Friday, August 27, 2010

Vindicating Capitalism: The Real History of The Standard Oil Company

Let me share this article by Alex Epstein in The Objective Standard about John D.Rockefeller and the success of his Standard Oil.

Let me also share to you my favorite part of the article:

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.

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.