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Standard Oil-Nazi Deal Exposes Boss Patriotism

Monopolies Put Profits Before Everything Else

Conspiracy with German Chemical Trust Led to Rubber Shortage, Crippled Production

(4 April 1942)

From The Militant, Vol. 6 No. 14, 4 April 1942, pp. 1 & 3.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Standard Oil’s conspiracy with the German chemical trust, I.G. Farbenindustrie, to share between them world control of the chemical and petroleum industries, is a devastating indictment of American monopoly capitalism.

This conspiracy, which blocked American synthetic rubber production and seriously crippled all of American industry, proves that the American bosses place their profits and monopoly advantages before everything else, in war as in peace, and that their patriotism is a hypocritical cloak for self-interest.

Standard’s conspiracy reflects practices and policies pursued by all the great trusts. It was a conspiracy known for years to the government, which did nothing about it until the rubber shortage threatened to cripple the whole war production program. And even now, the government’s exposure has been served up with a liberal coating of whitewash.

The main fact of this conspiracy, as related by Assistant Attorney-General Thurman Arnold last week to the Truman Senate Investigating Committee, is that the Rockefeller interests, by an arrangement first concluded in Nov. 1929, have agreed with I.G. Farben to give the latter exclusive world rights to the chemical processes developed by Standard, which include the cheapest and best methods for the production of synthetic rubber. In return, Standard has obtained from its German capitalist colleagues exclusive rights in “any patents or discoveries which directly concerned oil production, including synthetic gasoline,” according to Arnold’s report.

Additional Agreement

At the outbreak of the war in September 1939, an additional agreement was made to ensure the continuance of this arrangement throughout the war and thereafter, regardless of which group of powers won. A letter, dated October 12, 1939, from the Standard official in charge of the negotiations with I.G. Farben, states:

“They (I.G. Farben) delivered to me assignments of some 2,000 foreign patents, and We did our best to work out complete plans for a modus vivendi arrangement for working together, which would operate through the terms of the war, whether or not the U.S. came in.”

Standard’s modus vivendi included aiding the German capitalists in the construction of their synthetic gasoline and high octane aviation gas industries. As late as in August 1941, Standard sought to turn over its Hungarian plants to the Nazis for $24,000,000 gold. After the defeat of France, at the suggestion of I.G. Farben, Standard sought to make a mutually beneficial arrangement for the control of hydrogeneration patents in Occupied France.

Standard’s modus vivendi operated even after Pearl Harbor and the Far East defeats. Up to last week, Standard refused government requests that it release its patents for manufacturing Butyl rubber, although it had given these patents to I.G. Farben to use for the Nazi war machine and had agreed to their use by an Italian corporation.

“Standard’s activities thus frustrated the creation of an American synthetic-rubber industry,” declared Arnold. The practical results of the conspiracy were to confront American industry with a crippling rubber famine, strike a damaging blow at all production and force drastic curtailment of essential consumers goods.

Why Deal Was Made

Why did Standard make such a deal with I.G. Farben?

“These arrangements were not entered into with any desire to hid or assist Germany,” Arnold pointed out. “The sole motive was an attempt on the part of the Standard Oil to get a protected market, and to eliminate independent competition, and finally to restrict production in world markets in order to maintain control.”

Where protecting its monopoly advantages helped the Nazis, Standard did not permit considerations of patriotism to stand in its way.

Even after 1939, when Standard had received I.G. Farben’s consent, in exchange for certain considerations, to enter into negotiations for licensing the Butyl process to American companies, it still “proceeded to further retard the development of synthetic rubber because of its natural monopolistic desire to keep complete domination” over this industry.”

Government’s Attitude

The government did not undertake its exposure of Standard Oil and its suit against it with any willingness. This is indicated by the fact that Standard’s conspiracy – its existence, if not all its details – has been known to leading government officials for years. Yet, until last week, the government made no move to expose or end it.

As early as 1932, the American rubber corporations, with many pipelines into the government, had approached Standard for its synthetic rubber patents. In 1939, representatives of the government also unsuccessfully sought information on the Butyl rubber process from Standard.

So well known were the facts of Standard’s deal with I.G. Farben, that a New York newspaper, PM, on July 6, 1941 – five months before Pearl Harbor and almost nine months before the government took court action against Standard – was able to publish accurate details of the deal.

Over a year and a half ago, the threat of an impending rubber shortage was brought to the attention of Jesse Jones, Secretary of Commerce and head of the government’s Defense Plant Corporation. At that time, Jones was urged to facilitate the expansion of the synthetic rubber industry. Jones then opposed this venture – an attitude most favorable to the Rockefeller interests! – and gave out false information to the effect that there was a sufficient supply of crude rubber on hand, even with all imports cut off, to meet the country’s needs for more than a year of war.

A year after the true situation had been revealed to Jones, he finally contracted, on an “experimental” basis, for production of 40,000 tons of synthetic rubber. When Singapore was about to fall, Jones told the Truman Committee that he was making plans for the production of 400,000 tons of synthetic rubber – in 1944.

As a result of the heat put on him recently for failure of the rubber program, Jones tried to protect himself by issuing a statement two weeks ago disclaiming personal responsibility for the rubber shortages. He cited the fact, since further confirmed by William Batt, Director of Materials for the War Production Board, that the “president concurred in this course.” That is, the policies which were so favorable to Standard Oil and the rubber monopolies had the sanction of Roosevelt himself.

If Standard Oil had been willing to make a quiet deal to pool its patents with the big rubber companies as late as March 25 – the day before the government finally instituted its anti-trust suit to secure the Butyl rubber patents – in all likelihood Standard’s conspiracy with I.G. Farben would never have been exposed by the government. But Standard still refused to release its processes.

The government then had no choice but to take action against Standard Oil, because the rubber situation since the loss of Malaya and the East Indies has become so acute as to disastrously impede all war production. Only fear for the very outcome of the war finally impelled the government to challenge the mighty Standard Oil.

Not Just Standard Oil

In terms of the scope and power of Standard Oil alone, and the Rockefeller interests which control it, this conspiracy goes down to the very bedrock of American capitalism.

The Rockefellers control the greatest private family fortune in the world. Two other families with major holdings in Standard Oil, the Harkneys and Whitneys, stand fourth and seventh respectively in the list of America’s Sixty Families. These three families are linked by marriage and business ties with most of the other few families which control the major portion of the corporate wealth of the country.

Through holding companies, interlocking directorates, and other devices, the Rockefeller interests have direct control over tens of billions of dollars of corporate wealth. Rockefeller agents sit on the directing boards of hundreds of huge corporations – mines, factories, railroads, shiplines. They control the richest, bank in America, the Chase National, and billion dollar companies like Mutual Life Insurance. The Rockefellers, together with the J.P. Morgan interests, constitute the two most extensive and powerful financial dynasties in world history. Thus, to speak of Standard Oil is to speak of one of the two major foundation stones of American monopoly capitalism.

Others Involved

But even within the framework of this particular conspiracy to block the production of synthetic rubber, Standard Oil did not stand alone. Other giant corporations, whose agents are even now working directly within the government war production agencies, also played a part.

Among these were the duPont interests, the notorious “Dynasty of Death” which controls America’s chemical and munitions trust, and has the largest single holdings in General Motors Corporation. “For instance,” Arnold was forced to report, “there is no doubt that one factor in the delay in Standard’s synthetic rubber program was Standard’s cartel obligations toward duPont” and “Standard and I.G. had obligated themselves not to open the field of synthetic rubber in the United States without first offering a share, to duPont.”

Just as Standard sought to avoid competition with I.G. Farben on the international arena, so “Standard was seeking to eliminate ... also competition with the duPonts.”

Another giant corporation involved in Standard’s withholding of the Butyl rubber process was General Electric, whose chairman, Philip Reed, is head of the WPB’s key Bureau of Industry Branches. Reed is now under fire in the Guthrie scandal for using his position to further the “business as usual” interests of his corporation.

Explaining why Standard “held back use of Butyl rubber, even in this time of rubber shortage,” Arnold told of “the tremendous pressure which undoubtedly has been exerted upon Standard by various companies who did not wish to retard the development of synthetic rubber but nevertheless wished to make sure that they are given priority in its development.

“It may be that the pressure of such companies as General Electric to delay the release of samples of Butyl by Standard to other companies has played its part.”

Nor were Standard Oil, duPont and General Electric alone in holding up synthetic rubber production. Prior to the Far East defeats, the big rubber corporations, Goodyear, Firestone, Goodrich and the United States Rubber, also balked at the idea. They had huge investments in crude rubber plantations and in equipment for fabricating natural rubber. Their sole immediate interest in seeking to gain synthetic rubber patents was to forestall the rise of a competitive industry and to be in a position to capitalize by way of high monopoly prices on any rubber shortages.

“No Difference”

Standard’s arrangements with I.G. Farben are not unique. They are typical. Arnold himself revealed that I.G. Farben right now maintains over 100 known cartel arrangements with leading American corporations.

“There is no essential difference,” Arnold stated, “between what the Standard Oil of New Jersey has done in this case and what other companies did in restricting the production of magnesium, aluminum, tungsten carbide, drugs, dyestuffs and a variety of other critical materials vital for the war.”

And Arnold’s further statements indicate that the greatest impediment to production are those very monopoly corporations which are organizing and financing the present anti-labor drive under the pretext that it is the workers who “impede production.”

“So long as such cartel agreements continue to exist, the inevitable result will be shortages in essential materials. It is impossible to accomplish the purpose of a cartel – to maintain high prices, to keep a tight control over the market, to eliminate independent competition – without restricting production.”

Knowing all this, what did the government do about the situation of which the Standard Oil case is typical?

How Standard Oil Was “Punished”

On March 26 the Department of Justice finally “filed a criminal information and a complaint against the Standard Oil Co. and also entered into a consent decree with them.” That is, a deal was made with the Standard officials. They marched into the federal court and pleaded nolo contendere (no contest of the case) – not a plea of guilty – with the brazen declaration that their “war work is more important than court vindication.” They paid out a total of $50,000 in fines, about one hour’s average profits for Standard and its holdings. The government then withdrew its charges.

Nominally, Standard is now required to license any other company royalty-free for the duration of the war to produce Butyl rubber and to transfer full knowledge of the process to them. This, in fact, is the single “retribution” exacted of the Rockefeller interests.

The pay-off, however, is that Standard Oil has been “asked to produce a large portion of the synthetic rubber to be turned out in the next two years from government-financed plants.” (AP dispatch from Washington, March 28).

As for the basic question of Standard’s cartel arrangements with I.G. Farben, Arnold sadly confessed that “the decree does not have in it a provision allowing either the Attorney General or the court to pass upon the future relations between I.G. Farben and Standard Oil. I think the committee can understand why I have been worried about the resumption or continuance of such relationship.”

A Whitewash Job

When asked by one member of the Truman Committee why Standard had been permitted to get off so easily, Arnold answered, “We felt that getting those patents loose was more important than years of litigation,” and added that Standard’s court settlement “was on a take it or leave it basis” and that “rightly or wrongly I took it.”

But the government’s treatment of Standard Oil was not merely a matter of the government’s lack of power. The government did not want to press Standard any harder than it did. In fact, having obtained the Butyl rubber patents, the government is now seeking to whitewash and protect Standard’s “reputation”.

Arnold deliberately used no term more severe in characterizing Standard’s activities than that this immensely shrewd and powerful corporation has maintained an “ambiguous position.” This characterization was used continuously and exclusively throughout Arnold’s testimony.

At one point, Arnold spoke of the “conduct patriotic American companies may be forced into by these cartel arrangements.” In response to a question, he described Standard’s relations with I.G. Farben as “commercially simple-minded,” attempting to give the impression that this second most powerful financial group in the world is run by foolish, though fundamentally patriotic, gentlemen who permitted themselves; to be “taken in” by the Nazis.

In his summation, Arnold made a special point of giving a boost to Standard Oil “which has paid the penalty.” He said: “We need Standard Oil ... to help us win the war ... We may well be grateful (sic!) to that company for putting its arrangements in writing and thus to furnish an object lesson of the results of international cartels.” In the end, according to Arnold, Standard Oil emerges as an example of pious rectitude!

Still Holding Key Government Posts

Having “paid the penalty”, Standard’s agents still remain in their key government positions. There is its dollar-a-year man. Ralph Wolf, assistant director of the Synthetic Rubber Laboratory of the Standard Oil Development. Co., who is assistant chief of the WPB’s Synthetic Rubber Section. There is its staunch protector, Frank Carman, a dollar-a-year patriot from the Armstrong Cork Co. and chief of the Synthetic Rubber Section, who after Arnold’s testimony, heatedly said: “I won’t be a party to the statement that the company (Standard) was not co-operating with the Government on the Butyl patent.”

And there is Walter C. Teagle, chairman of the Board of Standard Oil of New Jersey, who blandly paid $5.000 wrung from the blood find flesh of the Standard workers to get a clean bill-of-health for his part in the conspiracy, and who continues in his government post as a MEMBER OF THE WAR LABOR BOARD.

Teagle, who aided the Nazis and whose efforts on behalf of Standard’s monopoly and profits helped produce the present crisis of American production, still sits on a government board with power to make decisions of tremendous importance for the welfare of American labor. And, the workers of Standard Oil still labor under completely open shop, company union conditions. Standard’s seamen, compelled to work under a company union set-up, are daily facing death on flaming oil tankers, torpedoed by Nazi U-boats run by oil which Standard so helpfully provided the Nazi war machine.

In 1909, in an attempt to break up the Standard Oil trust for violation of the Sherman Anti-Trust Law, a federal court fined the company $25,000,000. It was never paid. In 1912, the Supreme Court, decreed the “dissolution” of. the trust. Today, any one of the Standard companies, like Standard Oil of New Jersey, is greater than the whole trust in 1911. And the program of Arnold and the government now,, after the latest: revelations about Standard Oil, indicates that Standard, and all the other huge monopolies, have nothing to fear from the Roosevelt regime.

What Future Holds

In the conclusion of his testimony, Arnold had nothing more to recommend than that the government encourage research which would be available for all to use, that there be some minor reforms made in the matter of granting patents and in the regulation of patent licensing agreements, that companies be required to register their foreign agreements, and, finally, that there should be “eternal vigilance and ... a wide awake investigating agency to enforce the Sherman Act.”

The character of that “eternal vigilance” and “wide awake” enforcement of the Sherman Act was made clear in a letter to President Roosevelt, sent March 20 and pointedly made public on March 28, one day after Arnold’s testimony before the Truman Committee. This letter was signed by Attorney-General Biddle, Secretary of War Stimson, Secretary of the Navy Knox – and Arnold.

It informed Roosevelt that, “some of the pending court investigations, suits and prosecutions under the Anti-Trust statutes by the Department of Justice, if continued, will interfere with the production of war materials ... In those cases we believe that continuing such prosecutions at this time will be contrary to the national interest and security.”

To which Roosevelt replied, as of the same date, “I approve the procedure outlined in your memorandum to me ...”

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