to play to Koch’s advantage. “When the value of assets out there in the economy hit a low point, that’s the best time to buy. It’s pretty simple economics,” Markel said.
Koch made full use of this strategy. It began to profit from market downturns by snapping up its competitors. This was most evident in Koch’s giant oil gathering and pipelines division. Roger Williams, the vice president over pipelines, oversaw an expansion funded by the cash that Charles Koch was pouring back into the company. Koch’s pipeline network grew from six thousand miles of pipe when Williams joined in 1969 to roughly fourteen thousand miles by 1976. The company purchased some of the pipe from other firms, and it built between seven thousand and eight thousand miles of new pipeline on its own. This expansion helped make Koch the single largest purchaser of crude oil in the United States by the 1980s.
Even as Charles Koch streamlined his own organization and reduced debt, he operated in a political and economic world that was moving in the opposite direction. Every industry in which Koch operated was becoming subject to new and onerous regulations, price caps, and government controls emanating from Washington, DC. Charles Koch had always been something of a political dissident, espousing views that were outside mainstream politics. But during the early 1970s, his views hardened and prompted him to take action.
During this time, Koch came to embrace a concept that was embedded in the philosophy of thinkers like Hayek and von Mises, but that was rare in the thinking of corporate CEOs. He realized that there were not two separate spheres of American life: the public sphere of government action and the private sphere of business enterprise. Instead, there was only one tangled web of a nation’s political economy, the deeply interlaced workings of government policy and corporate structures. One intimately affected the other.
This reality was painfully apparent in the oil business. Government intervention affected every aspect of the industry. And the intervention reached its peak as Charles Koch was building his company.
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On November 7, 1973, shortly after the Arab oil embargo, President Richard Nixon proposed a sweeping government response. The government would cut the “allocations” of heating oil for homes and businesses by 15 percent, essentially rationing the vital fuel. Nixon said utility companies would be banned from switching from coal to oil as a fuel source. He would ask Americans to turn down their thermostats by about six degrees. He would ask Congress to pass a bill that would lower the national speed limit to fifty miles per hour, curtail the hours that shopping malls could be open, and impose other rationing measures.
“It will be essential for all of us to live and work in lower temperatures,” Nixon said during a televised speech. “Incidentally, my doctor tells me that in a temperature of sixty-six to sixty-eight degrees, you’re really more healthy than when it’s seventy-five to seventy-eight, if that’s any comfort.”
It might seem odd that a conservative Republican president would impose price controls and energy rationing, but Nixon’s actions reflected the settled beliefs of American political life in the early 1970s. There was a broad consensus in America that could be called “the New Deal Consensus,” tracing back to the 1930s, when Franklin Roosevelt created a new regulatory regime. The New Deal reshaped everything in America’s business world. It replaced unfettered markets with price controls in some cases. It gave unions very strong protections that helped workers organize. And, maybe most important, the New Deal convinced Americans that the federal government should play a large and interventionist role in the economy. It was loathsome to acolytes of Hayek and von Mises.
FDR’s actions were a response to decades of economic stagnation, when the government largely refrained from regulating markets and large corporations; an era that was defined by the laissez-faire, or hands-off, approach to regulation. During that time, the economy was dominated by a new breed of large corporations whose operations crossed state lines and transcended the control of state-based regulators. The federal government, the only entity powerful enough to constrain the companies, declined to do so on the theory that it would harm economic growth. The government was also constrained by a conservative US Supreme Court, which struck down regulatory efforts after a seminal decision known as the Lochner ruling. In 1905, the court ruled against New York state regulators who tried to penalize a bakery owner named Joseph Lochner. The state wanted Lochner’s employees to work