The United States of Koch

Listen to this episode

S1: This ad free podcast is part of your Slate Plus membership. This is live at Politics and Prose a program from Slate and Politics and Prose Bookstore in Washington D.C. featuring some of today’s best writers and top thinkers.

S2: We’re here to listen to Christopher Leonard talk about his new book Coco land The Secret History of Koch Industries and corporate power in America awarded the J. Anthony Lucas work in progress award. Leonard’s monumental work of investigative reporting charts the five decade rise of Koch Industries one of the largest privately held multinationals in the country and one of the most secretive. Coke owns companies and businesses ranging from energy to chemicals to banking. Its CEO Charles Koch and his late brother David who passed away just last week were together wealthier than Bill Gates As Leonard shows. The brothers have consolidated power by practicing a single minded attention to the bottom line which has also meant quashing unions widening income inequality thwarting action on climate change and making capitalism a deeply alienating force for many Americans.

Advertisement

S3: Here to talk more about it please help me welcome Christopher Leonard Allo.

S4: Hi. Thank you so much for coming out on a Friday night of a three day weekend I really appreciate it. I’m Chris Leonard and so we’ll talk about Coke land and I’m sorry to say there was a much easier way for all of you to learn about Coke Industries.

S5: All you have to do is go on Twitter or Facebook and send a message with the word Coke land in it and then for the next three days every banner ad you see will be Coke Industries public relations stories your Twitter feed will be smiling pictures of Charles Coke and I’m not even kidding I hear that from a lot of readers so the company has been very interested in getting its story out over the last couple of weeks and you know in the time I have tonight I don’t want to just try to walk through the whole book or give you these kind of soundbites that have kind of been saying over the last couple weeks. I’d like to just do two things give you an overview of the book talk about why I think Coke Industries is such an important institution and why it illuminates so much about our country. And then just tell you the most interesting part of the book because time is limited and I’d like to leave a lot of time for conversation. One of the best parts about being a reporter is that you get to meet the most extraordinary people. It’s just amazing. And this book was such a great chance for me to meet so many interesting people across the country and a lot of these people particularly the people at the heart of this institution Coke Industries changed the way I see the world. And I’d like to kind of to the degree I can transmit to you what they taught me how they see the world and convey that part to you which I think is I don’t know the most interesting part that I experience. OK what the heck. Why would I spend seven years of my life writing about this industrial conglomerate based in Wichita Kansas that refines oil makes fertilizer and is engaged in a lot of businesses that might be considered kind of boring back in 2011 I was a business reporter in St. Lewis and I had a lot of pressing concerns when I thought about the American economy. I was concerned about income inequality the role of corporations in our public life and our public policy. I think it’s pretty clear that we live in an era when corporations have more influence more power over our problem of public policy than they’ve had in a hundred years. And our economy you know you hear this like cliché phrase rigged all the time but there’s something going on in the structure of our economy. We’ve experienced 10 years of economic growth. We’re closing in on the end of a decade of economic growth. But statistically it is undeniable that a huge portion of Americans in the middle have not advanced economically over these 10 years when the overall direction has been upward. A lot of Americans are still at square one where they were in August of 2009. Why is that. Our economy’s growing productivity is increasing but a lot of these gains are captured by very small group of people. And I kind of had this realization that Koch Industries was a perfect way to explore this story. It was the perfect narrative to tell this story because it’s so diverse it’s so amazing this corporation. First of all it’s not publicly traded OK. There’s no stock. So CNBC doesn’t talk about it CNN doesn’t talk about it. It evades a lot of attention but it is enormous. Its annual sales are bigger than that of Facebook Goldman Sachs and U.S. Steel combined. And it’s not just the size of this company that I think makes it so important it’s its sweep it’s the scope of what it does. Coke industry specializes in these kinds of businesses that make modern civilization work. This is the stuff one level behind the visible world as I put it. OK. Coke sells the fuel we use to drive to work. It makes the building materials that are probably in this very building right now. It makes carpet windows. It makes the material in our clothing like nylon spandex lycra the stuff in baby diapers and exercise clothes. If it’s the third biggest maker of nitrogen fertilizer in the world and fertilizer is one of those things that none of us think we buy. But it’s literally the foundation of our modern food system. So if you eat where clothes drive to work you support Coke Industries OK. This company is behind the scenes helping make this system work.

Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

S6: So what that means is that when you write about this company it just creates this incredible portrait of our economic system. You can write about these blue collar manufacturing workers at Coke Industries Georgia Pacific Division who are in labor unions that have been marginalized and beaten back and torn apart and you know we can talk about that but I’ve I’ve I’ve interviewed workers whose lives are getting more and more onerous and they’re not making more money than they earned in the 80s.

S5: When you adjust for inflation at the same time with coke you can write about these high flying financiers who who one person might earn four million dollars a year trading derivatives you know the financialization of our economy something we hear about all the time. And strangely enough you see it exemplified inside this company that supposedly an oil company. OK. Coke has built a global network of trading desks that rivals anything operated on Wall Street by JP Morgan or Goldman Sachs. You can also when you write about Coke right about these private equity deal makers who work inside the company and there are these sort of diplomats to this new form of American capitalism that I think has been deeply alienating to people they go out across the economy look for companies to buy they buy the companies with borrowed money the borrowed money is put on the company itself and then the company earns it off if you will and pays back the debt. This entails cutting costs to boost profits whether that’s offshoring jobs making people work more for less money. You see all of those things at play. And then finally when you write about Coke you’re writing about one of the largest most sophisticated corporate influence machines in the United States. You know it’s predictable for me to get up here and exaggerate about Coke but I think the fact is this company’s political operation is unrivaled in the United States its unrivaled in its sweep and its influence. And I can describe that later for why I believe that. But all these things are under the the roof of this one corporation. But what I didn’t even realize when I got into it that makes this company such a perfect profile is is the is the individual who’s at the top of the pyramid and who’s driving this story. This guy named Charles Coke who took over Coke Industries in 1967 when he was 32 years old and his dad died suddenly of a heart attack. Charles Koch has been CEO ever since. I don’t think there’s any CEO in America who’s held the job that long. He got the job when Lyndon Johnson was president. And Charles Coke has very particular views about how corporations ought to work and in fact how society ought to work. And he represents an extreme pull in this bitter bitter debate we’re having in the country right now about what role government ought to play in our lives and particularly what role government ought to play in the markets. Is the government there too provide us a safety net or is it there to sort of stand out of the way and let the free enterprise system deliver prosperity. I believe we live in an age of contention and frankly dysfunction when we don’t have an answer to this question. And Charles Koch certainly has a very very firm view about where it ought to be. I mean the federal government should essentially be non-existent I believe in Charles Coke’s eyes. He’s he’s a hardcore free market libertarian and we can get into that later. So you know when you look at his life and what he’s done to reshape American politics it really illuminates this debate that we’re having and there’s a reason I call the book Coke land as you can see Coke land describes this institution itself which truly is like its own little world. I mean Charles Coke has this philosophy called market based management when you get hired to Coke Industries you’re going to spend the first four days of the job in a basement at Wichita headquarters learning the vocabulary the the concepts that the 10 principles of market based management so the people inside this organization they literally speak their own language. They have their own values and the company itself is like this private world but they are very much working to make the United States reflect the realities of Coke land and ice and you know toward the end of the book you write about what’s happened in this country right now and it does feel like it reflects what is going on inside of Coke land so that’s why I wrote the book and there’s just so much to go through in terms of the history because Charles Coke has no illusions and he’s very clear about this. That economics and politics are not separate spheres. These are one thing.

Advertisement
Advertisement
Advertisement
Advertisement

S6: They’re like two strands of DNA tied up together. He has been cognizant of that fact since since the 60s when he took over the company and what that means is that this book is also kind of an economic history of the United States.

S5: And you see these big policy errors we’ve had the sort of hands off laissez faire era of the early nineteen hundreds when we had the robber barons and it was the Gilded Age up through the passage of the New Deal and the federal government stepped in and broke up monopolies empowered labor unions regulated Wall Street then up through the chaos of the 1970s the 1980s and then this strange strange world we live in today that is neither free market nor big government.

Advertisement
Advertisement

S6: It’s hard to get your hands around. But you know Charles Cook has a point that our government is larger and has more rules today than it ever has the social safety net programs are larger than they ever have been. But the system has been deregulated at key points that benefit a few big companies. So that’s that’s kind of the underlying story at the heart of this. But I mean what the heck we’re here. It’s Friday night at a bookstore. I don’t need to tell you like the whole thing. I’ll just tell you the most interesting part to me and this is the part that I think describes what’s at the heart of this institution strategically Coke Industries both economically and politically. And I’m going to get there in the end how this translates to politics I promise.

Advertisement

S5: But let’s start at the beginning. I want to talk to you about trading this word trading Charles Coke talks about a so-called trading mentality. And I came to appreciate just the depth of that word. And what that means. Trading I really think it’s a way to see the world in a way to operate in the world. And I’ll tell you what the folks I interviewed the trading division of Coke Industries is the black box inside the black box. You know I don’t know if I have any you’ve seen pictures of Coke headquarters in Wichita is this. It’s a black building in the middle of nowhere.

Advertisement
Advertisement
Advertisement
Advertisement

S4: It’s it’s black granite with opaque windows. This is by design that reflects the corporate culture. It is literally now surrounded by a 10 foot tall earthen wall. OK.

Advertisement

S5: This is a company that’s inside a shell of secrecy and the reasons for that are strategic since the 1970s Coke has been one of the largest traders of global energy supplies in the world. What that means is you know it buys crude oil and sells it back in the 80s it was the biggest domestic purchaser of crude oil in the United States to drive out to the wells pick up the oil take it to market it was one of the largest buyers and sellers of super tankers full of crude coming from the Middle East to the United States and I remember interviewing this guy Ron Howell who is one of the earliest traders at Coke and he just described this business as a stomach churning just ulcer inducing. He kept using words like savage and whipping an awful. He retired when he’s like 34 because it was so brutal. I’d like to point out he had the money to retire at 34 OK. And we’ll get to that in a second. The energy markets are brutally volatile. It’s not an easy way to make a living. And the key to success when you’re trading energy like this is to know more about the world as it exists right now than your trading partners know and that your competitors know. And Coke happened to be in a perfect position to learn about the world because it operated huge chunks of our energy system and operated the pipelines it ran the trucks it ran the tankers.

Advertisement

S6: So Coke would know for example that its refinery up in Minnesota was about to shut down and then it could trade off that knowledge that the refinery was about to shut down and that supplies were about to be tight and the traders at Coke told me that back in the 1970s and 80s they realized the most important resource they handled wasn’t coal or natural gas or crude oil it was data.

Advertisement
Advertisement
Advertisement

S4: It was information it was knowledge about what was happening out there what was about to happen and then having an extremely sharp view for example of what a barrel of oil was worth. If you know what it’s really worth you can outbid your competitors.

Advertisement

S5: You know you can buy it if they’re selling it for less than it’s worth. And then you basically wait for the world to wake up and know what you know and then you can sell it as that price goes up. So let’s let’s fast forward a little bit to the year 2000. Coke has built a trading operation in Houston Texas. Coke bought a natural gas company in the late 90s and they didn’t care about the pipes. It was a natural gas pipeline company. They didn’t care about the pipes for the gas. They just wanted the information because this pipeline system was plugged into our energy system and all these different notes were gas was bought and sold so they could take that data and take it into the trading desk in Houston at the same time they would tap into these data bases that recorded like snowfall on mountains in California. They would they would tap into the Park Service database because snowfall is a leading indicator of snow melt a leading indicator of reservoir levels at these key points in California a leading indicator of electricity prices. So Coke is taking that data in. It’s also getting the customs manifests from ships coming into the U.S. Gulf Coast. That tells you exactly what kind of oil is coming in how much and who’s buying it. You can reverse engineer that knowledge that information rather to determine exactly what your competitors are running and what it would be worth and what they’re selling. You’re taking in consumer data from Cleveland to figure out if people are confident enough to buy a washing machine this weekend all. Oh my gosh. And then Coke hired the sharpest meteorologists from The Weather Channel brought them in-house to predict the weather for cocoa traders so that their weather predictions were just a tiny bit sharper than the public predictions. And they knew just a little bit more how cold it was going to be in Ohio and what electricity prices might be. So let’s look at the coke trader who’s going to act on this.

Advertisement
Advertisement
Advertisement
Advertisement

S6: OK a Coke trader is not what you picture as the Wall Street person in a suit driving an Italian sports car snorting cocaine and living the high life a Coke trader almost always will have graduated from Texas N.M. Oklahoma State University of Kansas Wichita State. They show up to work at five thirty a.m. wearing a golf shirt and khakis.

S5: I’m thinking now of this guy Chris Franklin who I interviewed for the book who started out writing software programs for pipeline systems really complex stuff. These are people that are comfortable sitting all day in front of spreadsheets and thinking about numbers each trader is going to be joined by a team of four or five analysts who are taking all that data. I just learned also staring at their own monitors full of information and and gaining knowledge about what’s about to happen and they’re going to trade off of it I need to point this out when Coke makes a trade.

Advertisement

S7: Huh.

S8: I interviewed this guy and we sat down at a table outside a coffee shop and we talked. Our first interview was eleven hours long and I staggered away from that interview.

S4: I told him stop giving me information about Coke Industries my brain is full I can take no more. And I remember him talking about shiny objects you know the rest of the world is out here. It is amazing how much attention is focused on quarterly earnings of big companies the countless millions of eyeball hours that are attached on this near horizon of what companies are going to perform in the next three months in the next three months after that the coke trader takes that in.

S5: It’s not unimportant but they’re focused on the machinery beneath the surface that’s not getting attention. So here’s the kind of trade a Coke trader is going to make. They’re not going to make a big bet that oil prices will go up. That was described to me as a kind of bet I would make frankly. It’s a sloppy bet it leaves you exposed to risk. It’s binary it’s win or lose. It also has a ton of variables or might be a bombing in the Strait of Hormuz can change oil prices the coke trader is going to make a bet that the price of oil at this tank farm in Louisiana is going to go up in comparison to oil sold in the northeast. It’s called a basis spread bet so your coke traders sitting there all day laying these basis spread bets relatively small a few million bucks at a time. And the goal is to win seven out of ten times.

Advertisement
Advertisement
Advertisement
Advertisement

S6: You’re not looking for that White Whale bet that’s going to deliver you’re looking to just win every day seven out of ten times and accrue breath taking profits like Brendan O’Neill who was an engineer at a Coke refinery earning 50 grand a year goes to the derivatives trading desk and he’s earning four million a year. He didn’t get a P H D. He literally read a book that was the equivalent of like options trading for Dummies and then he’s making four million a year. That’s the kind of profits that you can generate in this world this explained everything to me about Coke they’re trading every day they’re buying other companies with this kind of theory and this kind of platform’s kind of strategy and and I told you I was going to get to politics. I think that the DNA of this organization has been exported directly to the Coke political network and I know that the coke political networks of probably more interest to folks here in D.C. when Charles Coke got into politics he used his advantages.

S5: He used this model he uses trading mentality you know when I started the book I thought when I wrote about politics I’d be writing about campaign donations and campaigns and super PACs and Citizens United. Boy was I wrong. All of the political chapters start the day after the election. This this is where the granular complex under the surface world of governing happens. This is where Coke has their expertise. This is where they exert their influence. Coke essentially built a map of political power in the United States. Picture like a pipeline map. You’ve got the state legislatures. You’ve got the court system. You’ve got the United States Congress. All these things working in concert with each other. And so Coke just as they’re seeking to make bets based on their superior knowledge they’re gonna influence the machine where they have the advantage.

Advertisement
Advertisement
Advertisement

S6: For example they were way ahead of the curve influencing state legislatures across this country because as I described political power on the state level it’s a dramatically undervalued commodity.

S4: You can buy a state Senate seat for like fifty thousand dollars.

S8: It’s really not that much. And then you can start affecting policy on that level.

S4: The coke political network I will quickly describe it it’s got the largest registered lobbying shop in the United States one of the largest registered lobbying shops in the United States. It’s got a donor network that pulls together hundreds of millions of dollars and that might donate as much money during a campaign cycle as an actual political party.

S5: Along with that you’ve got this constellation of think tanks that Coke has created over the years that seed this atmosphere here in Washington with Coke’s ideas and makes them seem very serious frankly.

S4: And then finally you’ve got this nationwide activist group called Americans for Prosperity and I call this like the boots on the ground network. I think this is what sets Coke apart from Wal-Mart General Electric Lockheed Martin you name it. Coke can get people knocking on doors in Oregon. It can load up buses with angry voters from West Virginia Missouri North Carolina. It can bring them to Washington D.C. it can deliver those angry voters to very specific congressional offices that Coke’s lobbying shop has identified as a vulnerable lawmaker. And so when you when you put this multifaceted complex machine against a public policy problem as Coke has done repeatedly you get results and you win. And again I want to say it’s modeled on the trading mentality. You know I laughed when there was these stories about Coke backing out of the presidential election when Donald Trump was nominated. OK that was a big deal coke doesn’t like Trump.

Advertisement
Advertisement
Advertisement

S5: Trump did up in American politics but the bet on the president is like the bet that oil prices are going to go up. It’s binary it’s win or lose it’s super expensive. There are tons of variables. It gets all the attention it’s the shiny object Coke’s not that stressed out about it because when Donald Trump got to the White House he had to confront this machinery again the pipeline network of legislation to enact his agenda lo and behold guess who was there.

S6: The coke network. They they derailed. They they played a vital role in derailing the repeal and replace effort on Obamacare. They transformed the Trump tax reform plan into the Coke tax cut quite expertly I think. And you know this is where their influence is felt. And this is where they’re politically engaged. And when I say reporting on this has changed the way I see the world.

S7: It’s made me want to engage.

S4: You know you read the shiny object every day in the news. You know Boris Johnson is antagonizing Parliament Kristen Gillibrand dropped out of the race Donald Trump said something wildly offensive about a group of people. All this stuff is super important. It’s the turn though and Coke is engaged beneath that. At the at the machinery level. And Coke is going to be engaged when the election is over and all the eyeballs go elsewhere. And I think that you know if you agree with the coke political platform just sit back and relax because they’re gonna be taking care of it for you. If you disagree then I think it’s important to think about getting engaged and in a rigorous way learning about how the system works and being engaged the day after the election when these policy debates are happening with almost no public attention. So there’s my monologue.

Advertisement
Advertisement
Advertisement

S9: I have delivered a book talk and I think that it would be great to have more of a conversation now if there are any questions about an you’re talking about an alternative to the coke from the other side of the perspective. Do you see one of those. And the second part of the question is David just died. Charles is getting old. What do you see is Chase going to continue what Charles is doing.

S6: OK. Thank you so much. I apologize if my answers are a little long. I think most of that I want to make this more of a conversation. OK. A few questions there isn’t there. Is there an alternative to the Coke network. You know the American political influence system is like super volatile and crazy right now. You’ve got the Mercer donors out there on the ban in America first train. You’ve got the Soros network. I do think it’s a bit of a false equivalency to say that the Soros network is the equivalent of the Coke campaign. The dollar figures just don’t match up that the coke network gives so much more and drives so much more so then you asked this important question David Coke just passed away.

S5: He owned 40 percent of Coke Industries. He was sort of an equal partner in this political machine that they’ve built. What happens now. Where do we go in the future. And you all first of all I would like to say David Coke was not a significant driving figure in the story of Coke land. Well I would sit in the basement of executives in Wichita Kansas interviewing them about Coke Industries for a long time. People did not bring up David Coke.

Advertisement
Advertisement
Advertisement

S4: He lived over here on the East Coast. He lived a very public life of a billionaire philanthropist. He got a lot of attention. Meanwhile Charles Coke was back home in Wichita briskly building a private corporate empire. So Charles Koch drove the train. David Coke passing away as personally tragic as it is for his loved ones and his family. It won’t have an operational or tactical impact on either the company or the political network. What will is when Charles Koch steps away. Charles Koch has a son born I think in 1977 named Chase coke. There’s a chapter in the book called The Education of Chase Coke. When this kid was born somebody hung up a banner in corporate headquarters that said Welcome Crown Prince. That’s that’s that’s the burden he’s lived under his whole life. Charles Coke on Sundays would make this poor kid frankly listen to these economic lectures in the study. The family study he cultivated Chase Chase has gotten an education in this institution that is unrivaled. I think Chase will be CEO one day although there might be an interim CEO in the middle and the huge question hanging over this is what is Chase Coke going to do. Is he going to be the fighter that his father was on these libertarian causes. Is he going to be the driving force that you know made a company so giant.

S5: I don’t know you know all trace Coke’s initial forays into politics appear to reflect his father’s belief system. But Charles Coke was sort of a once in a generation fighter the prologue of the book is called The Fighter.

S8: He has a spine of steel unmovable ideology and I don’t know if his son is going to be the same.

Advertisement
Advertisement
Advertisement

S7: And it’s just a question mark. I don’t know is the short answer.

S10: So yeah I found the book to be very well balanced.

S11: I think you lived up to your journalistic ethic. So I’m curious can you summarize what the PR agents from Coke are saying about it.

S12: I can. It’s very nerve wracking if someone here who’s read the book by the way. It’s a lot easier for me to talk about it.

S6: Coke industry’s public relations team you know we’ve had a long marriage is what I would say goes back to 2013 and I’ve seen cycles of teams go through. They were very transparent and they engaged me and they gave me access to Wichita and they gave me access to senior executives. And in February I gave them two hundred and sixty pages of material describing what was in the book with a focus on what was negative. I said here’s everything you’re going to be angry about I told you in the beginning it was warts and all but some of the water an entire chapter and it’s a long chapter and we had a can they engaged they engaged in good faith.

S13: We had a months long conversation that did get contentious at the end because we came down to fundamental points of disagreement.

S6: I stand by everything in the book they put forward their point of view and then since the book has come out they have been absolutely radio silent. And I was kind of joking at the beginning about Twitter but Coke has been very proactive in getting out what they see as their positive story. Charles Coke will do an op ed in The Washington Post talking about can’t we all get along. Bipartisan solutions. The reason I say that we’re kind of obvious sarcasm is you’ve got the historical record that goes back to 1974 when Charles Coke was raising money for the Libertarian Party sent out a letter saying he was disgusted with the Republican Party because they’re big government socialists now those are my words but he’s saying that they are just as corrupt as the Democrats. This is the reality. Bipartisanship is not part of the coke plan. It is part of the coke story today that’s being put out there. So anyway I don’t mean to get heated about it but like they’ve been very proactive in getting out their side of the story and frankly I deeply appreciate that. I mean there’s a lot of evidence that when the great Jane Mayor released her book on coke dark money that she faced a lot of contentious bad stuff. And so I think that they’ve matured as a company public relations wise and they realize it’s better to flow out the positive than engage with the negative.

Advertisement
Advertisement
Advertisement

S13: And I really do need to kind of like I deeply appreciate your comment that the book was fair I would not have written a book about an institution that I just wholeheartedly disrespected.

S6: There’s a fascinating story at the center of Koch Industries. Charles Koch is a complex fascinating person that I think people are gonna be talking about in 30 years and it’s not a simple black and white thing.

S8: And I didn’t go into this wanting to write a simple black and white thing. So that’s very important to me. Thank you. Thank you.

S6: It’s my recollection Fred coke was in Russia. Yeah. The 30s and 40s. Did he become a real capitalist before or after Stalin paid him for his help and not the Russian oil industry. That’s right. OK. So Mr.. Mr. patriarch Fred Coke the John Birch Society co-founder also spent some time over in the Soviet Union building oil refineries for Stalin and made a lot of money doing it. And then I think he also was involved in. Look I didn’t look into this Jane Mayer reported. He also helped build an oil refinery in Nazi Germany in the 30s when there are a lot of companies doing that. Here’s Fred Coke’s story. He came home. He went over there because business was bad in the United States. The other big oil majors were locking him out of deals. He goes over. And it was in Russia that the scales fell from his eyes and he really realized the evil of totalitarian communism. I got his book A business man in the Soviet Union. I think it’s called it’s this little pamphlet and he talks about driving around town with this interpreter who eventually got executed by Stalin. And the story is that he came home as a convert to right wing free market anti-communist causes and that that was his conversion moment. So there’s no kind of like internal mental tension or sense of hypocrisy or anything in their mind. He went over there he saw it was evil he came home and he fought against communism through the John Birch Society every step of the way is the story that they have.

Advertisement
Advertisement
Advertisement

S14: I’m for capitalism and the free market but I’m for the real regulated version of these what kind of regulation will it take to limit the pernicious influence of the Coke and other corporate political influence machines.

S6: OK so I’m going to extend this event an hour.

S12: I hope everybody’s ready.

S6: Here’s my short answer to your question of like you love capitalism but regulated capitalism which we’ve had in the United States. Donald Trump talks about making America great again. I think most people in their mind picture economically like the 60s maybe the 50s maybe economically when you could like have a job have a car on a house not worry about your job and offshore that period in American life was defined by a radically interventionist federal approach to markets called the New Deal which was actually a lattice work of a lot of different laws. That was a response to an earlier era when we had huge corporations that spanned the continent for the first time that were very lightly regulated and under the new deal banks were broken up. Wall Street was regulated monopolies were tightly controlled. Critically labor unions were empowered. Thirty three percent of Americans belong to a labor union and all coincidentally working life look totally different than it looks today. And the new deal fell apart in the 1970s for a lot of reasons. There was a lot of economic volatility there was inflation. There was three recessions I think during the 1970s and people lost faith in government and then all these programs have become top heavy. I guess here’s what I want to say. There was a period in American history when the federal government intervened in certain ways dramatically and the market broke up banks regulated monopolies empowered labor unions and the economy worked really well for the most people it ever has. And then capitalism I think wants to revert to a mean where wealth is concentrated in fewer and fewer hands. Monopolies dominate a lot of industries. That’s sort of the natural shape. And so I think that as we’ve had these decades of economic confused or black political economic confusion from like the Clintons and Bush and Obama time this is all in the book it makes a lot more sense on the page and what I’m saying right now. We’ve reverted to a mean of stuff we saw in the early nineteen hundreds. Big monopolies tons of money in politics pollution poor working conditions economic growth that doesn’t translate into widely shared prosperity. It’s like the same thing. So there’s no single law you can pass. It’s an approach. Oh gosh there’s a great book called American amnesia by Jacob Hacker and Paul Pierson the talks about this whole thing that we had this system in America. We kind of forgot because it worked so well that we walked away from it. But it’s this thing called the mixed economy where the federal government is playing a role in taming the worst impulses of capitalism. And I’m gonna get to your question in a second but today we’ve got the worst of all worlds if I could make one little point. When when the economic system is in contention and dysfunction as it is today with war between these two sides in this debate the people who benefit most from that dysfunction are the entrenched incumbent players in the economy who benefit from the status quo. The Koch brothers wealth Dave and Charles Coke’s net worth doubled during the Obama administration. OK unlike a lot of you I’m an avid reader of Coke’s internal newsletter discovery. And when you read that newsletter you would think that the Obama years were when socialists were on the march across the country confiscating property taxing everybody to death. The Koch brothers doubled their wealth in that time. If Donald Trump serves two terms I would not be surprised if Charles Koch doubles his wealth yet again because dysfunction isn’t neutral. It benefits companies that own oil refineries. I mean I haven’t even touched that and I won’t because we’re getting close but when you own oil refineries you’re generating massive profits because the system around those refineries is dysfunctional and they’re very monopolistic. OK.

Advertisement
Advertisement
Advertisement

S15: I’m wondering what is stopping an enormous energy company like Koch Industries from making investments in fossil fuel or in renewable energies. Now you’re sort of getting ahead of the game.

S6: You have a habit with money that they can sort of burn such a great question why don’t they just build giant wind farms and get into solar and make solar panels and start to transition and we’re hearing a lot of rhetoric around transition from BP and Chevron with the shiny green logos and all this stuff. Why can’t that just happen and this goes back to the question of in 2010 why did coke fight truly a scorched earth take no prisoners campaign against a system that would have put a price on greenhouse gas emissions. The Democratic Congress under Nancy Pelosi tried to pass a Republican bill called cap and trade that would have put a price on greenhouse gas emissions and let companies trade the right to pollute a free market solution to a very serious environmental problem. Why did they fight that. Why not cap and trade and then start moving some of that oil money into solar and wind. The best answer I have for you is economic inertia and I’ll explain it. Coke wasn’t born totally neutral when Charles Coke took over the company in 1967 they were the largest crude oil gatherer in the United States. They owned a refinery they were about to buy another refinery. They were trading crude oil supplies. There’s inertia to that. The coke strategy is to invest in what you know so they build and build. And now they’ve gotten massive fossil fuel holdings. So let’s look out into the future if you invest in wind and solar and you contribute to this thing called peak demand and oil demand starts to fall. Or if you know God forbid somebody passes laws that put a price on carbon emissions or limit carbon emissions the value worth billions of dollars that you’ve got sunk into these massive refineries massive pipeline networks massive trading networks around the world trading these fossil fuels the value of all those assets that you own starts to go down. And then the future value of the revenue and profits that are going to go through those assets starts to go down. I think over 30 to 40 years the dollar losses in that are measured in trillions. T

Advertisement
Advertisement
Advertisement

S13: not be so it’s not like it’s an easy transformation for any company to do.

S16: And you know the policy history of Coke shows beyond question. They have simply fought to stop a price being put on carbon. There’s just no doubt about that. Now what they’re thinking right now tonight in Wichita is you and I are talking about this. I don’t know but there’s no evidence so far that they’ve moved toward that transformation and the costs for doing so would be really enormous.

S13: That’s not an easy switch. So I hope that makes sense.

S5: So I don’t know.

S17: Oh yeah. You picture a company with people who are really fact focused in the basement making rational decisions. And if you go down the street here at the Smithsonian you find all these exhibits that deny Oh evolution and global warming and an advocate against doing. You think that does that they nurture. It seems like they’re actually doing things to change the way we can whether we can react to these things.

S6: And I think correct me if I’m wrong I think you’re pointing at this disconnect and a question I get all the time Charles Koch has three master’s degrees in engineering from M.I.T. he’s a brilliant brilliant person. Doesn’t he realize that climate change poses a huge threat. That science is real. And then if that’s the case how do you fight regulations on climate change. And I don’t have an answer for you unsatisfying Ali I don’t have an answer. What I can tell you is that the people who work in the Coke political network do believe client climate change is a hoax Phillip islander who might be here is the top one of the top lobbyists one of the top lobbyist for Coke Industries.

Advertisement
Advertisement
Advertisement

S5: I’m sitting in the office with him in 2014 and he’s like You know I mean is it warmer is our humans doing this. Who knows kind of approach and that’s like on the record in 2014.

S8: And I interviewed other people inside this world who were like God Chris they felt sorry for me that I bought into this liberal conspiracy that was cooked up at universities and by the Democratic Party to terrify the population and justify government control. I’m not even kidding with you. He’s like I’m just so sorry you bought into that. But I don’t know truly what Charles Koch believes about this. They wouldn’t let me interview him about it. He wouldn’t respond to questions about it. He’s made these statements along the lines of you know obviously global warming is an issue humans are contributing to it. It’s kind of thin gruel and I don’t know truly what he thinks. But the evidence we do have that is totally clear is that the Koch political network has played an unrivaled role in delaying any action on climate change. That’s just categorically true. OK. Last question you really have.

S18: You’ve really almost answered it or the previous question did. But how big of a hit could coke in just industries take since the climate change train has left the station and still be a force in politics regulation cetera. Do you have any sense of that. In other words what I mentioned their industries are sort of tied into fossil fuels.

S19: So they seem to be playing out both sides. Yes arguing against climate change.

S8: So they’re wildly diversified company fertilizers which are huge greenhouse gas emitters Georgia Pacific. But the bread and butter is still oil and still oil refining. Coke owns and I couldn’t even get into it they own these oil refineries that I describe them as like broken A.T.M. machines that just spit out money 24 hours a day because we have a dysfunctional energy system that’s based on fossil fuels. That’s a monopoly essentially in energy. And so they they realize supra normal profits off of these things. What kind of hit would they take if the value of those refineries dropped dramatically. I just I don’t know and I don’t know what Coke Industries would look like in 10 years if you know they’re very adaptable patient company. They probably would adapt. I don’t know what it would look like but there’s also no question as you look in the rearview mirror that this super normal profits from these assets have built a political action network that’s unrivaled in America and they couldn’t have done it if they didn’t have these profits from oil refineries. So so with that really thank everybody so much for coming out on a Friday night.

S20: I really really appreciate it. APPLAUSE live at Politics and Prose is a co-production of the bookstore and Slate dot com.

S1: For information about upcoming Politics and Prose events visit politics dash prose dot com and please let us know what you think of this program. Our email is podcasts at Slate dot com.