Kochland: The Secret History of Koch Industries and Corporate Power in America

by Christopher Leonard

Charles Koch insists on reinvesting at least 90 percent of the company’s profits, fueling its constant expansion.

It specialized in the kind of businesses that are indispensable to modern civilization but which most consumers never directly encounter. The company is embedded in the hidden infrastructure of everyday life. Millions of people use Koch’s products without ever seeing Koch’s name attached.

to jet fuel, on which the global economy is dependent. Koch is the world’s third largest producer of nitrogen fertilizer, which is the cornerstone of the modern food system. Koch makes the synthetic materials used in baby diapers, waistbands, and carpets. It makes the chemicals used for plastic bottles and pipes. It owns Georgia-Pacific, which makes the wall panels, beams, and plywood required to build homes and office buildings. It makes napkins, paper towels, stationery, newspaper, and personal hygiene products. Koch Industries owns a network of commodities trading offices in Houston, Moscow, Geneva, and elsewhere, which are the circulatory system of modern finance. Koch traders sell everything from fertilizer, to rare metals, to fuel, to abstract derivatives contracts. Koch Industries’ annual revenue is larger than that of Facebook, Goldman Sachs, and US Steel combined.

The Koch brothers derived their wealth through a patient, long-term strategy of seizing opportunities in complex and often opaque corners of the economic system.

Charles Koch frequently derides the current political era as one of “crony capitalism,” but the company he built is perfectly suited to thrive in this environment.

It is revealing that Koch Industries expands, almost exclusively, into businesses that are uncompetitive, dominated by monopolistic firms, and deeply intertwined with government subsidies and regulation.

Koch derives much of its profits from oil refineries. The entire economy depends on refined oil, but no one has built a new oil refinery in the United States since 1977. The industry is dominated by entrenched players who run aged facilities at near-full capacity, reaping profits that are among the highest in the world. A single refinery shutdown causes gasoline prices to spike across entire regions of the United States. The underlying cause of this dysfunction is a set of loopholes in the Clean Air Act, a massive set of regulations passed in 1963 (and significantly expanded in 1970) that imposed pollution controls on new refineries. The legacy oil refiners, including Koch, exploited arcane sections of the law that allowed them to expand their old facilities while avoiding clean-air standards that would apply to new facilities. This gave them an insurmountable advantage over any potential new competitor. The absence of new refineries to stoke competition and drive down prices meant that Americans paid higher prices for gasoline.