A neo-conservative friend of mine who happens to support free trade but not laissez-faire told me about the case of Rockefeller and the railroads. How he refused to allow competitors from using his railroads which lead to “lack of competition”, he also remarked about the same practice done by Microsoft. How would you respond to these questions? (I have my own answer but I am sure you have better ones). By the way, is it true that Rockefeller used the law to prevent other railroads from opening up so he can control the railroads?
So? Lightbulb.inc won’t let Brightbulb.inc use its factories to produce lightbulbs! Google won’t let yahoo use its search engine for free! Zomg monopoly!
Its not like the railroads got any better once the government got involved… Intervention was justifiied initially in order to stop railroads from raising prices, and then they did anyway 2 seconds later. No competition in the market means the owners can sit back and watch the rent flow in. No work no hassle.
support free trade but not laissez-faire
I don’t see how that is possible. Things like NAFTA are bills with hundreds of pages of regulations, quotas, and tariffs. I guess that “free trade agreement” just sounds nice for the task of misleading the public.
I’m not familiar with how Rockefeller used government to help his interests. He innocently outcompeted others and served consumers with lower prices as far as I know. The story of land grants for railroads in the west is another story. There was massive corruption, dispossession and tax dollars wasted on railroads nobody needed at the time.
when listening to old lectures of Rothbard it seems like he is always either talking about the railroads or Pietists
Actually Ol’ Rocky was guilty of forestalling homesteading. He would buy up railroad tracks around his competiter’s oil fields and park trains there to stop them from being able to get across. In my mind, you could probably just walk around the train (no train is THAT long) but still…
Anyway, price of kerosene down to 90% is pretty good.
Where did you get this idea from? I’m skeptical that it is an actual case of forestalling. I’m not saying that Standard Oil never did anything wrong, but what the OP referred to, securing exclusive deals with railways by producing much greater volume than competitors, is a legitimate practice.
Yeah the vast majority of his practices were legitimate, but he’s basically encircling his opponent’s operations with a wall of trains. Again, I am also skeptical about how much a difference this would make unless, really really he bought 100 miles of train, but I’ve always heard that encircling someone’s property with feneces abridges easement rights etc…
Do you have any good source with the details of these properties though? It just doesn’t seem like something the US government would allow, truly blockading an oil refinery.
Read it on wikipedia. Couldn’t find it again. But I found found this:
Right… whatever I read was probably written by someone with anti-market bias who had no incentive to report what actually went on. Maybe courts reacted. Maybe he didn’t encircle anything, but made it more difficult. Unfortunately I can’t find any information on it 
Check out Dominick Armentano’s Monopoly and Antitrust. I believe he deals with exclusive contracts as it deals with Standard Oil.
I’m not familiar with how Rockefeller used government to help his interests.
Are you familiar with the origins of the Federal Reserve system? The Federal Reserve Act of 1913 was written by the big bankers, for the big bankers - the Rockefeller, Morgan, and Rothschild groups primarily. They wanted to set up a banking cartel to reduce competition, maintain their own profits from interest on massive loans created out of nothing, and make sure the government (that is, the taxpayers) would always step in to bail them out should the need arise. They succeeded on all accounts.
The same thing had happened previously with the railroads, with J.P. Morgan leading the way. Rothbard explains in The Case Against the Fed:
“It is important to realize that the problem faced by the big bankers was only one facet of a larger problem. Finance capital, led once again and not coincidentally by the Morgan Bank, had been trying without success to cartelize the economy on the free market. First, in the 1860s and 1870s, the Morgans, as the major financiers and underwriters of America’s first big business, the railroads, tried desperately and repeatedly to cartelize railroads: to arrange railroad “pools” to restrict shipments, allocate shipments among themselves, and raise freight rates, in order to increase profits in the railroad industry. Despite the Morgan clout and a ready willingness by most of the railroad magnates, the attempts kept floundering, shattered on the rock of market competition, as individual railroads cheated on the agreement in order to pick up quick profits, and new venture capital built competing railroads to take advantage of the high cartel prices. Finally, the Morgan-led railroads turned to the federal government to regulate railroads and thereby to enforce the cartel that they could not achieve on the free market. Hence the Interstate Commerce Commission, established in 1887.”
By the way, is it true that Rockefeller used the law to prevent other railroads from opening up so he can control the railroads?
Rockefeller most likely benefitted from the Interstate Commerce Commision of 1887 and the cartelization of the railroad industry. Since control over the railroads was crucial for his oil business, he probably struck up a deal with the Morgans - the major finaciers of the railroads. So, while the Morgan group led the push for legislation to reduce competition in the railroad industry, Rockefeller probably supported their cause. I would respond to your friend by explaining that Big Business always needs the help of the government to reduce competition. Rothbard explains this in the first section of The Origins of the Federal Reserve:
"During the 1890s, in the new field of large-scale industrial corporations, big-business interests tried to establish high prices and reduced production via mergers, and again, in every case, the merger collapsed from the winds of new competition. In both sets of cartel attempts, J. P. Morgan and Company had taken the lead, and in both sets of cases, the market, hampered though it was by high protective, tariff walls, managed to nullify these attempts at voluntary cartelization.
It then became clear to these big-business interests that the only way to establish a cartelized economy, an economy that would ensure their continued economic dominance and high profits, would be to use the powers of government to establish and maintain cartels by coercion, in other words, to transform the economy from roughly laissez-faire to centralized, coordinated statism. But how could the American people, steeped in a long tradition of fierce opposition to government-imposed monopoly, go along with this program? How could the public’s consent to the New Order be engineered?"