Capitalism’s newest critics offer a groundbreaking account of slavery, but does their economic history add up?
When Dr. William Levingston came to town, he arrived wearing a silk hat and peddling a cure for one of his age’s most terrifying ailments: uncontrollable growth. At $25, the cost was steep for the farmers and tradesmen of the rural countryside where Levingston did most of his huckstering. But for those in need, he made a promise that was irresistible. As one of his advertisements declared: “Celebrated Cancer Specialist. Here for One Day Only. All cases of cancer cured unless too far gone and then can be greatly benefited.”
Levingston was a confidence man of the sort that mid-nineteenth-century America bred in abundance. A self-styled “botanic physician,” he practiced without a license or any formal medical training, and by concealing his true name. William—or “Big Bill,” as he was known when he wasn’t trying to dupe gullible strangers—had nicked “Levingston” from his father’s hometown, where he grew up with the much more familiar surname of Rockefeller.
William Rockefeller’s antebellum capers gained national attention decades later, thanks to the fame of his eldest son. John D. Rockefeller’s entrepreneurial zeal resembled his father’s, but he owed his fortune to more banal talents. Like his fellow future magnate Andrew Carnegie, Rockefeller started his business career not as a tycoon in embryo, but as an accounting clerk. A mastery of finance’s intricacies was an invaluable asset for both men while they headed enterprises that yoked the pursuit of profit to the historically unprecedented productivity increases that made industrializing America into the planet’s largest economy.
Rockefeller’s success was undeniable: by the 1880s, his company, Standard Oil, had become a global behemoth, and he was well on his way to becoming the richest person in the world. Yet Rockefeller did not portray himself as an icon of cutthroat capitalism, or as the agent of Adam Smith’s invisible hand. For Rockefeller, competition was an obstacle to be overcome, a temporary phase of wasteful turmoil that industries cycled through on their way to a more rational order guided by a handful of monopolies. “Individualism has gone, never to return,” he maintained. “The day of combination is here to stay.”
The Supreme Court undermined Rockefeller’s confident prediction with a 1911 decision that broke apart Standard Oil, fracturing the corporation into more than thirty discrete firms. But Standard Oil, like its founder, cast a long shadow. Eight decades after the Court’s ruling, the company that had begun life as Standard Oil of New Jersey was known as Exxon. In 1994, still reeling from the Exxon-Valdez disaster, the firm requested a $5 billion credit line from J.P. Morgan, then a few years away from a merger with Chase Manhattan. The latter bank had once been led by David Rockefeller, a former student of Friedrich Hayek and the grandchild whom Rockefeller senior thought shared the most in common with himself. Scrambling to meet their client’s demand, Wall Street’s brightest invented a new way to minimize the loan’s cost. They would sell to a third party the risk that Exxon might default, creating a kind of insurance for the transaction. Thus was born a financial instrument that would transform banking yet remain obscure for more than a decade, until the worst economic crisis since the Great Depression made it into a household word: the credit-default swap. Dr. Levingston would have approved.