The discovery of natural oil was destined to rank among the most potent factors in this great and immediate increase in our national wealth. Standard Oil capital was early in the field, engaged in assembling a corps of picked men, equipped with skill and experience in that line, with intent to preempt and exploit the entire industry, with cynical disregard for public interests and for any private interests except their own. Powerful opponents contested the control of the oil fields; but business ability of a high order coupled with willingness to employ propaganda, spying and other devices that display a degree of cunning that would be esteemed "unfair competition" today, enabled the Rockefeller organization to achieve a complete victory over every opponent. While the situation at that time appeared mysterious, subsequent investigations have disclosed the secret of the means by which success was obtained; and it is now known to have been a case of brass knuckles against bare fists.

In an epochal opinion, Chief Justice White, in the greatest of all anti-trust cases, has taken occasion thus to describe and characterize the national impulse which at length resulted in the adoption of adequate protective measures by way of Federal anti-trust laws:

"*** the main cause which led to the legislation was the thought that it was required by the economic condition of the times, that is, the vast accumulation of wealth in the hands of corporations and individuals, the enormous development of corporate organization, the facility for combinations which such organizations afforded, the fact that the facility was being used, and that combinations known as trusts were being multiplied, and the widespread impression that their power had been and would be exerted to oppress individuals and injure the public generally."

Any impartial student of those times will discover that the persons in control of the Standard Oil Company's interests were the pioneers in the "trust" field, and that their vast measure of success stimulated and encouraged similar practices in numerous industrial fields; so that we shall pursue a natural course if we economize time by centering our attention upon this shin

ing example of "trust" methods, during the period when it was engaged in securing virtual control of an important industry.

Evolution of Standard Oil Company.

The oil industry was in its infancy in 1865, when John D. Rockefeller began in a small way to refine oil at Cleveland, Ohio. The original difficulty lay in refining the oil; but by superior efficiency he and certain associates succeeded in establishing a business that produced four per cent of all the oil refined.

The business of oil-refining had gradually become standardized; and the principal advantage thereafter to be secured consisted in obtaining cheaper transportation to market. The New York Central, the Erie and the Pennsylvania railroads had severally secured entrance into the oil fields; but the roads were poor, and a great struggle ensued to obtain freights in volume sufficient to pay current expenses and provide for needed extensions. Meanwhile, in the oil industry of Pennsylvania, competition had also been keen. All but fifteen of the refining companies had been obliged to sell out or to close down. By this time, however, the Standard Oil interests had grown to such size that they were the largest in the field; and were in a position to compel the railroads to compete for the traffic they had to offer.

In May, 1871, there was organized the South Improvement Company, an operating concern in which John D. Rockefeller and his associates were large stockholders, and which it was generally assumed represented the Standard Oil interests. In January, 1872, the South Improvement Company entered into an agreement with the Pennsylvania, Erie and New York Central railroads, (the principal oil-carriers), by which it allotted the oil at its command for transportation over those roads in agreed proportions, and in return received the following concessions: First: A rebate upon all oil transported whether furnished by itself or by its competitors.

Second: All other customers must pay full rates.

Third: Waybills of all shipments by competitors must be supplied to it, and,

Fourth: The promise of the railroads to maintain the business of the South Company against loss or injury by competi tion, and to that end to lower or raise the gross rates to such extent as should be necessary to overcome all competition.

The railroads reserved the right to grant the same terms to any other patron which should furnish equal transportation business, with equal facilities for promoting the oil-trade; but since there was no other concern in that class, the offer was obviously a mere sham and pretense, intended to varnish over this most unfair transaction with an appearance of respectability.

Upon the date (February 27, 1872) when the contract went into effect, popular judgment was evidenced by mass meetings in the petroleum centers. On March 15 a resolution was introduced in the House of Representatives at Washington to investigate the South Improvement Company. On March 25 the railroads publicly abrogated the contract; and on April 6 the Pennsylvania legislature repealed the charter. The fact remains, however, that persons prominently identified with Standard Oil interests owned 900 out of its 2,000 shares; and it is not improbable allotments of the remaining shares of capital stock were distributed among the officials of the three railroads concerned in this scheme.

Secret Dealings with Transportation Companies.

Practically all the investigators and writers who have probed into the phenomenal rise of the Standard Oil Company have agreed that somewhat later this inequitable and nefarious contract (by secret means) was renewed with the Standard Oil alliance which was then forming. At least two of the magnates in charge of the oil-carrying railroads suddenly rose to great wealth; and no funds corresponding to those enormous rebates and concealed profits provided for in the South Improvement Company deal ever found their way into the exchequers of the New York Central, Pennsylvania or Erie railways. In the opinion of the business world of those times, the Standard Oil principals were clearly masters of the situation. The Hepburn Committee of the New York Legislature when probing the oil situation in

1879 elicited this remark from William H. Vanderbilt, president of the Central system: "I think they are smarter fellows than I am, a good deal."

Leaving moral considerations out of the calculation, the transaction reflects credit upon the loyalty and business acumen of the management of the Standard Oil Company. They, at least, made a profitable bargain and did not discriminate against their own people; whereas, in the case of the transportation lines, the public which had given to those corporations valuable charters and grants of various kinds in numerous ways was militated against or ignored, and the stockholders had just reason to complain of conditions under which (as the testimony before the Hepburn Committee showed) oil was transported to the sea coast "for less than the cost of the axle grease!" The tyranny of such conditions, however, at length aroused the independent spirit of President Scott of the Pennsylvania Railroad, and he determined to free his transit system from the entangling alliance. In a desperate effort at one blow to crush the entire Standard Oil combination he reduced the carrying charges of oil for all shippers to eight cents less than cost and arranged with competitors to sell oil in Standard Oil territory for any price the market should offer.

Pennsylvania Railroad Sues for Peace Terms.

But this supreme effort was ineffectual against the massed forces which the oil magnates had at command. Their agreement, whatever its nature, with the Erie and New York Central railroads and their complete system of refineries and pipe lines were factors too strong to overcome; and at the end of a bitter contest extending over six months the Pennsylvania was forced to acknowledge itself beaten, to request an armistice and to sue for terms. This took place in October, 1877, and, when the smoke of battle cleared away, the Standard Oil interests came forth with the record of having in seven years increased from a concern controlling four per cent of the refined oil out

put, into one controlling ninety-five per cent, a virtual monopoly of the production and transportation of oil in the United States.

Stages of Standard Oil Development.

Less dramatic but not without interest for us here is the account of the successive stages by which the Standard Oil concern progressed from a mere association to a great corporation with enterprises and fleets encircling the globe.

Let us now consider the three forms under which this great company existed and through which its business developed:

First: In the inception of its career, the business of the Standard Oil interests was conducted by an "alliance" or "pool;" and this with little or no interference with the management of the constituent members. But such an arrangement proved too loosely constructed for employment when the business had grown to large proportions. The price could not conveniently be regulated, or output lessened at will; and a closer combination seemed necessary to effectuate the common purpose.

Second: "Trust Agreements" were originated and put into operation by John D. Rockefeller and his associates in 1882; and this new type of association was the earliest attempt in the United States to give legal and binding effect to the unenforceable agreements embodied in the "alliance" or "pool." It is a device that has since lent its technical name to an entire class of industrial combinations.

The machinery of the "trust" centered in a board of nine trustees, who took over from the various owners either the absolute control or the voting power of their several stock holdings. In return for, or rather in acknowledgment of these assignments, the trustees issued to the transferers-that, is, to the true owners -"trust certificates" representing the valuations of the several plants. Except for the qualifying shares of the directors of the various corporations, these trust officers could vote all the shares; and even this loophole was closed when the new instrument of business control was brought into complete working order by the election of these same trustees to fill the positions of directors upon the boards of the constituent concerns.

The