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The American State and Energy Policies

Our energy resources are not inexhaustible, yet we are permitting waste in their use and production. In some instances, to achieve apparent economies today future generations will be forced to carry the burden of unnecessarily high costs and to substitute inferior fuels for particular purposes. National policies concerning these vital resources must recognize the availability of all of them; the location of each with respect to its markets; the costs of transporting them; the technological developments which will increase the efficiency of their production and use; and the relationships between the increased use of energy and the general economic development of the country.

It is difficult in the long run to envisage a national coal policy, or a national petroleum policy, or a national waterpower policy without also in time a national resources policy.

Franklin D. Roosevelt, 1939

Such a statement could have come from any embattled American president in the 1970s. It was actually made by President Roosevelt in February 1939, in a message to Congress transmitting the report and study of the National Resources Committe of Harold Ickes.1 As FDR’s message indicates, American public officials were concerned with energy supply and security issues long before 1973. Important episodes of government involvement punctuate the long history of international and domestic energy markets. The policy outcomes of these earlier struggles created the institutional terrain for energy adjustment policy in the 1970s.

In this chapter I sketch the origins and evolution of the American state—both its general organization and those structures related to energy policy making. Although state organization puts important constraints on the activities of executive officials, it is itself explicable in terms of distinctive phases of political and economic development. The pattern of energy adjustment policy in the 1970s can be understood only through a specification of the institutions and policy tools that accumulated in the fifty years prior to 1973.


The organizational structures of the American state were shaped by the grand forces of political and economic development. From a comparative perspective, the most powerful state bureaucracies are to be found in those advanced industrial nations where monarchical state building preceded the emergence of representative institutions.2 Bureaucratic organization became one of the accessories of state making in Continential Europe. The building of states involved the territorial struggles of kings, the incorporation of existing political structures, the extraction of resources from a local population. State makers first had to raise taxes and deploy military forces, precisely the activities facilitated by bureaucratic staffs. Those political leaders in early modern Europe who developed specialized staffs and bureaucracies gained an “organizational advantage” over their rivals, and so national bureaucracy—relatively autonomous and powerful—attended the successful emergence of the first nation-states.3

American national political institutions, but contrast, were established without a strong or centralized state bureaucracy. The absence of an aggrandizing state maker and hostile external powers goes far to explain the modesty of the organizational center of the American state, which has remained “underdeveloped” because of the persistent prominence of other political mechanisms, such as political parties and the judiciary. As one author notes, “When the new nation was established in 1789, there was a very weak bureaucracy. And because of the decentralized federal system, political parties were essentially locally oriented. Indeed, throughout the nineteenth century, most of the federal bureaucracy was dominated by a locally oriented party system, thus reducing the ability of the central government to penetrate the society.”4

A system of courts and parties, Stephen Skowronek argues, provided a powerful bulwark for political order in nineteenth-century America. In the last decades of the century a highly competitive national party system set constraints on administrative development. Electoral struggle was the dominant mechanism for the dispensation of political goods and power; politicians divided the spoils of office, and public policy fed the imperatives of state and local patronage systems. “The creation of more centralized, stable, and functionally specific institutional connections between state and society was impeded,” as Skowronek notes, “by the tenacity of this highly mobilized, highly competitive, and locally oriented party democracy.”5 While political parties were emerging in European countries to challenge national administration, American reformers were seeking institutional alternatives to party dominance. State building in its American setting moved along a unique trajectory.

Much of the history of political reform around the turn of the century involved an effort to forge new bases for government authority. In its early phase, between 1877 and 1900, this reform struggle involved an ultimately unsuccessful attempt to establish a national administrative apparatus. Later, between 1900 and 1920, coalitions of reformers were able to break into national office and establish some forms of administrative power. These institutional breakthroughs, established within a rapidly growing and increasingly complex industrial order, brought bureaucratic administration into the politcal system. But the political strategies for reconstituting national political authority shifted with each presidential administration, and as a result bureaucratic administration remained dispersed and fragmented. The opportunities for state building were met with new forms of administrative authority, but in such a way as to encourage institutional disarray within the state.6 The most important new form of administrative authority was the regulatory commission. This institutional creation provided a new center for public authority, but it did so at the expense of centralized bureaucratic capacities.

The modern growth of executive administration has seen a continued layering and specialization of government bureaucracy. The postwar expansion of policy issues has greatly enlarged the scope of the federal bureaucracy but has further attenuated presidential control of administration. The growth in administration, Hugh Heclo observes, has occurred at the middle level of government, where narrow professional experts, organized in webs of associations that blur public and private boundaries, have gained increasing prominence and autonomy. The lines of power are arranged in complex “issue networks” that cut across government and societal organizational structures: “Participants move in and out of networks constantly. Rather than groups united in dominance over a program, no one, as far as one can tell, is in control of the policies and issues.”7

The American federal organization is distinctive because of its fragmentary, shifting, and narrowly specialized institutions. Bureaucracy within the executive establishment has grown, yet its authority and capacities have remained strikingly delimited. Obviously these persistent institutional conditions inhibit broad-scale policy planning. Bureaucratic organization remains a matter of small units, and administrative authority has been built on the basis of short-term political control of specialized expertise that is not attached to bureaucratic organization. Programmatic policy planning and the capacity to bring that policy into decision-making realms remain elusive in such a context.

This sketch suggests the American state is a continually transformed, internally differentiated area of conflict rather than an integrated institution. Andrew Shonfield has already noted the implication of the U.S. administrative structure—a “loose confederation of more or less hostile bodies”—for policy coherence. Whereas in other Western nations, “the general trend is to use the aggregation of public power in order to create a coherent force whose significance will be greater than the sum of its individual parts,” in the United States, a “curious disorder” resides at the “heart of the American administrative process.” Skowronek depicts the modern American administrative state as a “hapless giant,” a state that could “spawn bureaucratic goods and services but that defied authoritative control and direction.”8 Such patterns of state organization can be found in government-business relations as well.


The distinctive political development of the nineteenth century gave shape to an American state in which a centralized and weighty bureaucratic core was striking by its absence. That sequence of political development, when juxtaposed with the phases of economic development, also provides a powerful explanation for patterns of state involvement in the economy. Early industrializers did not face an established, competitive world industrial order, nor were the first industrial sectors, such as textiles, as capital-intensive as the later sectors. Accordingly, private entreprenuers did not have the same reliance on government for investment needs. As new industries emerged, moreover, already accumulated capital kept investment resources and industrial decision making beyond the realm of state control.

Those nations which industrialized relatively late (“backward countries”) faced larger and more complex problems of economic development.9 The types of industries that backward nations needed to encourage, such as steel, required large-scale and intensive industrial, banking, and state organizations. Large investment and export promotion served to bring the government into a close relationship with industry, and industry’s economic dependence on government brought political dependence with it. In late-industrializing Germany, for instance, relations between banks and industry were close. The investment needs of German industrialists, requiring rapid and massive capital expenditures, differed substantially from those of Britain. As Alexander Gerschenkron argues,

the industrialization of England had proceeded without any substantial utilization of banking for long-term investment purposes. The more gradual character of the industrializing process and the more considerable accumulation of capital, first from earnings in trade and modernized agriculture and later from industry itself, obviated the pressure for developing any special institutional devices for provision of long-term capital to industry. By contrast, in a relatively backward country capital is scarce and diffused, the distrust of industrial activities is considerable, and, finally, there is greater pressure for bigness because of the scope of the industrialization movement, the larger average size of plant, and the concentration of industrialization processes on branches of relatively high rates of capital output.10

Late industrializers will have more concentrated financial and industrial institutions, and the state is likely to be more directly involved in industrial development. State dominance does not simply reflect the level of economic backwardness, however, for complex historical antecedents conditioned the state’s involvement. For example, the Russian state, without large-scale banking institutions, sought rather unsuccessfully to use direct government intervention in order to force industrialization. German state involvement, on the other hand, was directed at infrastructural investment and the maintenance of political stability.11

It was not simply the demands of national economic welfare or efficiency that led the state directly into the economy of late-industrializing countries. A geopolitical logic made national defense important to European state involvement in the economy. As one analyst notes, “only the perception of external threat from the prior presence of already industrialized countries prompted considerably enhanced State involvement with industrialization, and explains the rapidity of progress.”12 Geopolitical pressures created incentives for the state to speed up industrialization and encourage industries of strategic importance to the national economy. This geopolitical logic and the unique capital and technological needs of late-arriving industries gave the state an added presence in the economy.

In the United States the early growth and maturation of big business and the strikingly late growth of national public administrative institutions were, Alfred Chandler argues, crucial for the distinctive American relationship between government and business.13 Unlike in Continental Europe, where a state bureaucratic apparatus appeared before large-scale industrialization, in America business growth preceded national institutions. In the crucial early period of industrial development the federal government remained outside the emerging institutional realms of economy and society.

Also of importance to American business-government relations, according to Chandler, was the substance of economic growth. External trade was of early importance to European industry, which reinforced collaborative relations with the state by creating incentives to seek government assistance in securing overseas markets. Furthermore, the emerging large firms in Europe tended to be in heavy industry, such as chemicals, metals, and machine tools, and did not have smaller entrepreneurial rivals. In the United States, however, the demands for government involvement were quite different. With large domestic markets and intense conflicts between large business and small merchants and wholesalers, the state played a peacekeeping rather than a promotional role.

Internal conflicts in American business and the limited organizational capacities of the state made antitrust and regulatory tools the state’s dominant means of intervening in the turn-of-the-century national economy. Regulatory institutions grew in reaction to rapid growth of large business, first the railroads and later industrial manufacturers, and in a context shaped by contention over vertical integration and intrabusiness hostilities. Between 1887 and 1914 an institutional framework was established through the Interstate Commerce Act, the Sherman Anti-Trust Act, and the Federal Trade Commission Acts. As Chandler argues, “when the large government bureaucracies did come in this country, the basic role of government toward business had already been defined; and that definition developed largely as a response to an influential segment of business community to the rise of modern big business. A comparable response did not occur abroad.”14

Regulation in Comparative Perspective

The unique centrality of regulatory mechanisms to American government-business relations reveals much about the conjunctures of political and economic life at a crucial stage of industrial development. One school of thought argues that American regulatory bodies have advanced “public interest” claims in the face of uncompetitive business practices. Others have emphasized the “capture” of regulatory agencies by business itself or, more strongly, claim that regulatory mechanisms emerged as instruments of industrial interests.15 The complexity of the regulatory process, the variety of agencies and industries involved, and the long expanse of regulatory history inhibit a settling of this argument.16

It is clear that regulatory institutions emerged in response to industrial and political conflict, usually conflict within a particular industry. Furthermore, the important issue that informed public, legal, and government debate—and the conflict that called for a public response—was the emergence of the large, integrated business enterprise. Between 1897 and 1900, 183 large industrial firms were formed, commanding one-seventh of all industrial manufacturing capacity.17 Unlike European states, which in different geopolitical and economic settings actively sought to encourage cartelization of major leading industries, the American state became involved in the economy because of internal business conflicts over size and competitiveness.

Regulatory bodies were established in response to pressures from clusters of vocal small businessmen, progressive reformers, and politicians using antimonopoly and procompetitive ideological appeals. The style of regulation evolved in the early decades of the twentieth century. The first industries subject to regulation were capital goods industries: railroads, steel, oil, coal. After World War I regulation expanded to include consumer goods: automobiles, appliances, packaged foods. The evolution of regulatory control followed a stream of Supreme Court decisions that delinated the proper sphere of regulatory action in setting standards and rates, in market conditions, and in antitrust.18

The regulatory approach was particularly compelling in the United States. In a rapidly expanding economy with large internal markets, the government was not confronted directly with a need to cartelize basic industry for purposes of international competition. Rather, its central task was the incorporation of public interest goals into conflicts among businesses and between business and society. Strong collaborative relationships between business and government were not necessary.

Just as important, the slowly evolving set of federal and state-level political institutions limited the opportunities for government intervention. The regulatory system created new realms of public authority, based on regulatory commissions staffed by experts and with the competence to apply administrative law as defined by the American judiciary. Institutional structures were created to bring government and business together, but the relationship remained at arms’ length, delimited by the courts, and substantially beyond direct congressional or bureaucratic reach.19

The regulatory mechanism was a modest tool of government, and around it reformers and capitalists frequently struggled. This form of articulation between government and business has retained a durability that stems partly from its flexibility. New Deal policy innovations, for instance, were built upon established regulatory controls: temporary industrial commissions were established to supervise regulated industries and to adjust the combinations of public and private officials charged with administering guidelines. But this adaptability of institutional form has also had a stunting effect on the competence and capacity of central government bureaucracies. The hallmark of the regulatory mode is dispersed centers of government competence, deployed in a reactive manner and directed at defining market shares and competitive practices. The mode does not include organizational incentives for added levels of planning and programmatic government policy.

When the institutional structures defining business and government relationships were formed, American government was left with primarily reactive, peace-keeping responsibilities. The prevailing organizational structures of the state positioned public authority in peripheral regulatory commissions.20

Macroeconomic Governance

Other methods of government intervention evolved in the 1930s and after, but the types of policy tools that emerged remained relatively indirect and undifferentiated by sector or industry. Policy was directed at the influencing of aggregate economic performance through gross fiscal expenditures and monetary policy.21

In 1968 the American delegation to the OECD explained the importance of what it called “global steering” as industrial policy: “The United States Government has come to recognize to a greater extent than ever before that its objective of steady economic growth without significant inflation requires it to co-ordinate its programmes with respect to Government spending, taxation and Federal Reserve discount rates and reserve requirements. . . When the fiscal and monetary policies of the Government are co-ordinated they constitute very powerful tools for providing systematic guidance to the economy as a whole.” The report noted that American government structure did not allow for systematic and industry-specific interventions. “The Federal administrative structure is not designed to carry out an active, co-ordinated policy of promoting industrial growth. . . Intervention has normally been ad hoc. Our actions are developed as the problem and the occasion arise: the structure for dealing with such matters is thus a reactive one rather than a formal planning structure.”22

These aggregate economic measures allowed the federal government to assume control of the economy without altering the structures—private, corporate decision making and arms-length public-private relations—themselves. This was the genius of Keynesian economics, for within the prevailing capitalist system government officials could fashion fiscal and monetary policy to influence aggregate spending, thereby influencing the investment climate and incentives for economic growth. Only modest levels of government autonomy were needed for this form of economic control. And among the variants of Keynesian economics, the least interventionist forms were incorporated into government activity.23

Since the 1930s American government has developed the macroeconomic tools and a modest planning apparatus to make “global” economic policy. These new economic tools were built upon institutions that did not involve direct and selective interventions. The result was a style of government activity that conformed, in Hugh Heclo’s phrase, to the “idea of government by remote control.” Heclo argues that “political administration in Washington is heavily conditioned by an accumulation of methods for paying bills and regulating the conduct of intermediary organizations. This pattern is consistent with a long tradition of fragmented and decentralized administration.”24


The historical shaping of the American state and the patterns of government-business relations are also revealed in the petroleum business. The timing and phases of industrial development and state building are again crucial to an understanding of the larger historical patterns. The petroleum industry had become a major domestic and international industry before the state actively became concerned with national energy goals. When the state did get involved, it was primarily in a reactive fashion, addressing domestic stability and security of international supply. The federal government did not develop a tutelary relationship with the industry, as occurred in other Western countries during the early decades of the twentieth century. Regulatory mechanisms typified domestic government intervention, and diplomatic initiative typified government involvement in the foreign operations of American-based international petroleum companies.

Early Growth of the Petroleum Industry

The American petroleum industry grew into a multinational system in the years following the turn of the century. The international growth of this American-centered industry accompanied its evolution into an oligopoly of firms, large in size and small in number, which divided and controlled production and distribution.

The early modern discoveries of oil were in the United States and in Russian Caucasia. As these sources of petroleum were developed, and the economies of the industrialized world generated further demand, a multitude of firms emerged to produce, refine, and market the new source of energy. In the United States the early years of the industry were characterized by intense competition among a large number of firms. The original sources of oil were in Pennsylvania and Ohio; markets were concentrated in New England, the Middle West, and Europe. By the turn of the century discoveries had been made in the Dutch East Indies, Burma, and Venezuela, and in this period individual companies could secure the whole of a producing country’s territory as a concession.25

Very early in the development of the industry, however, large integrated firms came to dominate. Characteristics unique to the industry, involving economies of scale, geographical logistics of source and markets, and finite sources of supply, conditioned this concentration of industrial power. The story of the Rockefeller empire at Standard Oil has been told many times.26 Prior to the restraint of trade action of 1911 and the breakup of the empire, the Standard Oil company used its market power to consolidate a staggeringly large position within the industry. The monopoly position of the American industry changed in the years after World War I, owing both to the breakup of Standard Oil and the emergence of smaller competitors in Texas. The important point here, however, is that the American industry emerged under conditions that did not require the state to play an active role in its early growth.

Yet the American state did come to play a role in the years between the world wars, when oil firms were expanding and stabilizing their operations. Several industry issues brought firms into the policy process. Independent firms sought government regulation to stabilize the wild fluctuations in production and prices. Others sought antitrust action to break up the dominant majors. International firms sought government action to gain access to new foreign oil fields.

At the same time executive officials were concerned with two major issues that complemented some of the concerns of American energy firms. Government officials, wanting to encourage open and relatively liberal markets in the sector, used regulatory and antitrust instruments. Also, federal government officials perceived at various junctures a need to encourage the expansion of American firms into foreign oil fields. Here diplomatic assistance was a key instrument. In Europe, by contrast, the patterns of state promotion in energy industries were somewhat different.

Foreign Government Involvement in the International Oil System

In the years before World War I the European powers actively encouraged their national firms to develop operations in promising areas of petroleum production. Britain was an early leader. Winston Churchill, among others, argued that oil was superior to coal as a fuel for battleships, and with war in the offing he advocated government involvement in Persian oil fields through the creation of a “national champion” company. In 1914 the British Parliament, by a vote of 254 to 18, agreed to buy controlling shares in a petroleum firm, and thus the British government became partowner in the Anglo-Persian Oil Company.27

State involvement was understood to provide financial and political support for company operations. In return the contract stipulated that Anglo-Persian would remain a British concern, with the government appointing two of the seven company directors. This decision to acquire a private petroleum firm became in many respects a model for subsequent governments. As one analyst notes, “it was a prototype. Britain sought and gained command of secured ‘tied’ supplies of oil from a promising source that later turned out to be part of the richest oil-bearing region yet discovered.”28

Commercial and government activity quickened with the end of World War I, in the creation of an international petroleum system from the relics of the Ottoman Empire. European governments actively involved themselves in securing access to Middle Eastern territories. In 1920, for example, it was agreed among the parties that Britain would have control over Mesopotamia and the French would assume the erstwhile German interests in the Turkish Petroleum Company. France, which had been desperately dependent on foreign oil sources during the war, moved to create its own petroleum firm, the Compagnie Française des Pétroles (CFP). CFP, partially owned by the government, represented French interests in Iraqi and other Middle Eastern oil fields.29 In 1928 the French government enacted extensive regulations in order to encourage the construction of independent national refining capacity.

By the late 1920s a few international companies had come to dominate the international production and trade in oil. The largest of these were the majors, also known as the “Seven Sisters”: Jersey Standard (later Esso and Exxon), Shell, Anglo-Iranian (later BP), Socony (later Mobil), Socal, Texaco, and Gulf.30 The large companies were involved in all of the industry stages—extraction, refining, and marketing. Some had developed their own extensive supplies of crude. Gulf had supplies in the United States, Mexico, and Venezuela, and later Kuwait and Nigeria; Socal had supplies in California, Bahrain, and eventually Saudi Arabia. Others, such as Jersey Standard, Shell, and Socony, did not have extensive supplies and had to buy from others to meet their refining and marketing needs.31 As the market for petroleum continued to grow, the various companies expanded their foreign exploration and acquired new concessions. Much of this expansion occurred in the Middle Eastern countries of Saudi Arabia, Iran, Iraq, and Muscat and Oman.

A renewal of state concern about oil security and development followed World War II, and again governments became directly involved in the petroleum industry. The French government, for instance, created two public firms—the Bureau de Recherches de Pétrole (BRP) and the Regie Autonome des Pétroles (RAP)—mandated to explore for and produce petroleum. These new French undertakings were pushed forward by a senior French official, Pierre Guillaumat, who had strong ties among political, civil servant, and business groups. Guillaumat, who was directeur des carburants from 1944 to 1951, also became director of BRP in 1945. Later, in the 1950s, he would be instrumental in promoting the French civilian nuclear power industry. Moving from one top post to another in government and in oil and nuclear enterprises, Guillaumat reflected in his career the institutional possibilities for collaborative relations among public and private organizations.32

The French state’s postwar push into the petroleum industry was matched elsewhere. Italy and Norway also created new public enterprises or nationalized old ones. Several factors shaped the state’s role in the oil industry. The most important determinant of initial government involvement was the magnitude of national dependence on foreign oil. France, more than Britain and Germany, for example, depended heavily on imported oil that was outside the control of French firms. Britain and Germany relied much longer than France on coal to supply a substantial portion of national energy needs. The pattern of involvement was further shaped by prevailing ideological and political conceptions of the proper role for public institutions to play in business activity—France and Italy had already developed an extensive government presence in business development. Finally, the existence of established, large multinational firms gave certain countries—notably the United States, the Netherlands, and Britain—less reason for direct government involvement.33 Thus challenges of resource dependence combined with national objectives of political control to mold separate styles of state involvement in the petroleum industry. After World War II, French, Italian, German, and Japanese government renewed their individual efforts to gain some measure of national autonomy in an international petroleum system dominated by the Americans and the British.

Nonetheless, between the late 1920s and the late 1960s a remarkable stability was maintained within the international oil regime. Large, integrated companies extended and stabilized their sources of crude petroleum, and predictable marketing systems were developed. There was little competition between the major firms. A mutuality of interest between these companies allowed a sophisticated system of oil sharing, even collusion, to emerge. Competition, to the degree that it existed, was primarily focused on gaining access to supplies. This managed aspect of the international oil regime was epitomized in the so-called Red Line agreement of 1928, in which five of the multinational companies involved in the Iraq Petroleum Company operation agreed not to seek further concessions in territories of the former Ottoman Empire. Under the “as is” agreement of the same year, moreover, the largest of the Seven Sisters agreed to specific pricing and market-sharing agreements.34

Later, combinations of integrated firms produced agreements jointly to exploit newly discovered reserves in Kuwait, Saudi Arabia, and elsewhere. The most extensive agreement came when five large firms jointly established Aramco to develop the massive Saudi Arabian concession. The Red Line agreement was later challenged by the American government in order to allow U.S. company access to the area, but these various agreements revealed the essentially negotiated nature of the newly established international petroleum regime.

American Government Involvement in the International Petroleum System

State officials became actively involved in supporting access to sources of oil for their national companies after 1919. The federal government in the United States, in contrast to the British and French governments, which favored direct corporate involvement, remained largely a source of diplomatic support. The United States by 1914 had a very large domestic petroleum industry, and problems of supply or security were matters of at most distant concern. Indeed, the first government involvement in the activities of American firms was the effort, culminating in 1911, to break up Standard Oil. Nonetheless, American companies did seek support from the State Department to help gain access to the territories of the former Ottoman Empire. U.S. government involvement took the form of diplomatic protests, primarily directed at the British, arguing for “open door” commerical conduct. In the end this pressure succeeded in convincing British, French, and Dutch interests to allow American corporate involvement in the Turkish Petroleum Company and in Mesopotamian oil.

During the 1920s, despite postwar concerns about oil supply and security, the American state did not adopt the national champion approach. Five large American companies with foreign operations had already emerged, making direct government involvement through a national champion more problematic. After World War I government concern developed about the depletion of domestic reserves, leading at least one senator (Phelan of California) to call for the creation of a government-owned corporation, yet a sequence of Republican administrations in the 1920s made such a notion unlikely. Finally, the commanding American position in world oil production, which was as high as 80 percent in 1920, gave little force to calls for greater government involvement.35

International and Domestic Firms

Although involvement by the American state was limited to diplomatic initiatives within the emerging international petroleum regime, the domestic industry provided a basis for regulatory intervention. Other industrial nations had modest domestic resources; The United States, on the other hand, had massive petroleum reserves. This difference created the basis very early in the industry’s history for a diversified American industry; diversified between producers, refiners, and marketers, and diversified in terms of large producers and small, independent operations. This latter division was particularly important in generating pressures for reactive government intervention.

The changing structure of the American petroleum industry after World War I, as new competitors emerged, stemmed in part from the breakup of Standard Oil. The energy problems perceived by American public officials and politicians were not as straightforward as problems were in Europe. Whereas the initial policy concerns for European governments involved access to and security of energy supplies, American government officials initially worried about the looming size of the Standard Oil empire. The government’s posture toward to oil industry followed a general, national pattern: the use of regulatory and antitrust policy tools to restrain big business and engage in industrial peacekeeping.

The state’s concern about the oil trust was buttressed by the presence of threatened small, independent firms. Independent oil firms occupied niches within the larger petroleum industry. These disadvantaged interest—local producers, refiners, and distributors—maintained pressure on government in its protracted antitrust deliberations.36 The niches they occupied were created in part, ironically, from Rockefeller’s early corporate strategy. The Standard Oil Company made a corporate decision not to invest in new domestic sources of oil. It aimed, rather, to control the industry through dominance of downstream refining and marketing facilities. The discovery of large oil fields in Texas in 1901 allowed new competitors to enter the industry. In the year Standard Oil was broken up, the company owned only about 10 percent of the new Texas production. As one analyst notes, “the new entrants, whose power was based on the ownership of crude rather than refining capacity, were able to breach Rockefeller’s domestic monopoly even before the Supreme Court acted.”37

The influence of the independents was (and still is) substantial. As Raymond Vernon notes, “the strength of the independents, then as now, rested in part on the fact that they were well distributed over the face of the United States and could rally formidable Congressional support for any position they took. The ability of the independents to provide a source of countervailing power would appear again and again in the shaping of U.S. oil policy during the decades to follow.”38 The organizational structure of the state enlarged the leverage of such companies over policy making, and beyond what economic clout alone might explain.

Following the early period, when antitrust was the central tool, executive officials became more concerned with influencing the management of an increasingly sprawling and disparate industry.39 In the midst of the diversity of petroleum interests, and with an influential domestic industry, the state adopted a style of involvement that emphasized tax and regulatory intervention. Special tax provisions began in 1918 to encourage the development of coal, gas, and petroleum resources. In the 1930s the central problem for domestic petroleum producers was the overproduction of domestic oil, which led to a state-level regulatory response—“market-demand prorationing”—that acted to restrict production and preserve market shares.40

Federal government interest in regulatory intervention focused on the conservation of supplies, the maintenance of minimal levels of competition, and the insurance of secure sources of oil for military purposes.41 Federal regulation of the natural gas market began in the 1950s. The resulting regulatory institutions were a fragmented mixture of decentralized and improvised mechanisms that left government at the periphery of the industry and the conflicts between various industry groups unsettled.

During World War I, and at other moments of intense government concern over oil security and supply, the emphasis of federal petroleum policy shifted. Rather than try to influence the structure and competitive status of the industry, executive officials sought to promote cooperative government-business relations and to make regulatory policy more effective. These new attitudes toward the petroleum industry, which would characterize government policy well into World War II, were developed in the Fuel Administration of Woodrow Wilson’s government. With oil conservation and production issues attracting high-level government attention during World War I, the Fuel Administration advanced regulatory policy that would further integrate the industry. This style of administration would become a basic feature of government intervention in the petroleum industry during times of crisis: the government promoted self-regulation by industry leaders. Seeking to stabilize production, for example, the Fuel Administration organized producers from various regions of the country to coordinate production levels. Because of the rising wartime need for petroleum, moreover, politicians and administrators advocated tax reductions for domestic producers. A consensus developed between government and oil producers—government would give the industry favorable tax treatment, and in return the industry would respond to the heightened petroleum needs associated with national defense.

After wartime concern over production and security of supply waned, the federal government’s influence dwindled, and industry leaders held on to their newfound tax and regulatory prerogatives while seeking to reestablish erstwhile levels of business autonomy. In the late 1920s new conflicts broke out between independent producers and international firms, and the first major conflicts appeared between domestic independents and oil importers. The position favored by President Herbert Hoover involved voluntary intraindustry cooperation to restrain imports. Later, during the Depression, when oil prices fell dramatically, state-level regulatory schemes were introduced to stabilize production. But as one analyst notes, “even in the depths of the Depression, public authorities rarely assumed the right to determine production quotas for private industries.”

The early New Deal, within the National Industrial Recovery Act, inaugurated a new state involvement. The NRA administrator promoted industrial collaboration to design industrywide codes. But government actions even at this juncture were defensive, attempting to rescue regulatory practices to stabilize production and prices in the face of intense intraindustry disputes. The final Oil Code did grant the petroleum administrator, Harold Ickes, power to determine monthly production quotas on the basis of recommendations from an industry advisory committee. Ickes attempted to further centralize his administrative powers in 1934 and 1935; opposition within the industry and in Congress prevented his doing so.

Like the temporary wartime petroleum planning efforts that would soon follow, the NRA mechanisms of government-led industrial organization did not lead to enduring government powers or responsibilities. As New Deal controls lapsed, Franklin Roosevelt in late 1935, over the objections of Harold Ickes, sent a message to the Independent Petroleum Association urging industrial self-regulation and cooperation in order to prevent government involvement. Thus the New Deal did not bring policy innovations to the oil industry. Rather, it built upon the administrative and regulatory mechanisms founded in earlier decades, fashioning a more sophisticated and efficient implementation of styles of intervention that had previously been experimented with. By the 1940s a fairly well-established pattern of state involvement had survived dramatic variations in prevailing policy and industrial concerns.

Congressional and executive officials responded, when they could, to the interests of both domestic and international companies. Thus Congress allowed tax deductions (a depreciation allowance) on domestic producers which could exceed actual levels of investments. International firms were also allowed special provisions to protect large amounts of foreign-generated income from U.S. taxation.42 When conflicts emerged between domestic and international producers, however, domestic interests tended to win out, as the 1959 Mandatory Oil Import Quota illustrates. As foreign oil became more abundant and inexpensive, the 1959 quota protected domestic producers.43

The pattern of U.S. policy before 1973 was to accord special treatment to mineral and resource exploration and production through tax subsidies, and to ensure adequate prices through regulatory means. Investment decisions remained private, and the “unique role [of the state] in setting the rules of the game within which the energy market functions” was rarely considered.44


The emergence in America of a petroleum industry without significant direction from state bureaucrats had important implications for subsequent industry-government relations. With limited policy instruments at its disposal, and with congressionally mediated pressures to attend to, the federal executive used regulatory means to promote competition and stability within the industry. When supply became a national concern, executive officials encouraged production through favorable tax arrangements. Foreign exploration and production were facilitated by diplomatic initiatives.

Although the management of energy production and supply was left in private hands, executive officials did act to promote broader national energy goals. These goals included a national security interest, which became pressing during World War I, in stable and secure supplies of oil. The military, particularly the navy, found petroleum to be increasingly critical to its capacities.45 Other government officials, with broader policy concerns, considered petroleum a strategic industry of importance to the general health of the economy. They understood stable supplies of energy at reasonable prices to be important for national economic growth, and the issue of economic growth frequently manifested itself as a concern for efficient markets in oil and energy.46 Finally, the level of national dependence on foreign petroleum raised issues of vulnerability to and manipulation by foreign powers. This fundamentally political concern arose from the general geopolitics of nationhood.47 Self-sufficiency, or at least some measure of national autonomy in critical industrial areas, remains a powerful underlying motivation of the state.48

Despite constrained institutions, U.S. executive officials found opportunities to pursue national goals, most clearly in the government’s encouragement of foreign exploration and production by American multinationals. Except briefly in wartime the limitations of the prevailing system and the constraints on government officials were rarely revealed. The system was successful for several generations in meeting broad national goals. The consistency of government goals and the apparent success of policy was indicated by John J. McCloy, an adviser to presidents from Franklin Roosevelt to John Kennedy, in 1974. “Strategists in the Government and Congress,” McCloy argued, “did everything they could to encourage American oil companies to enter into this new area [the Middle East] so as to protect and supplement our own reserves which had been severely drained and, as a result of this foresight, oil did flow at reasonable prices, as I said, to the free world and it continued to do so for a long time. For a long period we had a stable period of supply and prices.”49 Despite its consistency and “success,” however, the American system did not go unchallenged by government officials.

The Problem of State Ownership of Oil Production

Challenges to the prevailing government-business system came primarily at moments when public concern arose about petroleum supplies. The most important such moment occurred in World War II. Increasing reliance on oil imports and the problem of wartime energy shortages prompted government concern over resource availability and security. The seriousness of the perceived problem gave new weight to a government search for a national resource policy. Special wartime government planning institutions provided the opportunity for new forms of state involvement in the petroleum industry. The fate of those government initiatives provides insights into the possibilities for and limitations on institutional transformation at critical historical periods.

By 1941 the exigencies of war had brought the government into a dominant position in the petroleum industry. The chief challenge, in contrast to that of the previous decade, was to maximize production. Although Congress resisted authorization of new presidential powers to control petroleum production and distribution, Roosevelt resorted to executive action.50 As a result, the federal government gradually put in place controls over prices and production, the allocation of supply, and the direction of refining, transportation, and distribution.

Responsibility for coordination was established in the Petroleum Administration for War (PAW). The central bureaucratic figure was Secretary of Interior Harold Ickes, who was appointed petroleum coordinator for national defense on the eve of the American entry into the war. Ickes was instructed to gather information, coordinate voluntary industry collaboration, and recommend policy. His initial responsibilities were ambiguous, his powers modest. Ickes struggled to expand his powers, however, and eventually the PAW developed into an influential agency with direct access to the president.

The PAW was organized along functional lines. An industry committee was also created, the Petroleum Industry War Council (PIWC), to bring industry into policy deliberations. This organizational design, along with the staffing of PAW offices with knowledgeable industrial personnel, contributed to the agency’s effectiveness.51

The fear on the part of both industry and government leaders of a natonal oil shortage came to a head in mid-1943. On July 14, Roosevelt called a cabinet meeting to plan American international petroleum strategy. At this juncture Ickes used his position to seek further expansion of government coordination and control of petroleum. Ickes had for several years been stressing the seriousness of the decline in the discovery rate of American petroleum reserves. In 1941, in a letter to Roosevelt, he had estimated that the United States had enough oil supplies for only fifteen years and that, if Germany were to gain control of the Persian Gulf, the Western hemisphere would fall behind Germany in petroleum production.52

Problems in increasing domestic oil production led industry leaders in the PIWC to urge higher prices in order to stimulate drilling. Government officials, however, turned their attention to the consolidation of access to foreign petroleum sources. In June 1943 Ickes wrote to Roosevelt urging the administration to move immediately to acquire and develop foreign reserves. He proposed that the government create a Petroleum Reserves Corporation for this purpose, drawing on earlier proposals for such a corporation which he had advanced in 1935 and 1940.53

Several circumstances made the Ickes proposal attractive. The first concern was with the seeming inadequacy of future American reserves. In addition, recognition was growing of the vastness of Middle Eastern petroleum resources, particularly in Saudi Arabia. Finally, and vital to the rationale for a government corporate initiative, U.S. officials and industry leaders were concerned that these petroleum deposits would come under British domination of the area.54 Ickes also noted in his letter to Roosevelt that petroleum shortages in the coming year could impinge upon both the military campaign in Europe and industrial performance at home.55 Indeed, the military strongly supported the proposal for direct government ownership of a petroleum firm. Although many in the State Department opposed the proposal, key proponents beyond Ickes and his Petroleum Administration for War were the Joint Chiefs of Staff and members of the Army-Navy Petroleum Board.56

At this juncture the American government gave consideration to participation in the Saudi concession.57 Government support for direct participation in Saudi Arabia came from President Roosevelt himself, as well as from Secretary Ickes and Undersecretary of the Navy William C. Bullitt. American options were considered within the State Department’s special Committee on International Petroleum Policy, chaired by Economic Adviser Herbert Feis, and it was Feis who gained Secretary of State Cordell Hull’s assistance (if not direct support) for the establishment of a Petroleum Reserves Corporation. The State Department proposed that the PRC acquire option contracts on Saudi oil. Ickes, supported by the military, urged that the PRC acquire petroleum reserves directly, and do so by purchasing shares of the California Arabian Standard Oil Company. In June 1943 Roosevelt agreed to the Ickes plan.58

Secret negotiations were begun to buy shares in CASOC. After difficult talks, CASOC eventually proposed that the government should purchase a one-third interest in the company. In addition, the U.S. government would have a right to buy up to 51 percent of CASOC production during peacetime and 100 percent during war, and it could block the sale of company oil to third parties. Apart from these restrictions, CASOC would proceed under ordinary commercial rules.

Most accounts of the negotiations, and the ultimate failure of government initiatives, have centered on opposition to the plan from CASOC itself.59 However, evidence indicates that opposition from other companies, namely Standard Oil of New Jersey and Socony-Vacuum, was decisive.60 Industry opposition was centered in the Foreign Operations Committee of the PAW. This wartime association of petroleum executives favored the private development of Saudi reserves, with American diplomatic support. Irvine Anderson notes that “this was formidable opposition, coming as it did from a bloc of companies that up to that point had contributed mightily to Ickes’ success as Petroleum Administrator for War. Ickes’ rather formidable power within the bureaucracy rested heavily on his close relationship with Roosevelt, which in turn was based on his proven ability to get results. If this corporate revolt were to undermine cooperation with the PAW itself, the consequences would be serious.”61

Although the formal reason for the withdrawal of the government purchase arrangement was inability to agree on terms, opposition within the loose affiliation of petroleum executives was crucial to the outcome. Yet a complete explanation for the demise of the Petroleum Reserves Corporation must go beyond business opposition. Opposition within the administration, notably from the State Department, made the PRC problematic even within the context of the goals and interests of American foreign policy. Also, several investigatory committees—the Special Committee Investigating the National Defense Program and the Special Committee Investigating Petroleum Reserves—were skeptical about specific Ickes plans for government petroleum projects in Saudi Arabia. What becomes evident is that an array of groups and agencies served to dilute Ickes’s position within government and the legitimacy of his proposals.

The failure of the Ickes initiatives takes on substantial significance from the vantage point of later decades—a significance not lost on officials and politicians in the midst of the oil shocks of the 1970s. In hearings on multinational corporations and American foreign policy, Senator Frank Church made this observation:

Opposition both within the government and among leaders in the petroleum industry prevented the Ickes plan from inaugurating a new government role in oil and energy. Not until the 1970s would such proposals again find their way into the mainstream of the policy process. And even in the midst of the energy crisis of the 1970s, such proposals were wielded with much less conviction. In a study of government-industry relations in the petroleum area one analyst correctly concludes that

the most significant consequences of this series of unsuccessful forays into international petroleum affairs was that the U.S. Government thereafter implicitly left the function of control and supervision over the international petroleum system to the multinational petroleum companies. Unlike the British, French and Dutch, with their governmental interests in BP, CFP and Shell, respectively, the U.S. Government now, for the most part, divorced itself from the international petroleum industry. These events signified as well a virtual cessation of the Government’s efforts to obtain an information base independent of the companies, which might help it to formulate petroleum policy and take independent action.63

The 1943 episode was a watershed in industry-government relations. At that historical moment a departure was contemplated at the highest levels of government from long-established patterns of autonomous public and private spheres. The government’s impressive wartime controls over domestic production and distribution were possible, however, only in the context of a national crisis. The administration of government control was effective primarily because the industry itself was brought into the formation and implementation of policy. Nonetheless, an aggressive bureaucratic leader was able to assemble an agency to advance extraordinary proposals to bring the government directly into the industry. The fate of his agency reveals the limits of that process, even in times most favorably disposed to institutional innovation.

Finally, the Ickes experience reveals another aspect of American state structure. The PAW and its planning pretensions were not sufficiently established to survive the wartime emergency. The PAW, as one study notes, “functioned effectively . . . and . . . even manag[ed] to self-destruct when the war ended.”64 The institutional growth and decline of the PAW, where little wartime government capacity survived the war itself, signals a broader administrative pattern.


Historically, American planning capacities instituted or augmented during times of war or crisis have been dismantled or radically cut back with the return to normality. This pattern is clear in the energy resource area, with its cycles of state concern and complacency over energy supply and security. At various junctures of perceived shortages or threat, and in particular during World War II, executive officials have taken steps to develop resource planning capacities. These halting and ultimately unsuccessful efforts to develop comprehensive capacities within government left a fragmentary, ad hoc system of administrative responsibility for energy.

The most ambitious federal organization for resource planning, which dealt with energy issues but also ranged widely on issues of economic and industrial order, was the National Resources Planning Board. From 1939 to 1943 the NRPB consolidated and attempted to coordinate a variety of planning functions within the federal government. The agency had its roots in earlier planning bodies that had sprung from the early emergency programs of the New Deal. Its first incarnation was as the National Planning Board. Sympathetic to proposals for a national planning organization, Harold Ickes incorporated the National Planning Board into the Public Works Administration in 1933. This planning organization survived several more transformations to become the focal point for public policy planning, coordination, and research within the Roosevelt administration. The board received independent status from the Reorganization Act of 1939, which situated it in the Executive Office of the President, formalizing the operations of the staff. Yet the NRPB still rested precariously within the executive establishment. The agency was not well received in Congress, and indeed it was established and maintained in its early years out of discretionary emergency funds held by the administration.65

Composed of a small staff of professional economists and planners, the NRPB had as its central mission to produce reports on manpower, social, and resource policy. It operated as an island of analytic expertise unrelated to the functional responsibilities of executive departments. Although the NRPB attempted to cooperate with established departments, its influence was manifest primarily in the reports it produced and in periodic meetings of its staff with the president.66 In this body evolved the rationale and instruments of an interventionist, Keynesian, postwar economic program of full employment. The board also established itself as the most important federal agency involved in gathering information on and in analysis of energy and natural patterns.67

In 1938 the National Resources Committee, a special planning group under the direction of Secretary Ickes, prepared a comprehensive study entitled Energy Resources and National Policy, which marked the first step toward comprehensive energy planning within the government.68 The report provided the rationale for the activities of the council. “It is time now to take a larger view,” the report argued, “to recognize more fully than has been possible in the past that each of these energy resources affects the others, and that the diversity of problems affecting them and their interlocking relationships require the careful weighing of conflicting interests and points of view.”69 In energy resources the NRPB provided a setting for the gathering and organization of expertise that otherwise was widely scattered. With the demise of the NRPB, that professional expertise would again be fragmented in disparate public and private organizations.

The NRPB had recruited an impressive group of economists and policy analysts and articulated a strong appeal for planning and coordination. It failed, however, to establish itself firmly in the permanent federal bureaucracy. The proximate cause of its demise was termination by Congress of its funding. But the more important reasons lay in its claims to policy responsibility, which competed with those of a functional and clientilistic federal bureaucracy that was already well entrenched. Consequently, toward the end of World War II the NRPB was divested of its responsibilities, which came to reside in fragmented form throughout the federal establishment. Economic reports on business and unemployment trends, for example, were placed with the Council of Economic Advisers in 1946, and science policy found its way into the National Science Foundation in 1950. As far as energy resources were concerned, production and conservation programs dealing with oil and coal were given to the Department of Interior.70 The NRPB had responded to Roosevelt’s long-standing interest in comprehensive natural resource planning, but it could not gain an institutional foothold to survive even the end of the Roosevelt administration.71

The devolution and dispersion of planning went even further than this. The failure of federal administrative planning and coordinative responsibilities left these activities to organizations outside the established structure. In energy and resource planning two developments were important. Long-range analysis of resource security and supply was handled through temporary commissions. The most important example was the president’s Materials Policy Commission (the Paley Commission), which in the mid-1950s provided a systematic study and appeal for federal planning initiatives but failed to spur significant government action. The other development, following from the eclipse of the NRPB and a strong federal planning presence, was the growth of resource policy institutions and programs at private foundations. In fact the nonprofit institution Resources for the Future was a direct descendant of the NRPB and the Paley Commission.72

The Paley Commission report, a landmark study of national energy problems, was a response to general concern over the depletion of domestic energy fuels. For over a year staff experts gathered from various government departments, business, and several universities. The assembled group of energy specialists, economists, and policy analysts gave the Paley Commission a unique capacity to develop broad, national, and long-term perspectives on energy problems and policy. Such a sustained gathering of professionals, resembling the expert resources brought together in the NRPB, would not be seen again until the 1970s. Before and after the commission, however, energy policy resided primarily in the Interior Department and in several remote congressional committees.

The Paley Commission concluded that demand for energy in the industrial world would vastly increase, doubling by the mid-1970s. Conventional sources of energy would fall short in the next few decades, it argued, requiring the introduction of new energy sources and technologies. While recognizing the unfolding of powerful historic forces, the commission did not recommend major new government powers or responsibilities. Precisely because it cast its analysis in terms of world energy markets and Western security interests, however, it did strongly urge a comprehensive energy policy: “The Commission is strongly of the opinion that the Nation’s energy problem must be viewed in its entirety and not as a loose collection of independent pieces involving different sources and forms of energy.”73 The commission noted that “this implies no increase in Government activity; it well might mean less. It does mean that the multiple departments, bureaus, agencies and commissions which deal with separate energy problems must be less compartmentalized.”74

The commission delivered its recommendations to President Truman in June 1952. Truman in turn gave the National Security Resources Board responsibility for evaluating the commission’s findings and making specific proposals. The NSRB and various government agencies greeted many of the commission findings with approval. Disputes broke out over whether government should collect its own energy data or leave that task to the industries themselves. The Interior Department proposed that the commission’s objectives could best be accomplished through an expansion of responsibilities within that department.75 With the impending departure of the Truman administration, however, substantive organizational reform was not accomplished. The expert professional capacities of the Paley Commission scattered back to separate public and private organizations.

As this episode suggests, key U.S. executive officials and experts have called at important junctures for the expansion and centralization of energy policy and planning. The most important attempts to establish a high-level, coordinated planning body have come at moments of public concern over energy supply and security. However, proposals such as those by the Paley Commission and organizational experiments such as the NRPB failed to gain institutional footholds.


The organizational structures of the state are explicable in terms of larger historical processes. The crucial explanation for both government-business relations and state administration stems from the sequence of historical processes. The rise of large-scale business before that of large-scale government bureaucracy in the United States explains important aspects of subsequent relationships between the two. Also, and in contrast to the European experience, the establishment of representative institutions in the United States preceded the establishment of national administrative institutions.

Although moments of crisis periodically generated proposals and institutional experimentation aimed at developing new state capacities, these changes did not become a permanent part of the organizational structure of national government. Existing institutional relations of business and government preserved a minimalist role for the state. National energy goals were pursued within a fragmentary organizational context that conferred little unitary power on policy makers and provided few instruments for shaping private behavior.

Moments of crisis provided apportunities for executive officials to challenge this institutional regime. Such moments occurred primarily during the two world wars and the years preceding the Korean War. However, obdurate congressional resistance to planning, the weak bureaucratic position of wartime planning organizations, and the fleeting perception of crisis conspired to debilitate and diffuse proposals for institutional change. Consequently, institutional patterns in the energy area before 1973 exhibited a striking continuity. There was no centralized administrative body charged with programmatic policy planning, and the instruments of national policy remained limited and indirect. These institutional circumstances provided the foundation for political maneuvering and policy change as state officials confronted demands for energy adjustment in the 1970s.

1Franklin D. Roosevelt, The Public Papers and Addresses of Franklin D. Roosevelt (New York: Macmillan, 1941), February 16, 1939, p. 138.

2See Barrington Moore, Jr., Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World (Boston: Beacon, 1966); Reinhard Bendix, Kings and People: Power and the Mandate to Rule (Berkeley: University of California Press, 1978); and Hans Rosenberg, Bureaucracy, Aristocracy and Autocracy: The Prussian Experience, 1660–1815 (Boston: Beacon, 1958).

3So argues Charles Tilly in “Reflections on the History of European State-Making,” in Tilly, The Formation of National States in Western Europe (Princeton: Princeton University Press, 1975), p. 30.

4J. Rogers Hollingsworth, “The United States,” in Raymond Grew, ed., Crises of Political Development in Europe and the United States (Princeton: Princeton University Press, 1978), p. 165.

5Stephen Skowronek, Building a New American State: The Expansion of National Administrative Capacities, 1877–1920 (New York: Cambridge University Press, 1982), pp. 39–40.

6Ibid., pp. 165–76.

7Hugh Heclo, “Issue Networks and the Executive Establishment,” in Anthony King, ed., The New American Political System (Washington, D.C.: American Enterprise Institute, 1978), pp. 87–124, quotation at p. 102.

8Andrew Shonfield, Modern Capitalism: The Changing Balance of Public and Private Power (London: Oxford University Press, 1965), pp. 318–19; Skowronek, Building a New American State, p. 290.

9Alexander Gerschenkron, “Economic Backwardness in Historical Perspective,” in Gerschenkron, Economic Backwardness in Historical Perspective: A Book of Essays (Cambridge: Harvard University Press, 1962), pp. 5–30.

10Ibid., p. 14. The argument has been developed by James R. Kurth, “The Political Consequences of the Product Cycle: Industrial History and Political Outcomes,” International Organization 33 (Winter 1979), 1–34, and Kurth, “Industrial Change and Political Change: A European Perspective,” in David Collier, ed., The New Authoritariansim in Latin America (Princeton: Princeton University Press, 1979). The theory has been extended to Latin America also. See Albert O. Hirschman, “The Political Economy of Import-Substituting Industrialization in Latin America,” Quarterly Journal of Economics 82 (February 1968), 2–32, and Philippe C. Schmitter, “Paths to Political Development in Latin America, in Douglas A. Chalmers, ed., Changing Latin America: New Interpretations of Its Politics and Sociology (New York: Academy of Political Science, Columbia University, 1972), pp. 83–105.

11Gerschenkron, “Economic Backwardness,” pp. 16–21. See further Peter Gourevitch, “The Second Image Reversed,” International Organization 32 (Autumn 1978), 881–912.

12Gautam Sen, The Military Origins of Industrialisation and International Trade Rivalry (New York: St. Martin’s, 1984), p. 79.

13Alfred D. Chandler, Jr., “Government versus Business: An American Phenomenon,” in John T. Dunlop, ed., Business and Public Policy (Cambridge: Harvard University Press, 1980); also Chandler, The Visible Hand: The Managerial Revolution in American Business (Cambridge: Harvard University Press, 1978); and Chandler, “The Coming of Big Business,” in C. Vann Woodward, ed., The Comparative Approach to American History (New York: Basic Books, 1968), pp. 220–35.

14Chandler, “Government versus Business,” pp. 4–5, 10–11.

15For an overview, see Thomas K. McCraw, “Regulation in America: A Review Article,” Business History Review 49 (Summer 1975), 159–83. The classic statement of this public interest position is James Macauley Landis, The Administrative Process (New Haven: Yale University Press, 1938). On capture see especially Gabriel Kolko, The Triumph of Conservatism: A Reinterpretation of American History, 1900–1916 (Chicago: Quadrangle, 1963).

16See James Q. Wilson, ed., The Politics of Regulation (New York: Basic Books, 1980).

17See Thomas K. McCraw, “Regulatory Agencies,” in Glenn Porter, ed., Encyclopedia of American Economic History (New York: Scribner’s, 1980), p. 788, and Morton Keller, “The Pluralist State: American Economic Regulation in Comparative Perspective, 1900–1930,” in Thomas K. McCraw, ed., Regulation in Perspective (Cambridge: Harvard University Press, 1981), p. 68.

18See Keller, “The Pluralist State,” pp. 74–94.

19This logic can be found in social policy as well. See Theda Skocpol and John Ikenberry, “The Political Formation of the American Welfare State in Historical and Comparative Perspective,” Comparative Social Research 6 (Greenwich, Conn.: JAI Press, 1983), 359–81.

20As one analyst notes: “While most other states in capitalist societies increased their role and power as industrialization proceeded, the authority of the American state declined and its size remained relatively small. When seen in comparative terms, it simply had a less necessary role to play.” David Vogel, “Why Businessmen Distrust Their State: The Political Consciousness of American Corporate Executives,” British Journal of Political Science 8 (1978), 57. Also see Thomas K. McCraw, “Business and Government: The Origins of the Adversary Relationship,” California Management Review 26 (Winter 1984), 33–52.

21See Herbert Stein, The Fiscal Revolution in America (Chicago: University of Chicago Press, 1969).

22United States Industrial Policies, Observations presented by the U.S. Delegation before the Industry Committee of the OECD at its 6th Session (Paris: OECD, 1968), pp. 27, 35.

23See Robert Skidelsky, “The Decline of Keynesian Politics,” in Colin Crouch, ed., State and Economy in Contemporary Capitalism (New York: St. Martin’s, 1979), pp. 62–63; Robert Lekachman, The Age of Keynes (New York: Random House, 1966); Robert M. Collins, The Business Response to Keynes, 1929–1964 (New York: Columbia University Press, 1981); and Margaret Weir and Theda Skocpol, “State Structures and the Possibilities for ‘Keynesian’ Responses to the Great Depression in Sweden, Britain, and the United States,” in Peter B. Evans, Dietrich Rueschemeyer, and Skocpol, Bringing the State Back In (New York: Cambridge University Press, 1985), pp. 107–63.

24Heclo, “Issue Networks,” p. 92.

25See Harold F. Williamson and Arnold R. Daum, The American Petroleum Industry: The Age of Illumination (Evanston: Northwestern University Press, 1959), p. 320, and Evan Luard, The Management of the World Economy (New York: St. Martin’s, 1983), p. 143.

26See Ed Shaffer, The United States and the Control of World Oil (New York: St. Martin’s, 1983), pp. 20–22. On Standard Oil see, for example, Ira M. Tarbell, The History of the Standard Oil Company, 2 vols. (New York: Macmillan, 1933), and Harold F. Williamson, Ralph L. Andreano, Arnold R. Daum, and Gilbert Klose, The American Petroleum Industry: The Age of Energy, 1899–1959 (Evanston: Northwestern University Press, 1963).

27Louis Turner, Oil Companies in the International System (London: Allen 8c Unwin, 1979), p. 25; Raymond Vernon, “Enterprise and Government in Western Europe,” in Vernon, ed., Big Business and the State: Changing Relations in Western Europe (London: Macmillan, 1974), p. 11; Christopher Tugendhat and Adrian Hamilton, Oil—The Biggest Business (London: Eyre Methuen, 1975), p. 68.

28J. E. Hartshorn, Oil Companies and Governments: An Account of the International Oil Industry in Its Political Environment (London: Faber 8c Faber, 1962), p. 233.

29See Turner, Oil Companies, pp. 26–27.

30For background see Anthony Sampson, The Seven Sisters: The Great Oil Companies and the World They Shaped (New York: Bantam, 1975).

31Luard, Management of the World Economy, p. 145.

32See Oystein Noreng, “State-Owned Oil Companies: Western Europe,” in Raymond Vernon and Yair Aharoni, eds., State-Owned Enterprise in the Western Economies (New York: St. Martin’s, 1981), pp. 133–34, and Turner, Oil Companies, p. 57.

33See Leslie E. Grayson, National Oil Companies (New York: Wiley, 1981), p. 7.

34Sampson, Seven Sisters, pp. 70–103.

35See Turner, Oil Companies, pp. 27–28.

36Keller, “Pluralist State,” p. 68.

37Shaffer, United States, p. 30.

38Raymond Vernon, “The Influence of the U.S. Government upon Multinational Enterprises: The Case of Oil,” in The New Petroleum Order: From the Transnational Company to Relations between Governments (Quebec: Les Presses de l’université Laval, 1976), p. 56.

39Gerald D. Nash, United States Oil Policy, 1890–1964 (Pittsburgh: University of Pittsburgh Press, 1968), chap. 1.

40Cf. Arthur W. Wright, “The Case of the United States: Energy as a Political Good,” Journal of Comparative Economics 2 (1978), 168–69.

41The narrative sketch of the next few pages is drawn from several sources; especially useful is Nash, United States Oil Policy. The quotation is from Nash, p. 120.

42Stephen L. McDonald, “Taxation System and Market Distortions,” in Robert J. Kalter and William A. Vogely, eds., Energy Supply and Government Policy (Ithaca: Cornell University Press, 1976), pp. 26–50; Wright, “Case of the United States,” p. 169.

43Douglas Bohi and Milton Russell, Limiting Oil Imports: An Economic History and Analysis (Baltimore: Johns Hopkins University Press, 1978).

44Robert J. Kalter and William A. Vogely, “Introduction,” in Kalter and Vogely, Energy Supply and Government Policy, p. 11.

45Nash, United States Oil Policy, pp. 16–20.

46Craufurd D. Goodwin, “The Truman Administration: Toward a National Energy Policy,” in Goodwin, ed., Energy Policy in Perspective (Washington, D.C.: Brookings, 1981), pp. 2–3.

47See Sen, Military Origins of Industrialisation, chap. 2.

48See Kenneth N. Waltz, “The Myth of National Interdependence,” in Charles Kindleberger, ed., The International Corporation (Cambridge: MIT Press, 1970).

49John J. McCloy, testimony in Hearings before the Subcommittee on Multinational Corporations of the Committee on Foreign Relations, U.S. Senate, 93d Cong., 2d sess., pt. 5, January 24, 1974, p. 65.

50Goodwin, “Truman Administration,” p. 52.

51 Nash, United States Oil Policy, p. 159.

52John Frey and Chandler Ide, A History of the Petroleum Administration for War, 1941–45 (Washington, D.C.: GPO, 1946); Nash, United States Oil Policy, p. 160.

53Nash, United States Oil Policy, p. 172. See also David S. Painter, Oil and the American Century: The Political Economy of U.S. Foreign Oil Policy, 1941–1954 (Baltimore: Johns Hopkins University Press, 1986).

54Irvine H. Anderson, ARAMCO, the United States and Saudi Arabia: A Study of the Dynamics of Foreign Oil Policy, 1933–1950 (Princeton: Princeton University Press, 1981), p. 42.

55Nash, United States Oil Policy, p. 172.

56Stephen Randall, “Harold Ickes and United States Foreign Petroleum Planning, 1939–45,” Business History Review 57 (Fall 1983), 373; see also Stephen J. Randall, United States Foreign Oil Policy, 1919–1948: For Profits and Security (Kingston: McGill-Queen’s University Press, 1985).

57Anderson, ARAMCO, p. 42.

58The board of directors of the PRC was to consist of the secretaries of state, interior, war, and the navy. The State Department was to have veto rights over PRC activity, retaining the responsibility to conduct negotiations with foreign governments. Although the initial proposal for the PRC came from the State Department, the wartime concern over declining domestic petroleum reserves and the navy’s assertive support allowed the bolder Ickes plan to be adopted. See Randall, “Harold Ickes and U.S. Foreign Petroleum Planning.”

59Raymond F. Mikesell and Hollis B. Chenery, Arabian Oil: America’s Stake in the Middle East (Chapel Hill: University of North Carolina Press, 1949), pp. 91–92; Nash, United States Oil Policy, p. 173; George Stocking, Middle East Oil (Nashville: Vanderbilt University Press, 1970), pp. 98–99; Mira Wilkins, The Maturing of Multinational Enterprise: American Business Abroad from 1914 to 1970 (Cambridge: Harvard University Press, 1974), pp. 277–78; Sampson, Seven Sisters, pp. 96–97; Robert B. Kruger, The United States and International Oil: A Report for the Federal Energy Administration on U.S. Firms and Government Policy (New York: Praeger, 1975), pp. 50–51; Krasner, Defending the National Interest, pp. 190–97; Michael B. Stoff, Oil, War, and American Security: The Search for a National Policy on Foreign Oil, 1941–1947 (New Haven: Yale University Press, 1980), pp. 84–86; and David Aaron Miller, Search for Security: Saudi Arabian Oil and American Foreign Policy (Chapel Hill: University of North Carolina Press, 1980), pp. 81–82.

60Anderson, ARAMCO, p. 56. See also Robert O. Keohane, “State Power and Industry Influence: American Foreign Oil Policy in the 1940s,” International Organization 36 (Winter 1982), 166–83.

61 Anderson, ARAMCO, p. 63.

62Hearings before the Subcommittee on Multinational Corporations of the Committee on Foreign Relations, U.S. Senate, 93d Cong., 2d sess., pt. 4, January 30, 1974, p. 2.

63Krueger, United States and International Oil, pp. 51–52.

64Aaron Wildavsky and Ellen Tenebaum, The Politics of Mistrust: Estimating American Oil and Gas Resources (Beverly Hills, Calif.: Sage, 1981), p. 98.

65Barry D. Karl, Charles E. Merriam and the Study of Politics (Chicago: University of Chicago Press, 1974), pp. 270–72.

66Marion Clawson, New Deal Planning: The National Resources Planning Board (Baltimore: Johns Hopkins University Press, 1981), p. 9.

67Ibid., pp. 107–24; Charles E. Merriam, “The National Resources Planning Board,” Public Administration Review 1 (Winter 1941), 116–21.

68Clawson, New Deal Planning, p. 122.

69Energy Resources and National Policy, Report of the Energy Resources Committee to the Natural Resources Committee (Washington, D.C.: GPO, 1939), p. 1.

70Clawson, New Deal Planning, pp. 245–46.

71Arthur M. Schlesinger, Jr., The Age of Roosevelt—The Coming of the New Deal (Boston: Houghton Mifflin, 1959), p. 350.

72Clawson, New Deal Planning, pp. 250–52; Milton Russell, “Energy Politics Looking Back,” in Martin Greenberger, Caught Unawares: The Energy Decade in Retrospect (Cambridge, Mass.: Ballinger, 1983), pp. 29–66.

73President’s Materials Policy Commission, Resources for Freedom (Washington, D.C.: GPO, 1952), 1:129.

74Ibid., 1:129.

75Goodwin, “Truman Administration,” pp. 60–61.

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