The global profit system
“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” So said John D Rockefeller founder of Standard Oil.
Rockefeller’s wealth was gained through the exploitation of worker labour power to turn a free resource, oil, into a commodity for sale on the market. That in a nutshell is how he kept those dividend payments rolling in. What applied then just as surely applies now.
Standard Oil’s rapacious business methods laid the foundations for today’s oil conglomerates. Throughout its existence Standard Oil was the target of disgruntled politicians and newspapers. Rockefeller’s PR people and lawyers were as busy then as their modern day counterparts. In 1880 the New York World wrote that it was “the most cruel, impudent, pitiless, and grasping monopoly that ever fastened upon a country” (John D. Rockefeller: Anointed With Oil, p.60). A decade later Rockefeller controlled 88 percent of the United States’ refined oil. In 1911 the Supreme Court found Standard Oil in breach of the Sherman Anti-Trust Act. Its trading practices were ruled illegal and it was ordered to be broken up into 34 new companies. Rockefeller still held a 25 percent stake in Standard Oil. This was transferred proportionately into shares in the new companies. Although Rockefeller’s direct control of the oil market was somewhat diminished, his personal fortune in 1920, which was estimated at $900,000,000, translated into plenty of influence. And a great deal of personal pleasure.
Another capitalist who was to derive plenty of pleasure from oil was William Knox Darcy. He was the son of an English solicitor who emigrated to Australia where he began to speculate in land. He became a partner in a syndicate in 1883 that uncovered a large deposit of gold at Mt Morgan. Darcy returned to England with a considerable fortune in his knapsack. His thirst for pleasure still unquenched he cast his eye east to Iran.
In 1901 Darcy negotiated a contract that gave him the rights to drill for mineral resources over a significantly large area of Iran. The contract was signed by the landowner, the Shahanshah, king of kings. Darcy handed over £20,000 cash. The rest of the deal involved £20,000 in stock and a 16 percent share in the net profits if any transpired. In 1908 oil on a significant scale was discovered. Darcy never once set foot on the Iranian soil that would give him and a small elite considerable pleasure in the years to come. Out of this deal the Anglo-Persian Oil Company was formed. In 1935 its name was changed to the Anglo-Iranian Oil Company (AIOC); its new owner was the British government.
At the core of all conflict under capitalism are markets and profits. Iranian instability haunted the owners of AIOC. That paltry 16 percent share stuck in the throats of Iranians. As was AIOC’s refusal to allow the Iranian government to check their books to see if that legendary British fair play was being practised. In 1951 the pro-AIOC Prime minister was overthrown. The Iranian parliament nationalised the oil fields. AIOC was ousted from Iran and it squealed its way through boycotts and high courts. In 1953 operation Ajax was initiated. The CIA and British government conspired with the King of Kings and the Iranian military to effect a coup. However AIOC had to forego its earlier monopoly and make do with only a 40 percent share of the spoils. American oil companies received 40 percent and the French 20 percent. The fountain of pleasure was re-activated.
In 1954 AIOC changed its name to the British Petroleum Company. Expansion from their base in the Middle East to Alaska followed in 1959. Adding substantially to the profits and the dividend cheques was their oil strike in the North Sea in 1965. Thatcher sold off the British government’s holding in BP, but not their interest in its fervent pursuit of profit. When the Kuwait Investment Authority, essentially the Kuwait government, saw an opportunity to gain control of BP through market manoeuvres, the Thatcher government didn’t hesitate to block their attempts; despite the free market rhetoric of its members.
BP continued to grow through the capital generated from its exploitation of natural resources excavated by human labour power. Along the way those profits allowed BP to swallow up several of the offspring of Standard Oil. ExxonMobil and Chevron snapped up the rest of its most profitable siblings, and the trio came to form the backbone of the ‘Seven Sisters’ who in 1973 controlled 85 percent of the world’s oil reserves.
BP nowadays ranks as the fourth largest company in the world measured by its 2009 revenues of $239 billion. It has acquired 22,400 service stations worldwide, and pumps 3.8 million gallons of oil in to the market place every day. Its profits, and thus its power, are culled from throughout the world. A source of pleasure for a few, but one of deep discontent to many.
The costs of doing business can often seem strange to the uninitiated. The Guardian (12 April 1976) reported that BP handed over £500,000 to a “slush fund which dispensed money to the ruling Italian political parties in return for favours over oil taxes and prices”. BP’s own documents showed that this type of payment was “calculated as a percentage of the money the company could expect to make as a result of favourable legislation”. Profits are all about maths. Is doing a thing one way more profitable than doing it another? That is the logic of capitalism, and consequently the logic of what follows.
In September 1999 a subsidiary of BP in Alaska paid a fine of $22 million for the illegal dumping of hazardous wastes from 1993-1995 on the Alaska North Slope. In August 2006 BP were forced to shut down their operations as over one million litres of oil had been spilt over the North Slope. The Guardian (1 July 2007) reported that “a US congressional committee has uncovered evidence of ‘draconian’ cost cuts at BP”, and demanded documents “suggesting that managers considered turning off the flow of anti-corrosion chemicals to save money”.
Maintenance and safety cuts were also linked to an explosion at BP’s Texas City refinery resulting in 15 deaths and injuries to 180 people. Refineries based in Texas City and Toledo U.S accounted for 97 percent of all flagrant safety violations (829 of 851). The Centre for Public Integrity reported on 16 May last year that “most of BP’s citations were classified as ‘egregious and wilful’ by the Occupational Safety and Health Administration and reflect alleged violations of a rule designed to prevent catastrophic events at refineries”.
In April 2010 the offshore drilling rig Deepwater Horizon exploded in the Gulf of Mexico killing 11 people and creating an oil slick that covered at least 2,500 square miles. BP, Halliburton and Transocean, the three companies that expected to carve up the profits have ended up blaming each other for the disaster. This is a common occurrence when thieves fall out. BP’s chief executive at the time has since left the company pocketing a £2 million severance deal, £100,000 a year as a payoff from a Russian joint venture with TNK-BP and a £600,000 per year pension. But the news isn’t all good though, along with Lord Browne of Madingley he’s been cited in a multi-million dollar lawsuit linked to the bribery of government officials in Kazakhstan.
The Guardian (2 February) reported that BP is under investigation in the US over its “alleged manipulation of the gas market”, and “in a separate case in 2006, BP paid $300m to settle charges that it had manipulated the propane market in the US”. Another report in the same issue that would have made Rockefeller proud of one of his heirs is that “the administrator of BP’s $20bn (£12.3bn) Gulf spill compensation fund was accused last night by Mississippi’s attorney general, Jim Hood, of sweeping deficiencies and violations of law”.
In South America BP has been equally busy pursuing dividend payments. They stood accused in the European Parliament in October 1996 of colluding with the Columbian army in gross human rights violations and of wilful destruction of the environment. Evidence supplied by a report commissioned by Colombia’s President Samper’s human rights adviser alleged that “ BP passed photographs and videos of local protesters to the army, which human rights groups say led to killings, disappearances, torture and beatings” (corporatewatch.org). Likewise, a group of Colombian farmers won a multimillion pound settlement from BP after they were “ accused of benefiting from a regime of terror carried out by Colombian government paramilitaries to protect a 450-mile pipeline” (Independent, 22 July 2006).
Africa hasn’t escaped BP’s grasp either. In Southern Sudan BP have been linked to a civil war that it’s alleged has the central goal of depopulating the oil regions and the protection of pipelines. The people of the Niger Delta have been suffering from the oil cartel’s calculated exploitation of the land for the past 40 years. Its 606 oilfields supply 40 percent of all the crude that the US imports. Pollution from oil spills is endemic and dwarfs every other such disaster. As the Guardian reports “more oil is spilled from the Delta’s network of terminals, pipes, pumping stations and oil platforms every year than has been lost in the Gulf of Mexico”.
Nnimo Bassey, Nigerian head of Friends of the Earth International said “There is an overwhelming sense that the big oil companies act as if they are beyond the law… It is clear that BP has been blocking progressive legislation, both in the US and here. In Nigeria, they have been living above the law. They are now clearly a danger to the planet. The dangers of this happening again and again are high. They must be taken to the international court of justice” (30 May 2010).
Many people believe that companies like BP are the problem. Well-meaning people like Bassey see court rulings, legislation and even the break-up of companies as a solution. So did well-meaning people during the reign of Standard Oil. Nothing changed then except some names. The problem is the global profit system. The, dog-eat-dog, unquenchable compulsion to acquire earnings and dividends. Pollution, corruption and death are the symptoms of a disease. The disease is capitalism. Only major surgery can cure the disease.
When will the naive finally realise that the problems faced by people and the environment cannot somehow, magically, be solved by methods that have failed abysmally for decades? How long do we, the overwhelming majority, sit on our hands while a tiny minority derive their pleasure at our expense?