But the argument about energy independence, renewability, and ethanol isn't new -- it has been going on for nearly a century. As I mentioned in this week's lecture, Samuel Morey's 1826 internal combustion engine burned ethyl alcohol because it was readily available. Henry Ford and Charles Kettering both expected their future cars would burn alcohol fuels. Ford saw it as a way to support American farmers and use grain surpluses that were depressing prices. Kettering's statement that alcohol was the best way to convert solar energy to fuel reflected a belief that it was better to live on annual solar "income" than to become dependent on drawing down fossil fuel "capital." And both men worried that gasoline would involve the United States in the affairs of faraway regions. A speaker at a 1936 conference sponsored by Ford remarked that the biggest known oil reserves were "in Persia…and in Russia. Do you think that is much defense for your children?" (my source for much of this was Bill Kovarik's excellent website)
Since energy is such an important and contentious issue today, why aren't we more aware that these debates are not new? General-purpose American History textbooks have a lot to cover, it's true. They can't go into detail on every issue. Checking the indexes of several popular textbooks reveals that if they address the petroleum industry at all, it's usually just to mention that Standard Oil pioneered horizontal business integration and that John D. Rockefeller eventually controlled 90% of the industry. But even respected histories of technology like Vaclav Smil's 2005 book, Creating the Twentieth Century, tell the story of early internal combustion as if gasoline was the only fuel used until the end of World War I, when diesel trucks began entering the market. In Smil's history, there was no solution to the "violent knocking that came with higher compression. That is why all pre-WWI engines worked with compression ratios no higher than 4.3-1 and why the ratio began to rise to modern levels (between 8 and 10) only after the introduction of leaded gasoline."
But ethyl alcohol fuels were already widely used before the beginning of the petroleum boom dominated by Standard Oil. Engineers at both Ford and General Motors were aware that ethyl alcohol ran at high compression ratios without knocking. So how is it possible that historians --even historians of technology -- seem to be unaware of the battles fought in the early years of the twentieth century over what American drivers would put in their tanks?
Part of the answer, I think, is that the winners of those battles left more records for historians than the losers. History depends on evidence. A history of the petroleum industry can be based on mountains of documents in academic libraries and corporate archives. Books about companies like Standard Oil, written by both supporters and opponents, could fill a library. The makers of ethanol in the early twentieth century, on the other hand, left few documents. And finding the story of alcohol in the archives of Ford or General Motors requires dedication and persistence. A good percentage of the records left by these companies, after all, are not objective accounts at all. They're advertisements, public relations statements, and internal documents arguing not about what could be done, but about what they wanted to do.
As a result, the history we read tells the story of an apparently inevitable, unstoppable journey to the petroleum-powered world we have today. This type of history celebrates the winners while at the same time excusing them, because if it hadn't been Rockefeller, it would just have been somebody else. And that's the biggest problem. When we believe the present was inevitable, we lose the ability to imagine alternatives. In the past, and also in the present and the future.
Leaving aside the issue of extreme romanticism masquerading as realism (and obvious comparisons with Russian literature in the 19th and 20th centuries), one of the things that has always struck me about the place the books have taken at the heart of the free-market cause is how often Rand's ideas are deployed by the suits against the workers, when it's clear that even she understood the most romantic characters of all were people who worked.
We could argue about the best moments of Atlas Shrugged, but right up there on everybody's list you'll probably find the big bonding scene between Hank Rearden and Francisco D'Anconia where Hank rushes out to deal with a steel furnace break-out but Francisco beats him to the furnace and begins expertly throwing clay to stop the hole. This is a technique that only someone who had learned the trade from the bottom up would know, and Hank's opinion of the millionaire playboy changes completely when he realizes that Francisco has skills.
Another element of Rand's stories always puzzled me. When Howard Roark has his first important conversation with Gail Wynand, he says his favorite job in his youth was "catching rivets on steel structures." The image of Roark catching rivets actually appears earlier, as part of the opening exposition, when the Dean of Roark's college remembers he "had seen him, last summer, on his vacation, catching rivets on a skyscraper in construction in Boston; his long body relaxed under greasy overalls, only his eyes intent, and his right arm swinging forward, once in a while, expertly, without effort, to catch the flying ball of fire at the last moment, when it seemed that the hot rivet would miss the bucket and strike him in the face."
I had a hard time believing that people actually caught rivets in the way Rand described, but in the internet age it's easy to check. There's a Life Magazine story from Sept. 26, 1949, describing a rivet-throwing championship held in Mechanicsburg, Pennsylvania. The article says:
After the rivets has been heated in forges until they were white-hot, the tosser picked them up with tongs and threw them upward while his partner, delicately balanced on an I-beam, tried to catch them in a metal cone. Although the contest continued long after dusk--in which the rivets looked like tracer bullets and were about as dangerous--none of the steelworkers fell or was burned. (The trade, which pays about $2.75 an hour, has a national mortality rate of 5 to 10 workers per month.)
Don't you think it's a bit ironic that the most romantic thing Rand can say about her elitist heroes is that they can do the dangerous jobs of low-paid skilled workers? Francisco's steel-puddler skills and Roark's rivet catching grant them immense instant cred. What would American capitalism look like today, if free-market advocates demanded their heroes be able to walk the walk instead of just talking the talk?
The Common Law tradition America inherited from England contained a long list of precedents that guided judges in arbitrating between the claims of people whose interests conflicted. Some of these precedents dated back to the Roman Empire, giving judges a clear basis for deciding between the claims of individuals. But society wasn't made up only of individuals. The Americans had left behind the royalty and hereditary nobility of British society, but there were still some tasks that seemed bigger than individuals. Towns raised militia when needed, and the national government directed an army and a navy. The states ran criminal and civil courts. But who was going to build colleges, hospitals, and bridges? Things society needed but no individual had the wealth to take on alone.
Early America's answer was the corporation. Corporations in England had been quasi-public organizations that were given a royal charter to do a particular job. The Virginia Company and the Massachusetts Bay Company had been royally chartered corporations. They earned profits for their shareholders, but they also had -- or at least claimed to have -- an important social function that transcended mere business. Without this social dimension, businesses -- even large ones -- were normally organized as partnerships or sole proprietorships. State legislatures in early America carried on this English tradition, and chartered corporations to do particular tasks in the public interest. Colonial governments began this practice very early in our history, when the Massachusetts legislature established Harvard College in 1636 and then chartered the Harvard Corporation, America's first corporation, in 1650. In 1640, the Massachusetts legislature declared its authority to make laws regarding the environment when it gave Harvard a license to run a ferry between Boston and Charlestown across the Charles River, to raise money to operate the college. When the State of Massachusetts granted a corporate charter to the Charles River Bridge Company in 1785, to build the first bridge across the river, the charter specified that the company had to pay Harvard 200 pounds per year to compensate the college for the revenue the old ferry operation would lose.
The Charles River Bridge was a privately operated toll bridge. Originally conceived as a corporation that would provide a social benefit, the bridge company was wildly successful. The corporation, which had originally been capitalized at $50,000, collected $824,798 in tolls between 1786 and 1827. Although the original plan had been to eliminate the tolls once the bridge had paid for itself, the shares had been sold and the new owners decided to continue profiting from their monopoly. So the legislature chartered the Warren Bridge Company to build a second bridge next to the Charles River Bridge. The new charter specified that the Warren Bridge would only be allowed to collect tolls for six years or until it paid for itself, whichever came first. Then ownership would revert to the Commonwealth and the bridge would be toll-free.
Early map of Boston showing the Charles River and Warren Bridges (next to each other at top, Warren Bridge highlighted).
The Charles River Bridge Company sued the Warren Bridge Company, claiming their 1785 charter had granted a perpetual monopoly at that location. Charles River Bridge revenues disappeared, as travelers chose to pay the lower tolls on the new bridge, which became toll-free in 1836. The lawsuit failed in Massachusetts courts, and the plaintiffs took it all the way to the U.S. Supreme Court. In spite of hiring famous orator Daniel Webster to argue their case, the Charles River Bridge Company lost. The court's decision reflected the Justices' belief that the profits of the corporation and the interests of its shareholders were less important -- and legally came second -- to the right of the state to charter corporations to meet public needs. Even so, the tremendous profits taken by Charles River Bridge shareholders and their ability to push their lawsuit to the highest court signaled the beginning of a change in the way corporations viewed their role in society and the responsibilities that went with their public charters.