Empire Building

The Koch brothers have bankrolled a broad attack on
progressive government programs. Their grandfather's
history in Texas helps explain why.

by Yasha Levine

Published on: Monday, November 07, 2011

http://www.texasobserver.org/cover-story/item/18167-empire
-building

CHARLES AND DAVID KOCH are the most powerful right-wing
billionaires of our time. They have spent hundreds of
millions bankrolling a broad attack against Social
Security, organized labor, financial regulations,
environmental protection and public education. The
brothers plan to spend at least $200 million trying to
elect right-wing, anti-government Republicans in 2012,
according to Politico. They seem hell-bent on dragging
America back to the dark days of unregulated capitalism.
The history of their grandfather in Texas may help explain
why.

Little has been written about Harry Koch. He's the
least-known member of the Koch family, which has been
marching under the same laissez-faire banner for the past
three generations. Harry Koch emigrated to America in
1888, settled in a North Texas railroad town and became a
newspaper publisher and aggressive corporate booster. He
advocated for railroad and banking interests, amassing
wealth and helping big business fight organized labor and
squelch reforms.

Much of the Koch brothers' ideology can be found in Harry
Koch's newspaper editorials of nearly a century ago. Take,
for instance, the Kochs' current fight against Social
Security. Harry Koch took part in a multi-year right-wing
propaganda campaign to shoot down New Deal programs.
Grandfather and grandsons employ eerily familiar talking
points to bash government pension and welfare programs.

"No political system can possibly guarantee either a
national economic security or an individual standard of
living. Government can guarantee no man a job or a
livelihood," Harry Koch wrote on February 1, 1935, nine
months before Charles Koch was born.

Fast-forward 75 years and you can see Charles Koch using
the same lines of attack in his company's newsletter:
"government actions ... stifle economic growth and job
creation, which in turn will significantly reduce the
standard of living of American families."

This summer I traveled to Quanah, the dusty North Texas
railroad town that Harry Koch called home, to find out
more about the life of the man who spawned the two most
powerful oligarchs of our time. After spending days
hunkered over newspaper archives and rifling through a
century's worth of county records in the town's tiny
courthouse, I began to see a picture emerge of a man who
spent his life learning how to use newspapers and media
for ideological manipulation and as a platform for
pro-business agendas. As I strained to read the battered
microfilm, I was constantly surprised at the degree to
which Harry's views--on everything from the economy to the
role of government in a democratic society--have been
passed on nearly unchanged through two generations, and
are now being pushed by Charles and David Koch.

HARRY KOCH WAS BORN in Holland in 1867 to a wealthy
German-Dutch family of merchants, farmers and doctors.
After apprenticing to a newspaper publisher, he decided to
seek his fortune in America. At 21, he set off on a
steamer and arrived in New York on Dec. 5, 1888. He spent
his first few years in America working for various Dutch
newspapers in Chicago, New Orleans, Grand Rapids and
Austin until, in 1891, he finally settled down in Quanah,
a town that the railroad had established just a few years
before. Harry always remained curiously vague and evasive
about why he decided to stake his claim in a remote North
Texas town, but there is no real mystery to it: he came
because of the railroads.

In the second half of the 19th century, America was in the
grip of a massive railroad boom. Boosted by eager
investors, lucrative subsidies and free land, railroads
sprung up connecting every corner of the United States
without much thought for demand or necessity. America's
rail mileage quadrupled from 1870 to 1900, with enough
track laid down by the end of the century to stretch from
New York to San Francisco 66 times.

In those wild early days of the railroad age, real estate
speculation was a central plank of the business plan. The
U.S. government had given vast stretches of public land to
railroad companies, and the companies needed to sell that
land to settlers to create customers and pay off debts.
That meant railroads needed local publishers to trigger
real estate booms in the multitude of railroad towns that
had been planned and parceled across the country, luring
settlers with exaggerated stories of fertile soil and
incipient prosperity.

Dutch investors were heavily involved in several railroad
lines in the North Texas area, including the Fort Worth
and Denver Railway Company, which had spawned Quanah in
1887 and owned just about all the land in town. County
records show Harry provided advertising services and
worked directly for the Fort Worth and Denver for nearly
20 years, sometimes receiving payment in the form of land
transferred directly from the legendary railroad builder
Grenville M. Dodge, who helped lay the Union Pacific and
more than a dozen other lines across the country.

Harry bought up two of the town's newspapers, apparently
with his own money, merged them into the Quanah
Tribune-Chief, and began printing beguiling stories of
Western prosperity.

When Harry moved to Quanah, it was little more than a
dusty settlement with a patchwork of dirt lots, a few
rudimentary buildings and a railroad platform--a
get-rich-quick scheme laid out on paper. It was his job to
create the demand, bring people in and make the town a
reality. He ran his paper like a chamber of commerce
newsletter, cramming it full of stories about growth,
expansion and the limitless possibilities of life on the
frontier. He helped inflate a real estate bubble that,
along with the presence of the railroad, nearly quadrupled
Hardeman County's population to more than 11,000.

Harry Koch worked hard to bring a number of railroad spurs
to Quanah, and he helped make the town a major
transportation hub by the early 1900s. As the town grew,
so did Harry's fortune. He amassed substantial real estate
holdings in and around Quanah, which allowed him to cash
in on the real estate boom he had helped to create.

Harry enjoyed his success. He got married, had two sons,
traveled regularly to New York and Europe, and was proud
of having crossed the Atlantic nine times. He even
described being in Berlin, caught in a huge crowd that had
gathered to hear "der Fuhrer" make a speech.

By the time he retired, Harry Koch was not just a
respected newspaper publisher in Texas, but a powerful and
highly connected regional business player. He was also
extremely well liked. "There is no more popular member of
the Association than Harry Koch," read his bio by the
Texas Press Association, where he served as president in
1918.

But the bustling city he helped create was mostly made of
hype. Today, Quanah's population has sunk back to 1890
levels and has little industry left. A gypsum plant on the
outskirts of town is the only major employer, and it
happens to be owned by the Koch family.

Harry Koch's rise from immigrant small-town newspaper
publisher to entrenched business heavyweight might seem
like a classic coming-to-America story, confirming that
through hard work, perseverance and luck, anything is
possible. But that narrative would be misleading. Harry
may have lived among settlers who struggled to eke out a
living on the frontier, but he was never really one
himself. The difference was right there on the surface for
everyone to see: While Harry Koch prospered, almost
everyone else in North Texas descended into poverty.

On top of the crippling boom-and-bust cycles that gripped
the country from the 1890s through the late 1920s,
settlers faced crop failures, low agricultural prices and
real estate booms that made it impossible for new farmers
to afford land. Many sunk into deep debt and poverty.

The misery and hopelessness of frontier life sparked a
powerful new grassroots populist movement, which sought to
reform and curb the worst of corporate abuses. Harry Koch
was not sympathetic to the cause. (In 1897, while the
country was still in the grips of one of the worst
economic depressions in its history, Harry Koch penned a
long, gushing account of a luxurious trip to a convention
thrown for boosters and businessmen in Galveston. Between
detailed descriptions of all the oysters eaten and
champagne bottles emptied at swanky parties, Harry
expressed shock and outrage that the  street railway union
organized a strike during the convention and forced
attendees to temporarily move about on foot. But not for
long. "Santa Fe officials took pity on the suffering
newspaper men and made up a train to Woolman's lake where
the oyster roast was to be held," Koch wrote approvingly.)

In a series of early editorials, Harry Koch scoffed at the
idea that land rents should be regulated, and ridiculed
the plight of heavily indebted farmers, writing that while
they might find indebtedness unpleasant, a much bigger
problem was their laziness and inability to take care of
the farm equipment they had purchased on credit. He
patronized Quanah farmers with platitudes about honesty
and success: "Be honest. Dishonesty seldom makes one rich,
and when it does riches are a curse. There is no such
thing as dishonest success." He delighted in the fact that
unlike other cities and towns across America--filled with
strikes, riots, political agitation and violent unrest--the
people of Quanah largely steered clear of politics,
concerning themselves with what they understood best:
hard, honest labor. "A very commendable trait among
western people," Harry wrote, "is that they have no time
to give to politics."


THROUGHOUT THE 1890S, Harry never shied from using his
newspaper to promote specific business interests and as a
platform to express his aristocratic views on society.

But something began to change at the turn of the century.
Koch shed his abrasive attitude toward the masses and
began reinventing himself as a champion of the common man.

In 1901, Koch published a long editorial that hinted at
this transformation. In the piece, he defends popularly
embattled trusts and monopolies with the counterintuitive
argument that such protectors of wealth were a force for
the common good. He based his argument on the false notion
that trusts lowered the price of consumer goods:

"Let this thing be borne in mind as significant, that all
real trusts, all that are destined to succeed and endure,
are established on a basis of permanent lower prices for
their products. Everybody knows that sugar and oil have
been considerably cheaper since these industries have been
under trust control. And the same is true, barring periods
of fluctuation, of all industries under effective
monopoly, from steel rails to cigarettes."

Harry Koch's transformation was remarkable: Not only was
he attempting to convince readers of his point of view by
appealing to their own best interests, but he was fleshing
out economic arguments in language that his grandsons
continue to use today. Harry's defense of trusts reads
exactly like the pro-monopoly propaganda regularly cranked
out by scholars at The Cato Institute--a libertarian think
tank founded by Harry's grandson Charles Koch in 1977.
University of California-Irvine Professor Richard McKenzie
recently published an article in Cato's Regulation
magazine titled "In Defense of Monopoly," in which he
echoes Harry's 110-year-old editorial, including this
claim: "The monopolist does not charge higher prices; it
lowers them."

This new rhetorical approach was not Harry Koch's
invention. Rather, Harry was being swept up in a larger
national revolution in the way American business elites
communicated with the public.

At the turn of the 20th century, growing public outrage at
the way financial elites were handling the economy,
combined with a rapid expansion of voting enfranchisement
that increased participation in the democratic process
from 15 percent of the population in 1890 to 50 percent in
1920, began posing a real threat to the entrenched
interests of American corporations.

To protect itself, corporate America began experimenting
with modern public relations techniques and developing
strategies to manipulate and manage public perceptions.

Harry Koch was right in the thick of it.

In 1910, Koch became the founding director, as well as one
of the biggest shareholders, of a small North Texas
railroad company called the Quanah, Acme & Pacific. After
two decades of laboring to promote other people's railroad
interests, he had finally come into his own. The
Tribune-Chief became the de facto advertising arm of the
QA&P, extolling the region's bright future and certain
prosperity while hawking company shares and promoting land
in towns created and owned by the line. He had his own
railroad and his own newspaper to promote it.

In the 1930s, corporations were forced to ramp up their
pro-business public relations campaigns to deal with the
violent backlash in public opinion caused by the Great
Depression.

Harry Koch rolled out an aggressive multi-year attack on
Roosevelt's New Deal. Tribune-Chief criticisms of the
program echoed the propaganda of corporate boosters like
the National Association of Manufacturers. The paper
slammed public pensions, regulations, tariffs, unions,
muckrakers, labor laws and deficits, and filled its op-ed
space with pro-business opinion pieces delivered fresh
from New York lobby groups like the American Bankers
Association, whose president, R.S. Becht, wrote to assure
Quanah readers that there was no need for the government
to regulate banks. Industry self-regulation--or "voluntary
self reform," as he called it--would be enough.

Despite, or because of, overwhelming public support for
FDR's pension and welfare programs, they became major
targets, with Harry Koch publishing two or three op-eds in
a single day attacking them. "Some ten million old folks
are wanting to draw $200 a month from the government, and
one hundred million stand ready to quit work when they do.
Why not pension all of them?" Koch wrote in a February
1935 editorial, while claiming in a different editorial
that the "idea of an old age pension is a splendid idea
... such a pension is proper. But great care should be
taken...in preparing old age pension laws."

His editorials contained the same familiar right-wing
claims that we hear today: that there is not enough money
to support "entitlement" programs, that government will
tax industry into ruin, that similar programs in other
countries have failed, that regulation is unconstitutional
and workers, given the opportunity, will quit en masse and
live off government charity.

In a 1934 editorial titled "Democracy's Problem," Harry
rejected "mobocracy," which had "been discarded as
undesirable, even if attainable." Mobocracy was the
right's popular name for "tyranny of the majority," and
remains a favorite whipping horse of Koch-funded
libertarians, who increasingly promote the idea that
America is not a democracy and was never intended to be
one. Here's Steve H. Hanke, senior fellow at the Cato
Institute, writing in a 2011 editorial: "Contrary to what
propaganda has led the public to believe, America's
Founding Fathers were skeptical and anxious about
democracy. They were aware of the evils that accompany a
tyranny of the majority. The Framers of the Constitution
went to great lengths to ensure that the federal
government was not based on the will of the majority and
was not, therefore, democratic."

Harry Koch passed away in 1942, not long after business'
epic battle against the New Deal reforms. The Quanah
Tribune-Chief was passed on to his eldest son, who took
over the paper with his wife and kept it in the family
until the 1970s. Meanwhile, Harry's other son, Fred Koch,
used the fortune he made building refineries for Stalin in
the 1930s Soviet Union to ramp up his own business in
Wichita, Kansas. He would build a successful oil
transportation empire that would one day grow into Koch
Industries, the largest privately held oil company in the
country.

But even after the family's base of operations moved away
from Quanah, Harry Koch's ghost would never be far
removed. His life at the intersection of news media, big
business, public relations and ideological warfare would
be passed on as a family tradition from father to son to
grandson, elevating his offspring to ever higher levels of
wealth and influence.

Yasha Levine is an investigative journalist and a founding
editor of The eXiled Online. He lives in Venice,
California.

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