In 1870, John D. Rockefeller and a few of his closest friends founded a company called Standard Oil. By 1872, this company had more or less destroyed the competition in Ohio as well as in most of the Northeastern United States. However, at the time, State laws had been put into place to prevent companies from becoming too large, as this was seen to stifle competition and could lead to unfair business practices should a single company establish a monopoly. Of course, anybody who could form a monopoly on a product as necessary as oil would undoubtedly become fabulously wealthy, an idea which seems to have appealed to Mr. Rockefeller. So, for the next several years, the founders ran their separate companies (which at this time were technically only in partnership, despite the fact that they shared shares) until, in 1882, they combined all the companies together and secretly gave all the shares to nine Trustees (including Rockefeller and his brother) who effectively controlled the vast majority of oil in the United States by buying up or shutting down the competition. The loophole worked so well that it was copied by several other industries, including United States Steel, who became even larger.
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| John D. Rockefeller, circa 1900. |
Around the turn of the century, Rockefeller retired and kept all of his shares and in 1911, the United States sued Standard Oil for having violated the Sherman Act (which was pretty much written so that the United States could sue companies like Standard Oil) and won. As a result, Standard Oil was forced to split up into 34 separate companies, effectively killing the monopoly on oil in the United States (They tried this with US Steel, too, but they failed). The largest of these eventually grew up to become Exxon, Mobil, Chevron, and Amoco. Exxon and Mobil merged in 1999, and Amoco turned into BP. If those names sound familiar, it’s probably because ExxonMobil and Chevron are the 2nd and 3rd largest companies in the United States and BP is the 4th largest company in the world. Luckily, though, antitrust laws and international cooperation helps to keep these mega-corporations in check and separate. Only, you know, not really. Chevron and BP share several thousands of miles of pipeline and members of the ExxonMobil, Chevron, and ConocoPhillips (the 4th largest company in the US) boards of directors all sat on the board of the Peterson Institute forInternational Economics (a think-tank which researches ways of fostering massive international business ventures by looking at new strategies and ways around potential obstacles including US law).
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| Above: The weekly meeting. |
And if you think that is scary, you don’t even want to hear about where your sunglasses came from. Among the top brands of sunglasses are such well-known names as Oakley, Ray-Ban, Vogue, and Persol, as well as those from designer labels like Chanel, D&G, DKNY, Ralph Lauren, Prada, Tiffany, and Versace. For those of us who don’t want anything too fancy, we shop at standard retailers such as Sunglass Hut, LensCrafters, and Pearle Vision. Or, if you’re really cheap like me, you just pick up a pair at Sears or Target. Whatever your choice, it doesn’t really matter. Every pair of sunglasses from every name I just mentioned (and dozens more around the world) is made by one single company: Luxottica. These guys completely dominate the sunglasses market; making, distributing, licensing and selling the vast, vast majority of the sunglasses in the world, including generics. By licensing around half of their brands from designers and other companies, Luxottica avoids prosecution, while still making and selling the sunglasses at prices ranging from $2 to $500 apiece for frames and lenses made in the same facilities.
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| Yup, those are Luxottica, alright. You can tell because they're sunglasses. |
And if you think that is scary, you don’t even want to hear about where your corn comes from. And if you say the answer is “seeds,” well, you’d be right. Corn does come from seeds and for centuries farmers would collect the seeds from the corn which survived the weather and the pests and plant those the next year, ensuring an even healthier and more prosperous harvest the next year. This worked well for the bulk of human history. So well, in fact, that today, corn can be found in an incredibly wide range of products, including breakfast cereals, soda, chips, margarine, ketchup, chewing gum, beer, toothpaste, wallpaper, cardboard, spark plugs, shoe polish, ink, whiskey, fuel, and even diapers, among many, many more. It’s a product that, thanks to massive government subsidies, is one of the most important and valuable commodities in the world.
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| Soylent Green: now made from Corn. |
Another interesting point is that corn is actually used in the production of a weed-killer known as Roundup, which is actually sprayed on, you guessed it, corn. Roundup was introduced by a biotech company called Monsanto in the 70’s and by 1980 it was (and remains) the top-selling herbicide in the world. This is because Roundup is really, really good at killing plants including, you guessed it, corn. Now, normally, something like that would be the hallmark of a poor business strategy, but the folks at Monsanto are also the developers and patent-holders on a genetically-modified corn seed which is immune to Roundup, meaning that farmers who use this seed in conjunction with Roundup will have highly abundant and healthy crops year after year. So healthy and abundant, in fact, that farmers who don’t use Monsanto’s products can’t compete with farmers who do. So many farmers use Monsanto’s products that 80% of all corn in the United States is patented by Monsanto. And because the seeds are patented, farmers are legally not allowed to collect the seeds and re-plant them each year. They have to buy from Monsanto and if by accident some seeds should fall off and sprout the next year, farmers can be sued for pretty much the whole farm. Heck, if their seed blows onto somebody else’s farm, they can sue them. That means that literally 25% of every product at the grocery store (and a whole lot of products in a whole lot of other stores) is at least partially controlled by a single, massive corporation. So what else is new?
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| And every month, they send this guy to punch farmers in the face. |
Anti-trust laws were written at a time in history when the Industrial Revolution made it possible for single companies to control, under the right circumstances, entire markets. In the name of capitalism, the free market, and the American way, politicians spent decades fighting large companies in order to protect smaller ones. And it’s worked. A surprisingly low number of mega-conglomerates are found guilty of or even tried for breaking competition law. But that’s not because they’re behaving any better, it’s because, like these companies here and many more, they’ve found loopholes in the system along the way. But what should really scare you is the fact that these corporations no longer need to find loopholes. Consider the case of Microsoft, which was sued in 1999 for violation of the Sherman Anti-Trust act (which it won in an appeal). James Cash Jr. is a member of the Microsoft Board of directors. He also sits on the Board for Wal-Mart (The largest company in the world). Also on this board are Steven Reinemund (Pepsico, ExxonMobil, American Express) and James Breyer, who sits on the board for Dell Inc. Also running Dell are William Gray (Pfizer, Jp Morgan Chase, Prudential Financial), Michael Miles (American Airlines, Time Warner) and Alan G Lafley (Procter and Gamble) and Sam Nunn (The Coca-Cola Company, Chevron). Mr. Lafley and Mr. Nunn also sit on the board for General Electric alongside their good friend, none other than James Cash Jr. These are all massive corporations which dominate their respective markets, and they’re all being run by a mostly anonymous superclass of high-powered individuals who sit on multiple boards and exert incredible influence. Many of these people, like former US Senator Sam Nunn, are in politics and go back several administrations. Many of them are in academia, the deans of some of the nation’s most prestigious schools of business and economics. These are the top 1% of the top 1% of the top 1% of the world and they’re the ones running the show.
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| Me doing research for this post. |
What does this mean for us? Well, on the one hand, it means that the future is bright for mega-corporations. They already exert the influence of small nations and don’t have to play by the same rules. The future will very likely be full of even larger corporations which will mean more corruption, more unfair treatment of consumers and laborers, and the like. On the other hand, it means security. The fact is, many of the smaller companies that have come out in the past few decades have only been successful because they’ve been able to make use of the resources from larger companies (getting their products sold by Wal-Mart, using cheap corn, taking out risky loans from financial firms). These companies also drive the massive world economy which, while not too hot at the moment, is responsible for providing us with the high standard of living we’ve grown accustomed to. On the other other hand, several of the world’s largest corporations in the financial district (like Fannie Mae, Goldman Sachs, etc.) are responsible for such NON-secure things as the worldwide economic crisis.
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| "Did I do that?" ~ Fannie Mae CEO |
What can we do? We can buy local, reducing shipping costs which propel energy companies to seven of the ten biggest companies in the world. We can support small businesses, which will help foster competition and keep people like the farmers who refuse to use Monsanto seeds in business. We can stay informed, and learn where our products are coming from before we make our decisions about where to buy, who to vote for, or which university studies to consider. Above all, we can try really, really, really hard to get into that superclass because, frankly, it sounds pretty sweet.
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| *Sigh* |
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