Thorstein Veblen
The Timber Lands and the Oil Fields
(The Freeman, May 23, 1923, pp. 248-250 and May 30, 1923, pp. 272-274.)

Republished without change (only some punctuation changed) in Veblen's 'Absentee 
Ownership and Business Enterprise in Recent Times'
(New York: B.W. Huebsch, 1923, chap. VII., sect. V. pp. 186-201). 
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THE TIMBER LANDS AND THE OIL FIELDS
The American Plan of seizure and conversion as it has worked out in the case of 
the land and the precious metals has been greatly complicated with ulterior 
consequences and secondary effects, not aimed at and not contemplated in the 
original design. The like is not true in the same degree in respect of those 
other natural resources which are more usually spoken of as such; as timber, 
coal, iron, oil, gas, waterpower, irrigation waters. Harbor facilities and 
transportation lines should also be included among these. The history of the 
large and many enterprises that have had to do with taking over these articles 
of national wealth can, of course, not be recited here, nor need it be. The 
records are full and accessible, for all such facts relating to these public 
utilities as the public has a right to inquire into under this American plan.
Publicity touching these matters is no part of the American plan. Yet, to recall 
what the ordinary course of events has been like, and what has been the 
commonplace outcome of absentee ownership and business enterprise in this field, 
it is necessary to show some of the characteristic practices and incidents that 
have marked this pioneering enterprise. And this can be shown as well, and 
perhaps more simply and concisely, in lumber than in any other one line of 
natural resources.
There have been many picturesque incidents and not a few spectacular episodes 
in the course of this pioneering enterprise; but all such it will be 
necessary to avoid, since that which is of interest here as bearing on the 
present argument is not the colorful atmosphere of this thing but only its 
workday nature, causes, and outcome - the industrial significance of its 
ordinary working-out. The case as a whole, of course, as an object-lesson 
showing the merits and qualities of the American Plan, runs not on picturesque 
episodes but on standard practice and workday outcome.
What has been done with the country's timber supply is a well defined and 
characteristic case, showing how absentee ownership functions in taking over the 
country's natural resources and using them up. As a characteristic feature of 
the case it may be called to mind at the outset that much of what has happened 
to the stand of hardwood timber has happened as an episode by the way, a side-
issue of pioneer farming. The greater proportion, of the original stand of 
hardwood, together with an appreciable fraction of the pine and hemlock, was got 
rid of in all haste in clearing the land to get at the soil. It would be hard to 
say how much of this hurried work of destroying the stand of timber is to be set 
down to the account of absentee ownership. There can be no question as to the 
broad fact that the practice of competitively taking over land more rapidly and 
in larger parcels than the requirements of cultivation called for will have 
increased the rate and volume of this waste. For more or less, so much is to be 
set down to the account of absentee ownership. It would perhaps be an 
overstatement to say that this practice has doubled the waste of timber incident 
to bringing the soil under cultivation, though it is not an extravagant 
overstatement. The enterprise in "land-grabbing," as it has been called, has 
involved a great deal of hasty work by men who have commonly been short of 
equipment and "working capital" and who have been driven to many shifts by 
present need and so have gone on a plan of hurried exploitation instead of 
economical use.(1*)
The pine and other evergreens have been taken care of by enterprising lumbermen 
driven by a businesslike pursuit of immediate net gain without afterthought. The 
like is also true for much of the hardwood timber; for such of it as has not 
been included in the "farm areas." The greater and better part of the stand of 
pine timber east of the plains - and much of the hemlock, spruce, and cedar - 
was run through and virtually exhausted during the latter half of the nineteenth 
century.
In pursuance of this American plan of lumbering as shown in the pine-timber 
country the usual procedure of the business men who conducted the enterprise was 
to acquire title to tracts of timber-land by one means and another. There was a 
shady side to some - quite a large proportion, they say - of the 
transactions involved in so acquiring title to these timber-lands or to the 
stand of timber on them; but this somewhat prevalent shady complexion of the 
enterprise at this point is not of particular interest here. Title was acquired 
under the broad principle that all is fair in competitive business; particularly 
so long as any dubious practices are carried through at the cost of the 
community at large.
According to the standard routine of the time, as seen, e.g., in the pineries of 
Michigan, Wisconsin, and Minnesota, these tracts of timber-land would then be 
"lumbered" as expeditiously as might be;(2*) that is to say, as the practice ran 
through the larger and busier part of that half-century, the high-grade and 
accessible pine timber was taken out, turned into lumber, and marketed. The 
inferior grades of pine timber - the smaller sticks (say, under eighteen inches 
in the butt), the crooked and abort sticks (say, under sixteen feet length), and 
other kinds than White pine (as, e.g., "Norway," "pitch," "jack," or "bull" 
pine) - were left standing or fallen, together with the greater part, sometimes 
all, of the hemlock, spruce, fir, cedar, tamarack, and any scattered bodies of 
hardwood. So also the slashings (approximately one-half of the total mass of 
material in each tree) were left on the ground. So soon as these loppings were 
sufficiently dry - say, in two or three years - they would presently be 
fired, by accident or design, and the tract would then be burned over, 
destroying whatever timber had not been taken out.
When account is taken of the frequent spread of these fires into uncut tracts of 
standing timber, it is probably within the mark to say that something more than 
one-half of the original stand of timber was lost in these unavoidable fires. 
This standard routine of American lumbering, including the destruction by fire, 
did not vary greatly from place to place, and it has held true with little 
abatement throughout the period. It is doubtless within the mark to say that 
this enterprise of the lumbermen during the period since the middle of the 
nineteenth century has destroyed very appreciably more timber than it has 
utilised,(3*) although some practice of economy has come into the business 
toward the close of the period, and more particularly since the beginning of the 
present century.(4*)
None of this passionate endeavour of the lumbermen to get rich quick has 
been wilfully destructive. It is only that as it has been conducted, and as it 
could not but be conducted according to sound business principles, a destructive 
waste of the timber supply has been involved in it and a greater waste and 
destruction has unfailingly followed it up. It is always sound business practice 
to take any obtainable net gain, at any cost and at any risk to the rest of the 
community. The Captains of Industry, who have been engaged in this enterprise of 
disemboweling the country's timber resources and who have profited by it have 
been quite within their rights and within the ethics of business. Not only so; 
commonly if not invariably their conduct is heartily approved and admired by 
their fellow citizens, and they have come through the adventure with a greatly 
augmented self-respect and a very notable conviction of well-doing.
They, the successful ones, have become substantial citizens, bearing all the 
stigmata of civic substance and merit. And after the pattern of substantial 
American citizens they have, not unusually, gone on and acquired further merit 
by devoting some part of their takings to conspicuously humane works. There are 
towns, not a few, that have been named in reverent memory of these enterprising 
men, and there are many parks, hospitals, museums, libraries, fountains, school 
and town edifices, and other municipal works, in many towns and cities in these 
states, which bear their name and carry forward the memory of their munificence. 
Indeed, so highly do their fellow citizens esteem their meritorious work in so 
having disemboweled the country's timber resources, that they have not 
uncommonly been called by popular vote to take over the business of governing 
the country whose resources they have disemboweled, in legislative and 
administrative office, in the states and in the Federal Government. There is, 
broadly speaking, no fault to be found with them or their works, or at least no 
fault is found, by themselves or by their fellow citizens. Their rating, in the 
popular esteem and in their own, is reflected by the fact that a very 
appreciable and honorable number of these men have proved to be substantial and 
public-spirited enough to find their way into the federal senate, sometimes even 
at a cash outlay which it might be inconvenient to specify; and here they have 
honorably "stood pat," embattled in defense of the principles of business-as-
usual, and have honorably kept faith with all the vested interests. In short, 
they run meritoriously true to the American ideal of the self-made man who knows 
that his work is well done.
In the end, that is to say since the end of the timber resources has very 
crudely come in sight, a more economical plan of seizure and conversion has gone 
into effect, more economical and also more conclusive in the matter of seizure 
and conversion. It became evident some time ago that the timber-lands were by 
way of becoming valuable holdings for eventual profit. Therefore title to the 
major part of what was left was presently acquired by interested individuals and 
corporations, to be held for an eventual rise in the prices of lumber. And the 
rise in lumber was looked for as due to come so soon as the increasing scarcity 
of timber and the collusive strategy of these large absentee owners could be 
effectually brought to bear on the market. And, indeed, the anticipated advance 
came on with reasonable promptitude, so soon as the major part of the remaining 
stand of timber had passed securely under the control of these larger 
absentee owners. And the outcome has been such a schedule of prices as the 
traffic could be made to bear on this basis of organised collusion. In the end 
this remnant of the original stand of timber promises to cost the community as 
much at the hands of these collusive absentee owners as the original stand of 
timber would have been worth in case it had been managed on a plan of deliberate 
economy and conservation from the outset. And its value to its absentee owners 
is measured by its cost to the community, which in turn is measured by what the 
traffic can be made to bear in the case of a tariff-protected necessity under 
competent monopoly management.(5*)
The Lumber Interest shows the American plan as it has worked out in a moderately 
large and well defined field. In principle, what has been done with other, 
larger natural resources does not differ essentially from the case of the timber 
lands. The details are different, of course, inasmuch as these others come 
into the industrial system each in ways of its own. So far as the peculiar 
circumstances of each case will permit, these others, too, show the 
characteristic traits of the American plan, - initial waste and eventual 
absentee ownership on a large scale and on a quasi-monopolistic footing. And 
wherever and so far as the course of enterprise has had a chance to work out, 
the outcome is monotonously the same, - collusive management under absentee 
control at the cost of the underlying population.
But these larger items of the country's natural resources - as coal, iron, 
water-power, or transportation lines - are the material of the country's "key 
industries." They are, therefore, the substance of the country's industrial 
system, and it would be a bootless undertaking to go into a discussion of them 
except as organic factors in that balanced system of industrial processes in 
which they are the major forces engaged. They can only be taken conjointly, and 
their joint life-history is the life-history of American industry as it has run 
on since the mechanical technology began to dominate American industry during 
the latter half of the nineteenth century.
Coal and iron have already reached a passably settled state of collusive 
management under corporation control on a basis of unqualified absentee 
ownership. Waterpower is still in process of being taken over and converted to 
absentee gain, helped along covertly and overtly by official and legislative 
furtherance; no doubt conscientiously so, in the main, since the legislators as 
well as the administrative and judiciary officials are commonly men with a sound 
business-man's bias; men whose best knowledge and belief runs to the effect that 
such gainful absentee enterprise at any cost to the underlying population is 
"good for business"; that the common good turns on the unremitting 
acceleration of absentee business traffic; which is conditioned on increasing 
net gains for the interested parties. And the costless transfer of these 
necessaries of life to these absentee owners is an obvious means of increasing 
their net gains; thereby provoking them to do business with the underlying 
population; which is the good end to which in the nature of things a 
businesslike administration should bend its energies.
So the country's water-power is unobtrusively passing into the hands of duly 
constituted vested interests, to be turned to account for the benefit of duly 
accredited absentee owners, all in due accord with the American Plan. So also 
the transportation system is still in process, but in an advanced stage of the 
process, of approach to that settled state of vested interest which confers an 
inalienable right to a flow of free income computed on an immutably inflated 
capitalisation. The railways, e.g., should not have much farther to go along 
that road. What chiefly remains to be done would seem to be that which the 
authorities already have in hand, - to make the tax-payers chargeable for 
suitable earnings on the railway corporations' capitalisation, as a fixed 
overhead charge on the cost of living, without apology or afterthought. So that 
matter will have been arranged.(6*)
In coal, iron, and transportation the conversion of public necessities 
into private assets has already reached a passably settled and conclusive state, 
so that these means of production are now securely held in absentee ownership 
and managed on the sound business principle of charging what the traffic will 
bear. Their use is regulated on the steady presumption of rendering no greater 
service than that minimum which will yield a satisfactory net gain to their 
absentee owners. That is to say, as regards these natural resources their 
employment has been brought to a basis of "sound business," so that the abiding 
care of the businesslike management is to avoid an excessive output. An 
excessive output in this connection means such a full and sustained employment 
of plant and man-power as would overstock the market and lower profits. Hence a 
watchful curtailment of output, unemployment, and sabotage.(7*)
On the other hand Oil, that is to say the business in crude oil, is still 
in an immature phase of its development, resembling the earlier lumbering 
enterprise, and marked by a headlong competitive rush to disembowel the 
available resources expeditiously and at any cost. In the course of nature the 
older oil-fields have passed this stage of development and have duly come to 
rest secure and orderly under the absentee ownership and absentee management of 
economically regular corporations, of the large and stable type which is known 
colloquially as Big Business. So also is very much of the business of refining, 
transporting and marketing the output. These things have already come in under 
the bead of business-as-usual and are managed discretely by collusion and 
coercion on the principle of what the traffic will bear; that is to say, these 
lines of business run on a settled plan of competition between the absentee 
owners and the underlying population, according to which the absentee management 
makes the terms for the underlying population on the principle of what the 
traffic will bear. As business concerns these corporate interests have already 
become enterprises in salesmanship simply, and conduct their affairs quite in 
conformity with the later approved canons of salesmanship, as touches both their 
outstanding securities and their marketable products and services.(8*)
There still is much pioneering enterprise in the production of the crude 
oil, designed to get rich quick on a moderate outlay. Many "independent" 
concerns are engaged in this enterprise, a number of which - perhaps the greater 
number - are unrecognised subsidiaries of the large absentee corporations which 
handle the refined. The affiliations of these "independent" oil concerns are 
surrounded with much painstaking obscurity. For such of them as are in any 
degree independent in fact, the manouvres of the greater corporations are 
conditioning circumstances to be guessed at and taken account of. The great 
corporations stand as massive impersonal vested interests which move obscurely 
in the background of the market and make the terms on which business may be 
transacted; and it is for the "independents" to make their peace with them on 
such terms as may be had. Having come to terms with the master corporations, the 
enterprising knights of trover and conversion who are "developing" the newer 
fields go about their business of disemboweling the country's oil resources in 
all haste and without afterthought.(9*)
The greater number of these "independent" concerns are scantily equipped for the 
work; although the total expenditure on equipment and work in the field greatly 
exceeds what would be required to produce the crude oil on any reasonably 
economical plan. They are also commonly under-manned, in the sense that the 
working personnel in the field includes too small a proportion of suitably 
skilled and experienced workmen and too scant a staff of technical experts; too 
scant, that is, for economical working. Also they are commonly ill prepared for 
contingencies, whether of a financial or a mechanical nature; partly 
because they commonly do not have the benefit of competent technical advice and 
experience; partly because much of this enterprise still carries the mark of 
"wild-cat" and still does business in a hurry on a chance and a "shoe-string"; 
and partly also because unfavorable contingencies are not infrequently arranged 
for them as a matter of business strategy in behalf of the vested interests that 
move in the background. And quite as a matter of routine there is a notorious 
initial waste of the output (both oil and gas) when a well is brought in. This 
waste commonly goes on for some time at a high percentage, and the waste of gas 
will often run on nearly unchecked through the life of the well, for want of 
storage capacity, pipe-line connections, etc.
Much of this enterprise is of the nature of a competitive duplication of work 
and equipment. The independent producers, many of whom are corporations of some 
standing, are competitive leaseholders of plots of ground bounded by survey 
lines, lines of ownership, not by the natural boundaries of the "pools" which 
they are engaged in exhausting. These leased plots of ground touch one another 
along the geometrical lines of the survey. So, under the spur of businesslike 
initiative the leaseholders each and several bend their efforts to get the 
better of one another by cutting in on one another's oil-contents underground 
along these dividing lines. All and several sink many wells rapidly on these 
competing plots of ground, taking care to crowd many new wells up against the 
dividing lines and into the corners of their leaseholds, to draw off underground 
what it would be larceny to take over after it reaches the surface; until the 
resulting number of wells (and "dry holes") sunk in any given neighborhood is 
several times as many, at several times the cost that would be needed to 
get out the underlying oil on any reasonable plan.(10*)
This clamorous waste and manhandling of the oil resources runs on quite as a 
matter of business routine, and the recital of any part of the story here may 
well seem a piece of aimless tedium. It runs on in this fashion from the outset, 
but it is plain that the enterprise is in all cases due to head up eventually in 
a collective control of the output by large absentee owners. The older fields 
show what is to be expected in that respect and how it is likely to be done. The 
waste which this pioneering enterprise in oil involves, and the excessive cost 
of it, will not run to so high a percentage of the output as in the case of the 
gold production (some 500 per cent. for the Alaskan gold), but counted in 
absolute figures the total of wasteful costs and wasted output entailed by 
private initiative in the production of oil is doubtless larger than the 
corresponding total for gold.
The whole of this routine of waste and inefficiency is a matter of course under 
the American plan of seizure and conversion; and it is at least a blameless 
exercise of private initiative, commonly regarded as a meritorious work. 
It is, in effect, no more than an exemplary working-out of the American 
citizen's dearest constitutional rights, and there is no fault to be found with 
it all on any score of irregularity. In its time and under the given conditions 
of law and custom it is sound business enterprise; just as the Big Business and 
monopoly control in which it invariably heads up is also sound business. It is 
all in the day's work. It has seemed necessary here to recall these workday 
incidents of business-as-usual in oil, just because they show a concrete and 
exemplary working-out of absentee ownership as it affects the country's natural 
resources.
THORSTEIN VEBLEN

NOTES:
1) So, e.g., in much of the country where the ground was covered with hardwood 
timber it was in its time not unusual for the impecunious settlers to raise some 
slight funds for urgent use by hastily felling the stand of timber, burning it, 
and selling the ash, which was used for making potash. So also, in the same 
sections as well as in many places where the land was timbered with pine and 
hemlock, it has not been unusual to construct fences by felling the timber along 
the fence-line in such a way as to make a barrier of it to serve the purpose of 
a fence by cumbering the ground. These Independent Farmers were commonly very 
nearly penniless, and so were driven to many ingenious devices to find ready 
money, at the same time that their competitive enterprise in land-grabbing 
scattered them and their work out over wide spaces of half-wild country with 
long distances and atrocious roads, leaving them far out of reach of reasonable 
transportation. They were (commonly) unable to buy or to bring in anything like 
the equipment and materials required in their work. So they took this way out of 
present difficulties at the cost of the future; and the future, which has now 
become the present, is paying the cost in a scarcity of timber.
2) The time allowed for stripping any such given tract and "getting out" its 
first-class timber would commonly be limited to the number of years which the 
laws of the state allowed delinquent taxes to run before title to the land 
reverted to the state. Hence the need of despatch. This period was commonly long 
enough for the purpose if no time were wasted; and as a matter of economy it was 
accordingly not usual to pay taxes on the timber-lands during this interval 
while the desirable timber was removed. So that much of the timber-lands 
reverted to the state for delinquent taxes after the stand of timber had been 
cut or burned.
3) Cf. e.g., U.S. Department of Agriculture, Forest Service - circular 171. "The 
Forests of the U.S. and their Uses," pp. 9-11.
4) There has been an increasing endeavour to turn by-products and waste products 
to account, and more economical methods and appliances have come into use. The 
latter point is illustrated, e.g., by the gradual introduction of the gang-saw, 
and presently the band-saw, in place of the circular saw in the sawmills which 
turn the saw-logs into lumber. The circular saw is an American invention, at 
least in respect of its larger use and as a standard appliance for reducing saw-
logs to lumber. In this larger use, in the use of these circular saws of large 
diameter, the unavoidable waste of material is larger than the corresponding 
waste involved in the use of the gang-saw, larger by something more than 100 per 
cent. But the circular saw is expeditious, and it does not require so extensive 
or so massive an equipment, at the same time that it and its equipment are more 
readily portable. And so long as waste of material has little or no commercial 
value the circular saw is preferred. But it makes sawdust of something like one-
fourth to one-third of the lumber-content of a saw-log, whereas the gang-saw's 
or the band-saw's allowance for sawdust will be perhaps one-tenth to one-fourth 
of the lumber-content.
5) There is, of course, no monopoly control of the timber supply, de jure; no 
more than there is such a control de jure in anthracite or bituminous coal. The 
law does not tolerate such control, de jure. But the present argument is 
concerned only with the state of the case de facto. And de facto it will not be 
questioned that in the case of the timber supply, as is uniformly to be expected 
under this American plan of expeditious seizure and conversion to private 
ownership, the spectacularly wasteful competition among enterprising pioneers 
has now run its course and has worked out in a system of collusive management in 
behalf of these larger absentee owners who have acquired title to (virtually) 
all that is left. Whereby it has come about, as happens uniformly where an 
effectual monopoly control has taken over the output of one of the necessaries 
of life, that the competition which once used to run between the lumbermen 
producing for an open market now runs between this group of absentee owners and 
the underlying population. So the group of absentee owners of the remaining 
stand of timber make the terms under due cover of law, which the underlying 
population will have to take, de facto, but which they can leave, de jure.
6) Such a course falls in with the temper of a Business Administration, at the 
same time that it is wholly consonant with that popular sentiment that is 
animated with business principles. Any sound business concern is capitalised on 
that rate of net gain which it has been found that the traffic will bear; and in 
effect it is held, in law and custom, that any reputably large business concern 
duly capitalised on this basis, and of sonic years' standing, is duly entitled, 
has a vested right, to a net income in perpetuity answering to this 
capitalisation so arrived at. Therefore, when earnings fall off - due, perhaps, 
to businesslike incapacity - it should be the part of economy and clean 
management to cut out meaningless intermediate steps in the process of getting 
these legitimate gains out of the underlying population, by making the suitable 
rate of net gains for this business a fixed overhead charge upon the underlying 
population in the shape of a tax. There is no use of having taxpayers if they 
are not to be made use of in such an emergency.
7) This is by no means intended to say that this running sabotage on production 
and output constitutes the whole duty of the corporate management which takes 
care of the interests of the absentee owners of these natural resources. There 
are also always the many and various cares of corporation finance, and there is 
the running administrative routine of "hiring and firing" the working personnel 
with a view to lower costs, and this duty is forever complicated with "labor 
troubles" that arise out of refractory human nature. But sabotage, in that 
inoffensive sense in which the word is used here, remains after all the first 
and unremitting duty incumbent on these executives, in so far as their business 
is conducted on the sound principles of net gain in terms of price, as is 
commonly the case. And this sabotage, graduated un-employment, and parsimonious 
hiring and firing, entails "labor troubles," in the nature of things. On this 
head the situation in coal since the Armistice is typical rather than 
exceptional. So also in steel. So persistent, or rather chronic, have been the 
labor troubles in these industries during these years while the necessary 
sabotage on production has run high, that the management have found it necessary 
to call in the help of many "under-cover-men" and armed guards as well as the 
armed forces at the disposal of the local and state authorities. The authorities 
so called in have even found it necessary transiently to resort to "martial 
law." The salutary modicum of sabotage on production is no light care. - Cf., 
e.g., Public Opinion and the Steel Strike, ch. i; also Report on the Steel 
Strike of 1919, especially ch. vii.
8) Cf. Joseph E. Pogue, Economics of Petroleum, ch. i.
9) Cf. Pogue, Economics of Petroleum, chapters i, ii, iv and xv.
10) Any detail map of such an oil-field will show this duplication of wells as 
one of its striking features. Wherever four leaseholds meet, e.g., one expects 
to find four (or more) competing wells, sunk in all haste, crowded into the 
four corners as near as the dimensions of the machinery or of the law will 
permit, in a race to encroach on one another's oil-contents and draw off the oil 
which one well would handle with less waste. Such duplication of wells is also 
enforceable at law, as certain recent court-decisions have established. A 
leaseholder who fails to crowd in quickly into a competing corner of his 
leasehold is liable to damages at the suit of the lessor.
Cf., e.g., C. G. Gilbert and J. E. Pogue, Petroleum - A Resource Interpretation 
(Bulletin 102, part 6, U.S. National Museum, 1918); see also J. E. Pogue, 
Economics of Petroleum (New York, 1921), pp. 31-46, and map on p. 33.
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