Party policies, then, seem to represent not the end of a process of reasoning and investigation, but ends in themselves – adopted to inflict damage to opponents or provide political ‘definition’. Over this summer of 2017, such posturing has come to define Labour’s position on Brexit.

The term Hard Brexit is now ubiquitous, used freely by the UK’s broadcast news media. The phrase makes leaving the two main legal constructs of the EU – the single market and the customs union – seem like an extreme, ideological position. Hard Brexit suggests isolation and a bleak economic future. Soft Brexit – staying inside the single market and/or the customs union – conveys, instead, a comfortable ongoing relationship with the EU, with Britain still ‘part of the club’.

A political narrative has developed that the UK would be better off economically under Soft Brexit. The corollary is that those who want to leave the single market and the customs union are driven only by an obsession with UK sovereignty and immigration controls, and are prepared for the economy to be damaged as long as they get what they want.

As such, Soft Brexit is presented as a civilized compromise that respects both the majority who voted Leave in June 2016 and the minority who backed Remain – a rejection of hard dogma in favour of enlightened common sense. These are the widely accepted terms of the UK’s Brexit debate going into the autumn of 2017, as the Article 50 talks heat up. Yet they are wrong on every level.

Leaving the single market and the customs union isn’t Hard Brexit. It is Brexit

Staying inside either arrangement while being outside the EU, would leave Britain in a dangerous halfway house – with UK laws remaining subject to rulings by the European Court of Justice. Britain would become a ‘rule-taker’, bound by huge restrictions on its economic and political freedom, but no longer able to vote on or influence those rules, even if they’re changed to the UK’s disadvantage. The UK would also still have to make multi-billion pound annual payments to Brussels and the EU’s ‘freedom of movement’ rules would apply – to the dismay of the 17.4 million UK voters who chose to leave the EU.

The economic benefits of single market membership are grossly exaggerated. Since 2002, the share of UK trade with the EU has fallen from 61% to 43%. The single market barely covers services, in which Britain excels and which account for over three quarters of the UK economy. Politicians can cite slogans about a ‘jobs-first Brexit’, insisting we stay ‘inside the single market’. But if the single market is so beneficial, why does Britain trade less with the EU than with the rest of the world? Why is the UK’s EU trade shrinking as its non-EU trade expands? And why does Britain have a large deficit on EU trade, but a sizeable surplus on trade outside the EU?

Staying in the customs union, meanwhile, means the UK must charge high import tariffs on goods where there is often no UK industry to protect. British consumers are paying more, on a range of imports from outside the EU, to shield uncompetitive producers in other EU states from cheaper global prices. Because 80% of all revenues from the EU’s Common External Tariff are paid to Brussels, and the UK does more non-EU trade than any other EU member, Britain accounts for a disproportionately high share of the EU’s combined tariff revenues. Again, this burden is shouldered by UK consumers. Being inside the customs union also forbids Britain from cutting trade deals with non-EU nations –­ which account for four fifths of the global economy and include the world’s fastest-growing markets.

The rest of the world trades very happily with the EU from outside the single market. The US conducted a quarter of a trillion dollars’ worth of trade with the EU in 2016, without accepting ECJ jurisdiction, freedom of movement rules or making large annual payments. Tariff-free trade between the UK and the EU can continue after Brexit under a free-trade agreement that preserves the UK’s ability to reach similar agreements across other parts of the world.

If no such agreement with the EU is possible before March 2019, when the UK is scheduled to leave, trade with the remaining 27 members can continue under World Trade Organisation rules, with the mutual recognition of standards made relatively simple given a starting point where there is, by definition, full compliance. The US and Canada meanwhile share ‘friction-free’ customs arrangements, with no customs union – and the UK and EU can achieve the same.

The single market favours the producer over the consumer, big business over small business

As summer ends, the Labour party – after months of vacillation – has just adopted Soft Brexit as party policy. No matter that the UK voted to leave the EU in the June 2016 referendum, or that Labour won 40% of the vote in the June 2017 general election on a vow of “respecting the referendum” and leaving the single market and customs union. Given the Tories’ slim Commons majority, Labour senses that if it can derail Brexit, perhaps it can topple the Government.

Who cares that, under Soft Brexit, the UK would endure all the restrictions and costs of EU membership, with none of the advantages of shaping its own laws or grasping better trading opportunities elsewhere.

The UK’s single market membership promotes the interests of producers over consumers. It entrenches the advantages of large corporations over small firms. Staying in the single market suppresses the wages of the UK’s most financially insecure workers, while helping numerous multinationals dodge tax.

Those now aggressively selling Soft Brexit must also consider that it is wholly unobtainable

Since the EU referendum, UK politicos have furiously debated the intricacies of what Brexit ‘deal’ they might accept. Yet nothing can be settled except in agreement with the EU 27 and the European Parliament. British politicians are making demands and suggestions that strike the rest of Europe as absurd – not least those earnestly backing Soft Brexit.

“The single market and its four freedoms are indivisible,” said Michel Barnier, the EU’s Chief Negotiator, in December 2016. “Cherry-picking is not an option”. Yet such cherry-picking is precisely what the Soft Brexiteers think they can get, combining single market membership with special dispensation from freedom of movement rules and other related conditions.

Labour’s Soft Brexiteers – and the Tories threatening to join them – are leading the European continent towards an extremely acrimonious Article 50 negotiation and a Brexit that maximises uncertainty for businesses and the broader public. That’s because Soft Brexit puts the UK in direct and absolute conflict with the EU’s core principles – principles that, if seriously breached, could tear the bloc apart.

In late July 2017, this point was made with devastating clarity by Fabian Zuleeg, the Chief Executive of the European Policy Centre – a think tank with very close links to the European Commission. Referring to voices “outside government demanding that the UK reconsider its position”, Zuleeg described as “misguided” any notion the EU27 would accept a treaty-busting Soft Brexit. “What is missing in these discussions is a real appreciation of the view from the other side of the channel,” said Zuleeg. “Allowing cherry picking of benefits would act as a signal to others inside the EU that a Europe à la carte is obtainable, opening the Pandora’s box of disintegration”.

Earlier this summer, Tony Blair, the erstwhile spiritual leader of Labour’s Soft Brexit brigade, said Europe is willing to “consider changes to accommodate Britain, including around freedom of movement”. The former Prime Minister’s statement, seemingly based on inside knowledge, electrified the Westminster village. It has since been demolished by Zuleeg. “The Tony Blair suggestion is unworkable,” he said, because “the EU is a community of law, underpinned by EU Treaties”. Such a deal would “be struck down in Court”, Zuleeg continued, referring to the ECJ. The day his article was posted online, it was re-tweeted by Sabine Weyand, the EU’s Deputy Chief Negotiator who works directly alongside Barnier – confirming it as official EU policy.

Brexit isn’t a choice between Hard and Soft, but between Clean and Messy

The British government was correct to declare, back in January 2017, that the UK will be outside both the single market and the customs union once the Article 50 negotiation ends in March 2019 – what I would call Clean Brexit. Not only does this fulfill the referendum outcome, it also makes diplomatic sense. Striking a free-trade agreement with the EU, or using WTO rules as a platform to strike such a deal in the future, Clean Brexit is a practical, transparent, democratically-mandated position. It also limits the inevitable uncertainty surrounding the Brexit process as much as is possible, while minimising the damage done to the UK, the EU and their vital continued relationship.

Clean Brexit means taking back full control of the UK’s laws and borders, leaving the EU in a pre-announced, planned manner ­– allowing for proper preparation, with the UK knowing it will be outside both the single market and customs union. The alternative is a Messy Brexit ­– that would damage business confidence, maximize so-called ‘cliff-edge’ dangers and risk a disastrous UK-EU stalemate.

Labour’s Soft Brexit ploy is the worst kind of politics. Cynical, and anti-democratic, it is based on a willful misunderstanding of diplomatic realities and designed to cause Parliamentary chaos. Worst of all, Soft Brexit directly contradicts Labour’s own manifesto, prioritising the wishes of the party’s metropolitan elite over voters in Labour ‘heartlands’ who backed Brexit, and swung the referendum, as they want to stop unlimited unskilled immigration undercutting local wages, while preventing further billions going to Brussels. Both changes are only possible if the UK leaves the single market.

Ida Tarbell, the celebrated American journalist after whom this column is named, was herself deeply dismayed with party politics, not least left-wing opportunists. “All the radical elements, and I numbered many friends among them, were begging me to join their movements,” she wrote in All in the Day’s Work, her 1939 biography. “I soon found that most of them wanted attacks – they had little interest in balanced findings”.

Tarbell “was convinced that, in the long run, the public they were trying to stir, would weary of vituperation”. Almost eighty years on, this is precisely the case with Brexit. Britain has voted decisively to leave the EU, with the UK Parliament and government taking back control of laws, borders, taxes and trade negotiations. Now – as the polls repeatedly show – the British public wants the political classes to get on with it.

Such gloomy Marxist nostrums are, once again, becoming fashionable. No matter that the Soviet Union itself collapsed under the weight of its economic contradictions. No matter that, during the century since the Russian Revolution, centrally planned economies have never worked well anywhere, at any time.

And seemingly no matter either that deluded collectivist ideologies, by throwing an intellectual gloss over the regimes of countless dictators and despots, have been an accessory to millions of deaths. Marx may have been wrong about communism, today’s goateed bien pensants argue, but when it comes to capitalism, the old boy’s analysis was spot on.

Only a handful of cranks still cling to the central vision of the nineteenth-century economist and philosopher – that state-driven communism will create a society that is productive, humane and just. It takes a pretty concerted effort of self-delusion to ignore completely the economic and political history of Russia and China, but some tenured professors still manage it.

More and more respectable thinkers, though, now say that Marx was onto something when he argued that capitalism is inherently unstable ­– and will eventually collapse as a result of repeated booms and busts. Ten years on from the 2007-08 global financial crisis, only a fool would argue that we’re immune from another serious systemic meltdown. And as inequality spirals across the Western world, even hard-working, well-qualified people face an increasingly precarious financial future.

Just a generation ago, middle-class lives were supposed to unfold in an orderly fashion – a steady job, leading to home-ownership, financial security and a decent retirement. Over the last twenty years, all that has changed: as jobs-for-life have gone, pensions have often evaporated and, for many, the dream of home-ownership has been replaced by the locked door of unaffordability.

As capitalism has advanced, then, are we not reverting to the mid-nineteenth century? Are we not in the early stages of that self-destruction of capitalism the bearded revolutionary predicted almost 170 years ago? Are today’s middle classes not facing the precarious hand-to-mouth existence of Marx’s ‘proletariat’?

The first thing to say is that, while capitalism clearly has its faults, it has been capitalism in various guises that has, since the 1989 fall of the Berlin Wall, lifted billions of people out of poverty. Across the former Soviet economies and much of the developing world, the share of the global population in ‘extreme poverty’ has plunged from 37% in 1990 to less than 10% today. This unalloyed triumph, by far the most important economic phenomenon of the last three decades, has been driven by the spread of property rights, contract law and enterprise – in other words, by capitalism.

The second counter to warnings of an impending dystopia is that while many households across advanced economies like the UK and US are clearly struggling, with today’s young adults often less well off than their parents, we remain a long way from Marx’s vision of penury. The financially insecure have far higher incomes and, to an important degree, are cushioned against shocks by what remains an extremely comprehensive welfare state.

That is by no means to claim that trends across the Western world towards economic marginalisation and unhappiness are welcome, or even remotely acceptable. Because, of course, they are not. Yet the substantive response to reports of capitalism’s demise is that the predicted self-destruction we associate with Marx is far from inevitable. That’s because capitalism is what we make it. It is our servant, not our master.

During the mid-twentieth century, communist and capitalist ideologies vied for supremacy. It was the Russian-born American economist Simon Kuznets who argued, in stark contrast to Marx, that the inequality of capitalism corrects itself, becoming less acute as societies develop and become more sophisticated. Winning a Nobel Prize for his trouble, Kuznets’ work during the 1950s and 1960s underpinned the broad acceptance of capitalism and “the American dream”, helping free markets to prevail in the mid-century clash of ideas.

Since the global financial crisis, such ideas have increasingly been challenged. In 2013, Thomas Piketty’s Capital pointed to a sharp rise in Western inequality and the re-emergence of “patrimonial capitalism”. A dense 696-page door-stopper, it became an unlikely bestseller. Piketty’s book sparked fierce debate in the US about power, money and the grand bargain at the heart of American life – that a hard-driving, commercial culture is tolerable because anyone, if they try hard enough, can get ahead.

That’s no longer true, Piketty argued, because Western societies are reverting to historic type, with low social mobility and resources and opportunities dominated by a well-connected elite who too often came into money by birth. An inherent feature of capitalism, ever-rising inequality can only be tempered, said Piketty, by heavy state intervention – including an income tax rate of up to 80% and an annual 2% tax on wealth. Unless that happens, he concluded, the result will be chronic social and economic instability, leading to a toppling of the democratic order.

Piketty’s warnings should not be dismissed – not least as the descriptive analysis in Capital rests on firm empirical foundations. While there is a debate to be had about the extent to which income inequality is rising across the Western world, the distribution of wealth has undoubtedly become far more unequal.

Yet, when it comes to capitalism, Piketty is far too pessimistic. The 2008 Lehman collapse and its aftermath, for instance, far from highlighting the drawbacks of capitalism, as Piketty and his many admirers maintain, shows what happens when you mess with capitalism so much it mutates into something “cronyist” and destructive.

The financial crisis happened because ‘independent’ central banks, egged on by myopic politicians, pumped up equity and debt markets with cheap money. Bank regulations, designed to keep markets relatively orderly, had meanwhile been severely diluted courtesy of Wall Street’s campaign cash. The ‘financial elite’ was then shielded from the wreckage it had caused, as banks’ vast losses were shoved onto taxpayers.

None of this utterly outrageous behaviour is due to ‘free markets’ as, at every turn in this sorry saga, free markets have been traduced. Rather than too much capitalism, the financial crisis happened because there wasn’t enough.

I also don’t accept Piketty’s assertion that, under capitalism, inequality will inevitably rise. “Widening and deepening inequality isn’t driven by immutable economic laws,” the Nobel prize-winning economist Joseph Stiglitz once told me. “A well-functioning market economy doesn’t only create jobs, but should also generate increases in income that are shared”.

The key part of that argument, of course, is “well-functioning”. And Western capitalism in the twenty-first century is functioning rather less well than it should. Too-big-to-fail banks that extort government bailouts are anathema to free markets. Monopoly corporations using their power to restrict competition and exploit consumers are anathema to free markets.

An oligopolistic house-building sector, deliberately restricting the supply of new homes to keep prices and profits high, is anathema to free markets. Plummeting social mobility is anathema to free markets – undermining the social contract upon which capitalism is built. These trends are increasingly apparent in modern Britain. That’s why the UK’s broad cultural and political acceptance of free markets is now being questioned. That’s why urban trendy types are increasingly quoting Marx.

Capitalism need not lead to ever-rising inequality, provided the right checks and balances are in place. We must face down behaviour that causes systemic instability, or involves excessive corporate greed –  implementing regulations that work. Being pro-market does not always mean being pro-big business. It often means precisely the opposite.

This weekly column is called Tarbell – named after an American journalist of the late-nineteenth and early twentieth century. A writer who believed strongly in capitalism and enterprise, Ida Tarbell also understood the vital importance of reining in capitalism’s excesses. From humble origins, Ida rose to the pinnacle of American journalism, tackling the economic and business issues of her day with skill, determination and courage. It was Tarbell who exposed the criminality of Standard Oil, forcing Teddy Roosevelt to become the ‘trust-busting’ President. But it was also Tarbell who defended mechanisation and technological progress – arguing, correctly, that rising productivity and living standards, ultimately help create a better, more prosperous society for all. And, yesterday, UnHerd published my film about her life and example.

This column will, in the weeks and months to come, look at economic, business and political issues from the same perspective as Tarbell. The author supports capitalism, but is mindful that it must be tempered lest it lose public consent.

As for Marx, the irony is that he never said the quote at the start of this article. It was “the rule of the bourgeois democrats”, he told the Central Committee to the London Communist League in March 1850, not capitalism, that “will carry the seeds of its own destruction”. Under Marxist theory, ‘bourgeois democracy’ is essentially a government that serves only in the interests of the wealthy and well-connected. That’s one warning from Marx I am fully prepared to accept.

At the end of last month our weekly economics columnist Liam Halligan introduced one of his heroes – Ida Tarbell – to UnHerd readers. I’m afraid I’d never heard of this crusading American journalist until Liam corrected my lack of knowledge. He couldn’t hide his enthusiasm for the role she played in fighting big businesses like Standard Oil who, by the end of the 19th century, possessed huge market power, Octopus-like influence throughout federal and state government… and had frequently won both by unfair means.

For Liam, this daughter of small town Pennsylvania provides a model for business journalists to this day – although not, perhaps, her spinsterdom. She chose not to marry and to, instead, dedicate her life to campaigning journalism and research. Tarbell’s success, argues Liam, was founded on a respect for what business and enterprise contributes but that general respect has to be accompanied with an intolerance of the tendency of corporates to short-change consumers whenever they can get away it. Adam Smith identified this tendency in his Wealth of Nations, noting that “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” And it’s why policies to prevent monopolistic behaviours or market shares most always be a fundamental economic duty of governments.

If you admire Ida Tarbell so much you should do something to address the widespread ignorance of her…

And not that long after I uttered those words and suggested he jet off to the USA to make a short film about (a) her successful campaign against John D Rockefeller, the world’s first billionaire and (b) the need for similar journalism in our own times – characterised as they are by the rise of new giant companies (in technology, pharmaceuticals and finance)… Liam was at the airport and on his way.

The twenty minute film we publish today is the fruit of Liam’s visit. He was ably assisted by Tom Besley, the director, and the producer was Sean Glynn. Sean also produces our audio programmes[1. The first was an examination of the news industry’s short-termism and included interviews with Alastair Campbell, Jonathan Dimbleby, Craig Oliver, Lionel Shriver and Justin Webb.]. My thanks to all three of them and to the interviewees who gave generously of their time. I hope you not only watch the video but also consider sending it to any teachers and other educators you know. The David-Vs-Goliath quality to the story – the example of a woman defying her male-dominated times – and the continued need to fight concentrations of economic power make it relevant in multiple ways to young, impressionable minds…

…it also reminds me (what a coincidence!) of the article we published yesterday about the EU’s current Competition Commissioner. Margrethe Vestager – profiled by Harriet Maltby as “the eurocrat who shows the middle finger to big business” – has a lot of Tarbell in her.

What is it that prepared Cohn for the enormously influential role he now plays in the American and by extension the global economy? Prior to joining the Trump administration, he spent almost 27 years working for Goldman Sachs, culminating in almost 11 years as president and chief operating officer.

Goldman Sachs has long been one of America’s premier investment firms and in recent decades has emerged as a principal breeding ground for senior government officials. Robert Rubin’s tenure as Bill Clinton’s Treasury secretary helped cement Goldman’s place in the corridors of power. As the chief architect of “Rubinomics,” Rubin is widely credited with steering the Clinton administration towards an emphasis on balanced budgets and lower trade barriers.

Not to be outdone, George W Bush appointed more than his fair share of Goldmanites, up to and including his chief of staff Josh Bolten. Hank Paulson, who served as Bush’s Treasury secretary during his tumultuous second term, engineered the widely-loathed Wall Street bailout of 2008 with the help of a small army of former Goldman colleagues, most notably Neel Kashkari, who is now the influential president of the Federal Reserve Bank of Minneapolis.

One might think that the pointedly populist Trump administration would avoid Goldman like the plague – not least because Trump had been consistently so scathing in his denunciations of Wall Street elites over the course of his political campaign – but one would be wrong. Goldman alums serving in the Trump administration include Steve Bannon, the president’s chief strategist; Steve Mnuchin, the Treasury secretary; and Dina Powell, the deputy national security adviser. Some of Trump’s Goldmanites worked for the firm longer and more recently than others — Dina Powell, for instance, only left the firm to join the White House; Bannon, on the other hand, hasn’t worked for Goldman since the 1980s.

America’s Ecole Nationale d’Administration

There is something striking about the extraordinary bipartisan reach of this one investment firm, which seems to have become America’s equivalent of France’s École nationale d’administration, the elite graduate school that is known for educating the country’s top bureaucrats and a number of its top politicians, including Emmanuel Macron, the current French president, and his immediate predecessor, François Hollande. While the ENA is a public institution that is at least ostensibly devoted to preparing France’s best and brightest to serving the interests of the country as a whole, Goldman is a profit-driven business enterprise that attracts talented graduates of the world’s elite universities by offering them high salaries and the promise of still higher performance bonuses.

This is not to suggest that Goldman alums are necessarily any less public-spirited than those from the ENA. Moreover, by the time a Goldman alum is in a position to serve in a senior government role, she or he has likely amassed a small fortune (presumably making them less susceptible to petty corruption) and a wealth of experience in a high-pressure work environment, which is of course invaluable. The problem is not that Goldman Sachs produces greedy or thoughtless public servants — it runs deeper than that.

Hoarding talent

Consider the possibility that the concentration of talent in Goldman Sachs and firms like it represents a threat to economic dynamism in itself. Matt Klein, a journalist at the Financial Times, has argued that the outsized growth of the financial sector may have damaged productivity growth in the wider economy. Notably, finance has offered such handsome compensation to its junior employees for so long, it’s hard for firms in other sectors to compete for highly-skilled young workers, the very workers companies need to innovate and to grow. This is especially true for firms in sectors that need a lot of research and development, which is to say a lot of brainpower, and that need a lot of external investment, which can put them in direct competition with the likes of firms such as Goldman that instead channel investment dollars towards, say, mortgage-backed securities.

Bias against the non-financial sector

When the Goldmans of the world then supply government with top bureaucrats, there’s a danger that this bias against the real economy will be reflected in government policy. Over the past thirty years, America’s manufacturing sector has been badly damaged by a series of policies that have eroded its competitiveness while leaving the financial sector largely untouched. For example, the US failed to counter aggressive currency interventions by China and a number of other countries from 2003 to 2011, which led to dollar appreciation that in turn accelerated the pace of the offshoring of U.S. manufacturing employment. US tax and regulatory policies have similarly made moving production offshore more attractive. Yet these policies have left the financial sector largely untouched.

In trade negotiations, the US has at times placed greater emphasis on opening foreign markets to US financial services firms than to ensuring a level playing field for manufacturers and other firms in the tradable sector. It strains credulity to think that this is all a coincidence. The more a government is led by Goldmanites or aspiring Goldmanites, the more likely it is to protect the interests over the financial sector while neglecting the interests of the real economy.

It takes a village

And then there is the question of whether a Goldmanised government is capable of properly regulating the financial sector. Anat Admati, a professor at Stanford’s Graduate School of Business, has long argued that the excessive use of debt in the US financial sector has left the American and global economies extremely fragile. To Admati, the best way to reduce risk in the financial sector is to force financial institutions to rely less on debt and more on equity. The trouble is that such a shift would inevitably make financial institutions less profitable, which in turn would mean lower compensation for their employees. Admati writes:

“Even if a crisis occurs, the enablers of the system can promote narratives that divert attention from their own responsibility and from the fact that much more can be done at little if any social cost to make the system safer and healthier.”

Assuming that there is at least some truth to Admati’s analysis, it follows that the outsized influence of the Goldman alums in government might mean that government will be more susceptible to these self-serving narratives. There are, of course, some exceptions to this pattern. Gary Gensler, a former Goldman Sachs partner who Obama appointed as chairman of the Commodity Futures Trading Commission, was known for favoring a more aggressive approach to regulating the financial sector. And Gensler is not alone in this regard. The broader pattern is still there, however, and it’s still deeply concerning.

***

> Bankers scored poorly in UnHerd’s YouGov poll on which wealthy groups deserved or didn’t deserve their riches

“That misguided woman!”

That’s how John D Rockefeller described Ida Minerva Tarbell. Their relationship was strained, bordering on mutual obsession, although they never actually met. Yet their confrontational standoff reverberates to this day. Just as it should.

The world’s first billionaire, Rockefeller was the business genius who, in the late nineteenth century, came to dominate America’s early oil industry. A struggling journalist from small-town Pennsylvania, Tarbell was the spinster who, after painstaking research and showing enormous courage, exposed Rockefeller’s illegal methods, bringing the oil titan to heel.

Understand Rockefeller versus Tarbell and you’ll understand the importance of a free press – and, in particular, investigative business journalism. Understand Rockefeller versus Tarbell and you’ll understand the colliding forces that must be balanced to make a capitalist society work.

Our story begins at ‘Oildorado’

The global oil industry today generates revenues of over $1,000bn a year. Extracting and marketing hydrocarbons is, by far, the world’s biggest industry. It all began, though, in 1859, in a forest to the west of the Appalachians, on what was then the God-fearing American frontier. An eccentric backwoodsman called Edwin Drake had been told the thick, smelly discharge sometimes found on forest floors in Pennsylvania might be usable in whale-oil lamps. So he rigged up a steam turbine and started boring a hole, just outside a small town called Titusville. After a year of trying, Drake finally struck black gold, sparking a drilling frenzy. “Oildorado” saw farms upended and virgin forest stripped. A slow-paced, agrarian community became a chaotic, money-making free for all.

When Drake discovered oil, Ida Tarbell was two years old – her family living close by. Growing up amidst the depravity and destruction of this oil bonanza, she buried herself in books. The young Tarbell, though, her later writings show, was alive to the mud, the lawlessness, the forests of wooden-drilling derricks. Oil changed everything in Titusville, bringing big characters, chancers and new technologies to a town transformed by crude.

As capital poured in, an oil industry of sorts began to emerge. A young book-keeper-turned-businessman, Rockefeller built a small refinery in nearby Cleveland, Ohio, turning oil into usable fuel. His operation – Standard Oil – was ruthlessly efficient, and began taking over competitors. By the start of the 1870s, just a decade after Drake’s discovery, Cleveland was America’s oil refining hub, with Standard controlling 10% of US refining capacity.

Appalled by disorder and inefficiency, Rockefeller took America’s wildcat oil industry by the scruff of the neck. Bringing together production, refining, transport and marketing, he invented what was then called a “combination” – the vertical-integrated modern corporation. “The day of the combination is here to stay,” Rockefeller boomed, as Standard moved to corner the market. “Individualism has gone, never to return”.

For many, Rockefeller’s sentiment went against what it meant to be American. This young country, after all, had been built by brave souls hacking a living out of the wilderness, standing on their own two feet. Admired by some, Rockefeller was more widely resented – most intensely by small, independent oil producers. That resentment turned to anger, when rumours swirled that Standard was in cahoots with Eastern America’s railroads.

Before pipelines and trucks, the only way to get large volumes of oil from Pennsylvania to the coast, and wider domestic and international markets, was by rail. While uniform freight charges for oil barrels were supposed to apply, stories emerged of Rockefeller using his market power to secure prohibited “rebates” – lower prices to carry his crude in return for giving competing railroads guaranteed volumes. There was also dark talk of “drawback” deals between Rockefeller and rail tycoons like Cornelius Vanderbilt and Jay Gould. These clandestine contracts were said to channel payments from the railroad companies back to Standard, funded by freight price rises that damaged Rockefeller’s rivals.

During the ‘oil wars’ smaller businesses attacked the railroad companies for colluding with Standard Oil

Outraged by collusion between Standard and the railroads, independent producers rioted and attacked rail terminals. Throughout the 1870s, as a teenage Tarbell watched, the “oil wars” played out on the streets of Titusville and other towns across America’s oil region. She had a ringside seat. Tarbell’s father, an oil-barrel maker turned small-time driller, helped to organise “the independents”.

When proof emerged of Standard’s secret “sweetheart deals” with the railroads, Rockefeller was unapologetic, greasing palms, seeing off legal threats and dismissing the regional press. “It is not the business of the public to change our private contracts,” he told one frontier journalist. “It is easy to write newspaper articles, but we have other business”.

By the early 1880s, the oil wars had passed and most of the independents had gone bust or sold out to Rockefeller. This was America’s “Gilded Age”, an era when “the Trusts” – huge monopolistic businesses, run by “Robber Barons” – dominated industries such as copper, sugar, iron and steel. Standard Oil – depicted in coruscating newspaper cartoons as “the Octopus” (below) – was the most notorious. By 1890, Standard and its affiliates controlled no less than 90% of the US oil industry.

By this stage, Tarbell had become a journalist. Having decided never to marry, she devoted her life to writing and research. Her articles – heavily fact-based, yet lively – caught the eye of Sam McClure, a self-made publisher who had come to America from rural Ireland. McClure was starting a magazine, he told Tarbell, to “explain complex events to the masses”.

The McClure-Tarbell partnership is one of the most important in the history of journalism. They built McClures Magazine into a powerhouse of investigative exposes, determined to reveal the lawlessness and corruption of early American capitalism, bludgeoning readers with facts. At the turn of the century, they turned their sights on “the Trusts” and, inevitably on Standard Oil. Tarbell, now a nationally known journalist, had a chance to harness her frontier experience.

What followed can only be described as a journalistic onslaught. Tarbell threw herself into her research, tracking down interviews and documents. She infiltrated Standard at the highest level, charming one of the directors, introduced by her up-and-coming novelist friend, Mark Twain. Over two years, in monthly installments for McClures, Tarbell exposed illegal activity with Standard Oil beyond doubt – including continued collusion with the railroads and corporate espionage. While Rockefeller called her “misguided”, the American public was, at once, transfixed and outraged. Teddy Roosevelt had no choice and he became the “trust-busting” President.

The Supreme Court ruled that Standard Oil be broken up. Some of the resulting companies – such as Chevron and Esso (a phonetic spelling of Standard Oil’s initials) – are still with us today. As America transformed itself from an agricultural outpost into the world’s mightiest economy, this Supreme Court decision sent out a message – capitalism works, but there are limits. “She did it,” says Paula Treckell, a US historian who for thirty years taught at Allegheny College, Tarbell’s alma mater. “A middle-aged woman from Western Pennsylvania – she did it”.

Ida Tarbell is not as celebrated as she should be. I came across her by accident in the mid-1990s – while reading The Prize, Daniel Yergin’s epic history of the global oil industry – and have researched her life ever since. I find her example incredibly inspiring. So it is a pleasure for me to embark on this weekly “Tarbell” column for UnHerd.

Tarbell’s writing, on Standard Oil and a host of other topics, told the truth about early American capitalism. Her frontier spirit and deep intelligence meant she admired business and enterprise, but as long as it was done right. Of Standard Oil she wrote:

“I was willing they should combine and grow as big and rich as they could, but only by legitimate means… but they had never played fair and that ruined their greatness for me”.

Rooting-out and exposing wrongdoing, refusing to be cowed – what Tarbell did so superbly, and what business journalists should always do – is a vital part of this process. Yet today, we’re at a crossroads, with journalism failing and capitalism’s exploitative tendencies, while always with us, becoming ever more prominent. “Big oil”, “big pharma”, “big food” and now “big tech” – these phrases are journalistic slang for the mighty corporations which, yes, provide so much, but which need to be constantly questioned and monitored. Something I’m looking forward to doing with Charlie Pickles, the editor of UnHerd’s capitalism track.

To probe in this way is not to undermine capitalism or to be “radical” or “extreme”. It is to grasp that capitalism, if it is to work well, requires a balance between untrammelled energy and reflection, between determination and decency, between soaring ambition and restraint. Tarbell understood that implicitly. It is vital that we do as well.

SOME FURTHER READING

> On UnHerd today, read Charlotte Pickles’ piece on how the tech giants of today have some resemblance to the anti-competitive industries of Ida Tarbell’s time.

Read the text of Ida Tarbell’s history of Standard Oil (original above).

A profile of Tarbell on Smithsonian.com.

The website of the Drake Well Museum – remembering where America’s oil industry began.

Suggested

The unheard story of Ida Tarbell. Our video about the journalist who tamed the big businesses of her time

By Liam Halligan