another Great Depression. The recession ended (at least for a while) and we now are adding several thousand jobs a month — anemic growth, but an awful lot better than the alternative. How did that happen? Luck?

Notice the extraordinarily low bar for a not-bad president: merely ceasing to lose 700,000 jobs per month. Why are we not losing 700,000 jobs per month? Because we hit bottom, and we are now “bouncing along the bottom,” a phrase recently used to describe the housing markets. From Alter’s perspective, this current stagnation is the best anyone could possibly hope to “enjoy.” He’s Jack Nicholson arguing that this is as good as it gets.

The stimulus was not sufficiently stimulative. Infrastructure spending can be useful – imagine widening the roads in the most heavily-trafficked areas, reducing commuting time for millions of Americans and shortening shipping time for billions in goods – but it’s not particularly fast-moving and it’s not, as the president later admitted that he learned, “shovel-ready.” If I had a magic wand, I would have eliminated the entire payroll tax for the entirety of 2009, effectively giving every American a 7 percent raise and making every employee 7 percent less costly to every employer; the self-employed would have received the equivalent of a 14 percent raise. (I realize a bunch of other smart conservatives disagree on this, but I would hope everybody could agree it beats replacing five-year-old sidewalks in Boynton, Oklahoma.)

There’s plenty more, of course. Obama pledging to put away childish things in his inaugural address and then cutting off debate with Republican lawmakers by declaring, “I won,”; Obama the senator who said that voting to raise the debt limit was a fil ; Obama the senator declaring that increasing the deficit by $4 trillion is “unpatriotic,” when Obama the president has now raised it by $4.02 trillion in a much shorter period of time…

Say "Yes" to Oil Sands

Say "Yes" to Oil Sands

Top 10 Things Obama Could Have Done Differently:

Top 10 Things Obama Could Have Done Differently: Excessively well-sourced Obama boosters are now channeling, not just White House spin but White House self-pity. Both Ezra Klein and Jonathan Alter wonder aloud why our intelligent, conscientious, well-meaning, data-driven President is taking a “pummeling.” ”What could Obama have done?” (Klein) “What, specifically, has he done wrong .. .?” (Alter)

They’re kidding, right? There are plenty of things Obama could have done differently. Most of these mistakes were called out at the time. Here, off the top of my head, are ten things Obama could have done:

1. Not subcontracted out the details of the 2009 stimulus to interest-group-addled Congressional Democrats. Instead, he could have drawn up his own plan that relied more on large, quick payroll tax cuts rather than the ”shovel ready” infrastructure projects that, as Obama later admitted, weren’t shovel ready and (in the case of home-weatherization efforts) were delayed most of the year while bureaucrats figured out how to apply union-backed “prevailing wage” regulations. And why do we think aid to state and local governments–a stimulus centerpiece–had such a big Keynesian “multiplier”? Didn’t many states use the money to pay down their debts rather than retain workers?

2. Sold his health care reform as a valuable benefit for voters that would give them security (they’d be covered) and freedom (they could leave their jobs without losing insurance) rather than as an eat-your-peas plan that would not only “bend the cost curve” by denying treatments but somehow actually reduce the deficit–a sales pitch that assured Obamacare would be unpopular and vulnerable long after Dems rammed it through Congress. At the time, New Yorker‘s Ryan Lizza said that Obama had “staked his presidency” on Budget Director Peter Orszag’s notion that “health care reform is deficit reduction.” It was a stupid bet. He lost it.

3. Made the UAW take a pay cut. Whoever else is to blame, the UAW’s demands for pay and work rules clearly contributed to the need for a taxpayer-subsidized auto bailout. To make sure that future unions were deterred from driving their industries into bankruptcy, Obama demanded cuts in basic pay of … exactly zero. UAW workers gave up their Easter holiday but didn’t suffer any reduction in their $28/hour base wage. Wouldn’t a lot of taxpayers like $28 hour jobs? Even $24 an hour jobs?

4. Pivoted! In 2010, after the health care bill passed, Obama was going to “pivot” to jobs but wasn’t able to do that when … yeah, I don’t remember what prevented him from doing it either. What’s that FDR quote Alter likes to trot out, about “bold, persistent experimentation”? That is not the attitude the Obama White House gives off when it comes to jobs. Maybe the Weitzman profit-sharing plan isn’t the answer. Maybe a use-it-or-lose-it credit card won’t work. Maybe a neo-WPA paying minimum wages wouldn’t attract unemployed middle class workers–though it could be tried in one or two states. But Obama’s attitude has been: “I tried A. I proposed B. So I propose B again. And again. And again.”

5. Not pursued a zombie agenda of “card check” and “comprehensive immigration reform”–two misguided pieces of legislation that Obama must have known had no chance of passage but that he had to pretend to care about to keep key Democratic constituencies on board. What was the harm? The harm was that these issues a) sucked up space in the liberal media, b) made Obama look feckless at best, delusional at worst, when they went nowhere; c) made him look even weaker because it was clear he was willing to suffer consequence (b) in order to keep big Democratic constituencies (labor, Latinos) on board.

6. Dispelled legitimate fears of “corporatism“–that is, fears that he was creating a more Putin-style economy in which big businesses depend on the government for favors (and are granted semi-permanent status if they go along with the program). I don’t think Obama is a corporatist, but he hasn’t done a lot to puncture the accusations. What did electric carmaker Tesla have to promise to get its Dept. of Energy subsidies? Why raid GOP-donor Gibson’s guitars and not Martin guitars? We don’t know. At this point, you have to think the president kind of likes the ambiguity–the vague, implicit macho threat that if you want to play ball in this economy, you’re better off on Team Obama. That’s a good way to guarantee Team Obama will be gone in 2013.

7. Stolen some populist Tea Party thunder by going vigorously after Wall Street. Even Alter says Obama “neglected to use his leverage over the banks and failed to connect well with an angry public.” (Alter was also the first to get Obama’s admission of “shovel-ready” ignorance. How many does it take, Jon?)

8. Not appointed pro-union innovators to NLRB who try to hamstring our biggest remaining industrial exporter by preventing it from opening a non-union factory in South Carolina–and then not had his spokesman say there’s nothing the president can do about it because, hey, the NLRB is “independent.”

9. Faced with Republican demands for leaner government, embraced them! Instead of letting GOPs make him the champion of bigger government and higher taxes, Obama could have said he thought higher taxes are probably inevitable but that he wasn’t going to raise them or cut a penny from benefits until he was sure all the fat has been wrung out of Washington. Become Dr. Cut-the-Bloat! Instead of letting his top management official advertise for a new $80,000-a-year ”deputy speechwriter,” tell him to lead a government-wide diet of the sort private companies conduct all the time. Publicize and promote the agency heads who cut their staffs and lower their budget requests instead of those who protect their turf. Have some “RIFs”–actual layoffs of redundant bureaucrats. The goal would not just be to reduce the deficit but to shrink the government to a level that’s … how do they put it … sustainable. This would be the greatest gift Obama could give to liberalism, and it would leave the Republicans gasping for air, speechless, Don’t they teach “co-optation” in Alinsky School? Given the choice between a triangulator and someone who acts like a triangulator, people will vote for the real triangulator every time.

10. Defend the core of Medicare, a popular universal program that works and (according to Orszag) is cutting costs, rather than proposing to shrink Medicare by raising the eligibility age from 65 to 67. It seems like only yesterday Democrats were trying to lower the Medicare eligibility age to 55–a political winner. Now the party has to defend a standard bearer who wants to raise taxes but who has no sympathy for the most valuable things those taxes pay for. (Screw granny for “green jobs”!).

**********

Would doing these 10 things have revived the economy? Who knows. Probably not. FDR didn’t really revive the economy either until World War II began, as Alter knows. But Obama would have shown leadership and creativity. He wouldn’t be both unsuccessful and disdained.

P.S.: I’m also not saying that Obama is necessarily headed towards a failed presidency in the larger judgment-of-history sense. Just a single-term presidency. If his health care reform sticks, he’ll go down as a success in a way Jimmy Carter won’t. One day soon we may look back on 2011 with fond longing. But that’s not the question Klein and Alter asked.

Read more: http://dailycaller.com/2011/08/28/top-10-things-obama-should-have-done-differently/#ixzz1WRGoAW5j

Manchester’s Claims to Soccer Supremacy

If you’re talking about international soccer in the truly international sense, the sport’s capital could probably be said to reside on a lush, extravagantly wealthy and previously unmapped island located somewhere between Barcelona and Rio de Janeiro, with a private landing strip reserved for Lionel Messi whenever he cares to visit. But with all due respect and apologies to Spain’s top-heavy and talent-rich La Liga a case could be made that England’s Premier League is, for lack of a less redundant phrasing, the sport’s premier league, at least in terms of global following, as well as the top-tier players employed there and their top-tier paychecks. So it could be argued that the city that rules the EPL rules global soccer. And while Sunday was just one day, it was a day that also seemed to signal, strongly, that the seat of power in Premier League soccer had moved a couple hundred miles to the north.

“Manchester became the capital of English football, with [Manchester] City crushing Tottenham 5-1 at White Hart Lane and then United winning 8-2 to condemn Arsenal to their biggest loss since 1927,” the Independent’s Tim Rich writes. “By the end, both Manchester clubs were leading the Premier League with a combined goal difference of +19 after three matches, while only a last-minute goal for Stoke at West Bromwich Albion prevented Arsenal from joining Tottenham in the relegation zone.”

It’s cold comfort to some shivering fans, but not all of this can be attributed to the ineptitude of Tottenham and Arsenal. The EPL’s twin Mancunian powerhouses have looked brilliant so far, and this year’s model at United is looking like a team that could both make history and hurt some feelings. Even in context, Manchester United’s victory was remarkable. “Arsenal might be a shadow of its former self. … But this was still an eye-opening, rollicking and monumental signal of intent for the campaign,” Yahoo’s Martin Rogers writes. “It does seem right now as if there are two outstanding teams in the EPL – and they are situated just down the road from each other.” ESPN’s Mark Payne was more succinct in regards to United’s showing. “This is officially the match where it became impossible to remain calm about what United can achieve this season,” he wrote.

Which is all very nice for Manchester United, of course. It doesn’t make things any easier for the team on the short side of that lopsided result, even if the spectacular loss in question – it was the first time in a century that Arsenal had allowed eight goals – came as a result of being outclassed by a spectacular team. In the end, Arsenal deserved its loss as much as United deserved its win. “In the hard-nosed world of American gridiron, they call what Manchester United did to Arsenal running up the score,” The Independent’s James Lawton writes. ” Unfortunately, yesterday, United were not given a whole lot of alternatives.”

After losing stars Cesc Fabregas and Samir Nasri in the transfer market and enduring a raft of suspensions and injuries to critical players, Arsenal was clearly a team in transition. But a loss like this was painful enough to cast into doubt whether legendary Gunners coach Wenger could survive. “Wenger is a strong character – no one who survives at the helm of a Premier League side for a decade and a half could be anything else,” the Guardian’s Richard Williams writes. “But in the wake of this defeat, you had to wonder whether he will be able to summon the resilience needed to overcome such a catastrophe. … When his side were invincible, Wenger was quite properly given the credit for his genius. Now failure must be laid at his door.”
* * *

For most sports fans, the names of the world’s fastest people are kicking around somewhere in the great, echoing space we reserve for recollection of stats and names and best-fill-in-the-blank-I-ever-saw moments. And then the Olympics come around, and we put faces to names like Asafa Powell and Lolo Jones. Usain Bolt, though, is different. He’s different because it’s difficult to think of a way in which his name could be more memorable, but also because the way in which the Jamaican sprinter has dominated and redefined the 100-meter distance is the sort of thing you just don’t forget. Bolt almost offhandedly smashed a world record in the 100 at the Beijing Olympics in 2008, and continued at that pace for another year – until he abruptly seemed to lose his stride somewhat, due to injuries and things harder to identify.

“Who knows why Bolt hasn’t been like an Xbox monster for the last two years?” Sports Illustrated’s Tim Layden writes. “If Bolt loses, he’s a two-year wonder, Flo-Jo doubled until further notice. If he wins, it’s one more step toward a long, dominant career, uninterrupted by failure when it counts most.”

At the world championships on Sunday, Bolt managed to do neither. A false start disqualified him from the 100-meter finals as part of the sport’s new, tougher rules.

“For Bolt, becoming a legend means consistent domination, meant defending his titles from Beijing and Berlin,” Christopher Clarey wrote in the New York Times. “As his sport debates anew the merits of the draconian false-start rule that came into force in 2010, Bolt will now have to settle for trying to defend his 200 title.” Between that and righting the ship after this peculiar period of drift, it looks like a challenge even for the world’s most memorable sprinter.
* * *

Right up until it didn’t, Javaris Crittenton’s career trajectory looked for all the world like that of a player destined for great things. A star prep point guard at Southwest Atlanta Christian high school, Crittenton carried a stellar reputation and a fine GPA into Georgia Tech, where he excelled on and off the floor during his sole season with the Yellow Jackets. He slid somewhat in the 2007 NBA draft, but he was still the 19th overall pick after just one year in college.

While he bounced around some after that, Crittenton could have had a solid career before his involvement in the ultra-stupid gun-related prank that nearly ruined Gilbert Arenas’s career sent him into a tailspin. Last weekend, things appeared to hit bottom when news broke that Crittenton was wanted for murder in his hometown, where police allege he killed a 23-year-old woman – an innocent bystander, as if that matters at all – in a drive-by shooting. (Crittenton’s agent, Mark Bartelstein, declined comment on the allegations.)

To call Crittenton’s descent puzzling and saddening doesn’t seem quite sufficient to the bleak, strange facts of the case. “There’s not a clear plot from there to here, even if you fill it in with injuries and one very public mistake turning a NBA backup role into a for-hire D-League career,” SB Nation’s Jason Kirk writes. “All we’re left to piece together is the story of a young man who quietly worked his [butt] off until he reached the highest point of his profession, then lost his mind as his career fell apart.”

Found a good column from the world of sports? Don’t keep it to yourself — write to us at dailyfixlinks@gmail.com and we’ll consider your find for inclusion in the Daily Fix. You can email David at droth11@gmail.com.

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