Faithful Cafe patron – and promising young economist – Jon Murphy texted me a few minutes ago with this observation:
I’m seeing more and more the argument that Rockefeller was wealthier [than are ordinary Americans today] because he could order people around.
Jon here refers to some reactions (that I, too, have seen) to my recent posts (here and here) arguing that, in many relevant ways, an ordinary American in 2016 is materially wealthier than was J.D. Rockefeller in 1916.
Jon will himself later post on this matter at his excellent blog (A Force for Good). I’ve a point to make here that differs from the one that I understand Jon plans to make.
My response to the above claim about Rockefeller is that he had no power to order anyone around. He had neither slaves nor political power. Rockefeller’s power to “order” people about was no greater than is my power to “order” people about.
Now it’s true that Rockefeller, because he owned and managed a large company, hired (at wages voluntarily accepted) people to work for him. It’s also true that most labor contracts give to employers some discretion to determine the particular task that any worker will, at any period of time, perform for the firm. But here’s yet another truth: Rockefeller was a remarkably successful businessman – which means that he used his contractually purchased discretion to direct his workers in ways that he believed were most likely to enhance the net present value of his company.
Put differently, Rockefeller’s discretion to “order” Standard Oil employees about was really the discretion (that he paid to possess) to manage his firm profitably. He himself, as an executive in a highly competitive industry, was tightly constrained in what he could do with his employees. That discretion was not used to satisfy Rockefeller’s consumption ends; it was used to ensure that his firm was as successful as possible at besting his rivals at attracting and keeping consumer patronage.
Of course, Rockefeller’s success on this front is what yielded to him his monetary fortune. Yet it is this very fortune that I argue was, by the standards of what can be acquired with the income of an ordinary American of 2016, not exceptionally high.
It’s possible that those who write of Rockefeller “ordering” people about have in mind, not his Standard Oil employees but, instead, his household servants. Well, yes, such servants – unlike his Standard Oil employees – mostly served Rockefeller’s consumption ends. But much of what those servants did for Rockefeller in 1916 is today done in middle-class American homes by machines that we ordinary Americans “order” about. Tasks such as laundry and washing dishes are done by machines today. Expert performances of music in our homes are also done by machines today. Keeping the transportation vehicles at the ready is done by the modern technology that is standard on automobiles. Delivering messages is done by texting.
Yes, yes, yes. It is indeed true that Rockefeller in 1916 could afford to pay for legions of people to do his direct bidding – to do hand-stands at his command, or parlor tricks, or clown acts, or whatever else that Rockefeller might have fancied to see other human beings do. In contrast to Rockefeller 100 years ago, no middle-class American today can afford to hire legions of people to be, in effect, his or her play toys. True dat. But against this ‘disadvantage’ that we ordinary Americans suffer today relative to Rockefeller of 1916 must be weighed the countless advantages that we take for granted that Rockefeller, for all of his money, couldn’t have possibly experienced in 1916.