Wednesday, June 11, 2014
Schulman, Sons of Wichita
There are not two but four Koch brothers—Frederick, the “I’m not gay” firstborn who eschewed business for the arts; Charles, the quintessential hard-nosed businessman and head of Koch Industries who spearheads the fight for the political soul of the country; and twins David, “an endearing figure on the New York society scene” and Charles’ ally, and William, the litigious Koch empire spoiler and America’s Cup winner.
To understand the Koch brothers it is necessary to understand their father Fred, since the old saying “The apple doesn’t fall far from the tree” is particularly apt in this case. His pathological anti-communism, which he saw lurking behind American foreign aid, modernist painting, the American civil rights movement, government handouts, and labor unions; his distrust of government in general; and his sometimes questionable business practices became, along with his vast fortune, his legacy to his sons.
Fred was an engineer with an MIT pedigree whose firm Winkler-Koch touted a unique cracking method for oil refiners. The problem was that both the lower court and a three-judge panel in the Third Circuit determined that its process was a knockoff. As it turned out, however, Universal Oil Products, which had brought suit against Winkler-Koch, wanted to be sure of a favorable ruling and bribed one of the appellate judges. The patent infringement verdict was ultimately vacated. This two-decade legal battle, a saga that “his sons drank … in along with their milk at the family dinner table,” sent “a strong message that the U.S. legal system was deeply flawed.” (pp. 30, 32)
Worse, “the toll that the Universal Oil Products battle took on Winkler-Koch’s revenues had pushed Fred and his partner out of the United States and into the welcoming embrace of Josef Stalin’s Soviet Union.” (p. 35) In 1929 Winkler-Koch signed contracts to design and construct fifteen oil cracking stills in the U.S.S.R.
The following year, when Fred went to the U.S.S.R. for a month and a half to check on the progress of his engineers, he was appalled at the conditions in the country. He was also subjected to the incessant taunts of his “minder” that the communists would infiltrate every aspect of American society. “The schools, the churches, the unions, the military, the government—all were communist targets.” (p. 37) When he returned home, Fred began a fervent anti-communist campaign.
His zeal eventually brought him to the notice of Robert Welch, founder of the John Birch Society. Fred joined the Society’s National Council and “threw himself more vigorously than ever into the fight against communism.” (p. 43) Although many people viewed him as “a red-baiting crackpot,” he was undeterred. For instance, he tried, and failed, to remove an admitted communist from the faculty of MIT, where three of his sons were studying.
“Of the four brothers, Charles most heartily imbibed their father’s hard-line political views…. Like his father, Charles occasionally speechified about the dangers of collectivism and the encroaching welfare state. … With Koch family friend Bob Love, Charles opened a John Birch Society bookstore on Wichita’s East 13th Street, down the road from his family’s compound. He curated a section there on Austrian economics (a school of thought that heavily influenced libertarianism) and enjoyed introducing customers to the works of economists including Ludwig von Mises and Friedrich Hayek.
“A family acquaintance recalled visiting the Koch family’s home one day in the 1960s, carrying a dog-eared copy of Ernest Hemingway’s The Sun Also Rises, the assigned reading in a college literature class. When Charles answered the door, his eyes lingered on the book’s cover. After an uncomfortable pause, he finally asked the visitor to leave the Hemingway book outside, since it could not enter the house.
“'Is there a problem?’ the puzzled visitor asked. It wasn’t like he was carrying a copy of Tropic of Cancer.
“'Well,’ Charles explained, ‘he was a communist.’
“The guest entered. Hemingway remained on the stoop.
“Communism may have been sweeping the world, but there was at least one threshold where, by God, it would not cross.” (p. 52)
Fifty years later Charles and David Koch are still fighting to remake America, promoting free-market economics and mainstreaming libertarianism. And with record revenues of $115 billion in 2012, Koch Industries can keep their dream alive.