In this week’s Bygone Relics show, we continue digging into the partnerships between the government and the private enterprises. While doing so, we are also drawing a comparison between Elon Musk and John D. Rockefeller.
In our previous post, we discussed the silent partner Tesla and Apple have: the government. You have Tesla growing their business using tax credits and low interest rates, you have Apple being treated much more favorably than an oil company, perhaps.
And today, we are going to discuss the private business and government partnerships and compare the world’s richest man Elon Musk to a former world’s richest man, John D. Rockefeller. C Thomas, the floor is yours.
Last week, we didn’t go into how the government is actively fighting against the oil companies by cancelling pipelines, threatening them with windfall tax policies, and even with shutting down them completely. We talked about how it is choosing its partners like Tesla and Apple. Now, when did the government start to pick and choose their favorites like this? Let’s go back in history and see when this lack of capitalism (it is a lack of capitalism) truly began.
John D. Rockefeller was one of largest of the titans in the early 1900s. Rockefeller, the owner of Standard Oil, had a very diversified line of products from kerosene to gasoline. Rockefeller started drilling for oil, but it was in kerosene that the real fortunes came. After the civil war, the common home was lit by candle or by a gas lamp that was incredibly unstable. There was no brand of kerosene that could be trusted to be stable and burn consistently. Think about this Austerity, you have a kerosene at your home, and I have a kerosene at my home, and I buy your kerosene and I go home and light it up and it explodes or burns too hot and causes a fire, because it is not a chemically stable and uniform product. That’s why fires and explosions were super common. But, Rockefeller and his chemists solved this problem and society benefited from his chemical improvements. Due to economies of scale, Rockefeller was able to continually lower prices and this affordability increased the living standards for everyone – think of this: a cheap affordable source of light at home during the nighttime hours in the late 1800s and there was no government involvement. There was no government involvement here, just an entrepreneur and the public and both exchange value.
But, it wouldn’t be long before Thomas Edison would put kerosene on the back burner so to speak, when a newer more useful product, electricity, began to improve people’s lives even further. This would ultimately be the demise of the kerosene industry, but like a good businessman J. D. was already focused on oil production for the burgeoning auto industry which was threatening to put the horse out of business as a means of transport. So, when kerosene replaced candles, it was an upgrade. When electricity replaced kerosene, it was an upgrade. When Henry Ford and the auto put the horse back in the barn, it was an upgrade. So, is an electric car an upgrade from a regular car? It seems like a shift from one form of transport to another. It uses different materials, and it is more expensive? How does this improve the lives of the common American? The answer is maybe, but instead of letting the public decide, the government is trying to mandate it by law and regulation and financial incentives.
Whereas Rockefeller was able to scale and lower prices because of public adoption, Elon Musk is only now lowering prices as the government tax credits are expiring. Don’t get me wrong, I think Elon is playing the game and playing it well. Raise money, promise a narrative like self-driving cars, and promise a utopia seems to be his motus operandi. The politicians and media have fed on this narrative. Now laws are mandating it here in the US and in Europe. If all other forms of transport are outlawed, then yes green cars might have a future, by government mandate. Rockefeller was able to grow and gain market share by offering a superior product that people could afford and added to their standard of living. Tesla on the other hand is just a substitute for an already existing cheaper technology. Elon might very well win, by the force of a gun, by the force of taxation, by government mandate and other regulatory things that we don’t find very capitalistic here at the CTPC. Elon’s wealth is predicated on a inflated stock price whereas Rockefeller’s wealth was largely created by sales and a strong cash position. When the bubble pops and the leverage stops, we will see truly what a titan looks like. I think the titan looks like the American capital building and I know they are anywhere near smart enough to be titans but merely power grabbers. They want power and to tell you what to do, not do what is in your best interests.
The West points its finger at China for being totalitarian and communist, but is the West truly democratic and capitalistic you think? I personally very well understand China looking at Americans and saying what the hell are you talking about? China is developing their country like America was 150 years ago as is India. They need cheap energy to transform their infrastructure and economies. They aren’t going green, it is they who are using the cheaper sources of energy to grow their economies. America has a developed economy and wants to mandate that the world not better itself when we use 20% of the world’s energy yet have only 3% of its population? The American way is to dress up as a wolf in sheep’s clothing and tell everyone that we are not a wolf.
Why do governments feel they need to bridge the gap when private companies often do it better, cheaper, and more productively? Governments can provide public goods like roads that are paved for the general use of the public and all citizens and companies can benefit. No company is singled out from another. The government can have a fire department that can provide services and every citizen and business can benefit. But can you imagine if the government said, only non-Ford cars could use their new paved roads? Or they were able to at a discount? Isn’t this what California and Europe are mandating, non-EV cars can’t be sold in a few years? That is the advantage that Tesla and other EV companies are getting today, a regulatory push instead of the invisible hand of the market, a la Adam Smith, determined to be in the best interests of the customer. Governments are playing favorites and trying to push society in a direction that is driven by politics. Does anyone think that the Federal Reserve has done a good job? How has that worked out? Would we be better with a private financier like Warren Buffet? It sure seems like it considering that Buffet was called in 2008 to look at the failing banks and also last month when Silicon Valley Bank failed. These institutions all fell under government oversight, but like all things the government touches, it turned to poop. When the government was in trouble they called in the guidance of the smartest guy in the private sector. Please tell us what to do Warren?
Rockefeller, and by the way also other titans like Andrew Carnegie and J.P. Morgan, helped American productivity be the envy of the world, and honestly, I believe the government got jealous! of their success and power! It wasn’t long before President Teddy Roosevelt rode in and said he was breaking up the big businesses and he started to dismantle them for being monopolistic trusts and he was the trustbuster! The most spectacularly successful time in world history was ended by the United States government. The following century was plagued by depressions caused by the Federal Reserve, created after the break up of the trusts. An abandonment of the gold standard was next achieved because the government couldn’t spend within its means. Finally, the debt balloon has been blowing and its about to achieve its apex. $31 trillion in debt and counting has taken the world’s greatest economy and turned it into a banana republic with a hard candy shell. The source of that decline was government involvement with private enterprise.
It seems like the government has failed spectacularly: in its foray into industry with regulations, in its foray into finance with regulations, and in its foray into being a limited government with controlled spending. The good news is that we aren’t alone. Governments around the world are getting a wake-up call and ours is just delayed. When people realize the real source of their troubles, high taxes, lack of services, lack of accountability in its elected officials, they will realize that it was the government that failed them. The government will always fail them. The government is never properly motivated to not fail them and that’s why they do. Our founding fathers chose a government to be its limited partner. Now our government is choosing businesses to be its limited partner. Our greatest strength was our limited government and interference and now it is our greatest weakness. Its no wonder that it seems like the world is upside down. We have it all bass ackwrds.
Sincerely Yours,
C Thomas Printer
This weeks financial tip
The homework answer is just over $2000 an oz, which was last reached after covid when the government printer $8t. How about that? Not a bad return from the 1971 price of $35 an oz. The problem is that $35 an oz in 1971 would have bought a man a nice suit and $2000 does the same thing today. The purchasing power of an individual is preserved using gold and silver, but the dollar? Haha! That has been devalued over 90%. The dollar has gone down, not gold going up. That’s what happens when your government decides to spend your money foolishly to the tune of a $31t deficit. Next, week’s homework- what’s the price of silver, and what is its all time high?
On this date in history
109 years ago to be exact Weegham Park hosted its first baseball game. It would later be renamed Wrigley Field.
Also born on this date
A guy named Bill. Bill Shakespeare, was generally thought to have been born on this date in 1564.
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