The Roots of Stalin in the Tea Party Movement
Continued from previous page
The story of how the Koch family amassed its socialist wealth starts at the turn of the 20th century with the birth of Fredrick C. Koch. Fred was born in a tiny north Texas town to a Dutch immigrant and newspaper publisher. The historical record is not clear about the family's wealth, but it appears that great-granddaddy Koch was not hurting for cash, because Fred Koch turned out to be a smart kid and was able to study in MIT and graduate with a degree in chemical engineering. A few years later, in 1925, Fred started up the Winkler-Koch Engineering Company with a former classmate, quickly developing and patenting a novel process to refine gasoline from crude oil that had a higher yield than anything on the market. It was shaping up to be an American success story, where anything was possible with a bit of elbow grease and good ol' ingenuity.
The sky was the limit -- until the free market rained on Fred's parade.
See, Fred was living through the Roaring Twenties, a time of big business, heavy speculation and zero government regulation. Much like today, cartels were free to form and free to fix -- and so they did. Sensing a threat to their royalty-revenue stream from Winkler-Koch's superior refining technology, the reigning oil cartel moved in to teach the young Koch how the laissez-faire business model worked in the real world.
"[W]hen he tried to market his invention, the major oil companies sued him for patent infringement. Koch eventually won the lawsuits (after 15 years in court), but the controversy made it tough to attract many U.S. customers," according to Hoover's Company Records service. Just like that, Winkler-Koch Engineering found itself squeezed out of the American market. They had a superior product at a cheaper price, but no one to sell it to.
Luckily, there was one market where opportunity beckoned and innovation was rewarded: the Soviet Union.
Stalin's first Five-Year Plan was just kicking into action a nation-wide industrialization effort, and Soviet planners needed smart, industrious college grads like Fred Koch. The Soviet Union was desperately trying to increase its oil refining capacity, so oil engineers were especially in high demand -- and well paid, too.
"We are the world's greatest market, and we are prepared to order a large amount of goods and pay for them," Joseph Stalin told an American journalist in 1932. Stalin wasn't kidding. From 1926 to 1929, the Soviet oil industry bought $20 million worth of equipment. And Koch was about to get in on the action.
In 1929, after hosting a delegation of Soviet planners in Wichita, Kansas, Winkler and Koch signed a $5 million contract to build 15 refineries in the Soviet Union. According to Oil of Russia, a Russian oil industry trade magazine, the deal made Winkler-Koch into Comrade Stalin's number-one refinery builder. It provided equipment and oversaw construction:
The first Winkler–Koch plants were set up in Tuapse in 1930. The cracking unit operated commendably, and would in the future be the type preferred by the heads of the Soviet Union's petroleum industry when purchasing new cracking equipment. In 1931, two Winkler–Koch cracking units were launched in Baku, another two in Batumi, and six at once in Grozny; the last had a combined refining capacity of 900,000 tons per year. In 1932, a Winkler–Koch unit commenced operations in Yaroslavl.
At the time, the Soviet Union's oil industry was a total mess. Equipment built by Western engineering firms was always breaking down or didn't work at all. Western engineers were constantly being accused of espionage or sabotage, real or imagined, and booted out of the country. Soviet workers suspected of colluding with the foreigners were simply taken out back and shot. Winkler-Koch made sure it was running a tight, efficient operation. Unlike his Western competitors, Koch pleased his Soviet clients by ensuring top quality and helping the cause of socialism.