Discovery

JANUARY 2010 THE QUARTERLY NEWSLETTER OF KOCH COMPANIES Governments going broke Throughout history, those societies with $1 trillion in borrowed money, much With the world’s third-largest popula- a high degree of economic freedom have of it earmarked for pet projects in the tion – much of it rapidly approaching re- not only been more prosperous, but name of “economic stimulus.” Such tirement age – the United States is facing healthier and happier. spending pushed the federal deficit to the real prospect of bankruptcy. Many The opposite is true for those whose a record $1.4 trillion. would argue it already is bankrupt. governments heavily interfered in busi- Not surprisingly, Congress recently Deadly deficits ness and commerce. raised the overall federal debt ceiling by If citizens do not $1.9 trillion to a record $14.3 trillion. U.S. PUBLIC DEBT And yet, despite all the evidence, all hold their govern- % too many governments seem intent on To be clear, the blame for such fiscal irre- ments accountable 2008 21 of GDP reducing economic freedom these days. sponsibility is non-partisan. During the and insist on fiscal 2009 42% (projected) They do so by spending enormous sums recent Bush administration, Congress responsibility, the of borrowed money and taking away the approved eight increases in the debt ceil- situation can only go from bad to worse ability of individuals to make decisions ing totaling $5.4 trillion. – a frightening prospect for those whose for themselves. From Britain to India to Mexico, debt finances are already under pressure. This is not the path to prosperity or ceilings have recently been raised, often To overcome large deficits, govern- freedom. It is a formula for misery and to unheard-of levels. Clearly, debt ceil- ments have few choices. These include national bankruptcy. ings do nothing to limit government raising taxes, cutting spending and in- debt if they are continuously raised. Binge spending flating the volume of currency to water Do the math down debts. Individuals who insist on spending The Bank of England has already chosen more than they make not only go into When consumers max out their credit cards (charge the limit on them), is it wise the last option (called quantitative eas- debt, they eventually go bankrupt. The ing) by creating £200 billion out of thin air. same is true for governments. to keep raising their borrowing limit? The debt level of the Greek government At some point, both borrow more than When government debts rise, economic growth lowers. On average, nations with has led its Prime Minister to suggest rais- they can ever pay back. They reach that ing individual income tax rates as high as point even sooner when income drops. debts exceeding 90 percent of GDP have less than half the growth rate of when 90 percent while cutting Social Security The hallmarks of government over- debt is less than 30 percent of GDP. payments by 10 percent. spending are easy to spot. They include By its own accounting, the U.S. govern- For award-winning TV newsman John wasteful programs, record deficits and Stossel, U.S. government overspend- frightening levels of national debt. ment has unfunded liabilities exceeding more than $100 trillion, more than the ing is cause for concern – and some Last fiscal year, the U.S. government entire value of the nation’s economy. grim humor. saw its tax receipts fall by more than 16 Those liabilities include Social Security, “I’d say they’re spending like drunken percent, yet its spending rose by more Medicare and pension benefits that the sailors,” quipped Stossel, “but that than 18 percent. government has promised to its citizens would be insulting drunken sailors, who That spending included more than but has no money to pay. spend their own money.” www.kochind.com/ViewPoint/gov.Growth.aspx International shared services Carbon cap-and-trade this issue… pg 3 pg 9 Year in review pg 5 Perspective: Charles Koch pg 12 Postal Pipeline

Letters may be edited for length and clarity

We thoroughly enjoyed reading the October Discovery magazine. We wish somebody would go to Washington and drum into their heads some of the ideas put forth in this edition. Regarding the picture of the five presi- dents across the front page and on page seven – we don’t know who most of those men are. We’d like them identi- fied in print. Jane Melton Coordinator, personnel Koch Specialty Plant Services Houston, Texas The Presidents of Koch Industries and their tenures (from left to right): Bill Hanna (1987-1999), the late Sterling Varner (1974-1987), Charles Koch (1968-1974), Joe Moeller (1999-2005) and Dave Robertson (2005-present).

For decades, Koch companies have advocated On behalf of hundreds in the Domini- for a market-based approach to public policy can Republic, I want to say a hearty development. The following letters regarding that thank you for INVISTA’s donation of advocacy were received at kochind.com. surplus desktop and laptop computers! We are on the constant look-out for I read Byron York’s article in the Exam- items that will enhance development in iner on the current push to blame your a way that brings the greatest number company for “everything that ills us.” of people out of wretched poverty. To sum up my feelings, thank God for These computers will be used in a people like you, for without you we small community computer lab in a would surely sink. suburb of Santo Domingo. We have Until reading a recent article in Thank you for your values and for your already graduated one small class of biggovernment.com, I was unaware community members. The donated propensity to project these values in the of the outstanding work your com- current toxic political environment. computers will do that job so much pany and employees have done in faster and easier! Charles Jones the realm of charity and defense of Brownsboro, Texas true American values. Linell Stabler, President ACES North America I thank you for your support of the Williamsport, Penn. traditional American values that have I read with interest that your critics are built this exceptional nation. John Allen of INVISTA has coordinated the donation blaming Charles and David Koch as F.J. Foley II and delivery of more than 700 used computers to the reason the “progressives” are having the Dominican Republic. These computers will help such a problem in winning the hearts of Dominicans develop marketable skills. America. Due to the attacks on your company, If this is true, as an American who is my family will research your companies concerned with the freedoms of our and attempt to purchase or recommend Discovery January 2010 | Volume 16 | Number 1 country, I thank you for doing what anything you sell. Editorial Board Questions? Comments? Reprints? you are doing. Philip Ellender Contact: Rod Learned We appreciate your courage in stand- Rich Fink 316.828.6136 My greatest hope is that we as Ameri- ing up to the demonization of all of our Mary Beth Jarvis [email protected] Jeff Gentry cans will wake up in time. country’s producers. Dale Gibbens Publication Design: Charles Koch Deanna Bauman Bob Schneider Stephen Tougias Jim Mahoney Koch Creative Group Topeka, Kan. Raleigh, N.C. Dave Robertson www.kochind.com ©2010, Koch Industries, Inc. Koch is an EOE. M/F/D/V

2 International News

Sète - This port city serves markets in southern London - There are half a dozen Koch companies, including Brussels - Koch Companies Public Sector now has and eastern France and along the Mediterranean. Koch Carbon, with employees in or near London. employees in Europe as well as Canada and the U.S.

Sète – Koch Fertilizer Trading Sarl has to add value to our expanding global for European and other international signed an agreement to expand a fertil- customer base.” government and public affairs work. izer import terminal in Sète, France. Brussels – In years past, if a Koch com- On behalf of INVISTA, Georgia-Pacific, The new facility will serve markets in pany had an issue to discuss with local and other Koch companies, Dubois can southern and eastern France as well as policymakers, it would send its own tap into internal and external resources, the Mediterranean. representative. Three or four different including INVISTA’s government affairs The agreement calls for SEA-invest representatives might call on the same staff members in South America and Sète, S.A. to build a 25,000-metric-ton legislator during the course of a year. Asia, and outside consultants in regions storage facility for exclusive use by Koch From the policymaker’s point of view, around the world. This helps leverage Fertilizer Trading. Construction should this approach must have seemed dis- knowledge of a wide range of global be complete by the end of this year. jointed. Why not have just one Koch policy issues that affect Koch compa- Koch Fertilizer will be able to market a representative? nies’ business strategies. number of products from the expanded With the formation of Koch Compa- Katarina Elbogen, based in Germany, terminal, including urea, CAN, ammo- has begun serving the communication nium sulfates, phosphates and potash. nies Public Sector, LLC last year, that’s exactly what has happened. and public affairs needs of not only These products can be transported to INVISTA, but also other Koch compa- KCPS is one of several shared services and from the port via barge, truck and nies with a European footprint, such as organizations owned by KII. Others rail shipments. This agreement is the Koch Chemical Technology Group and include Koch Aviation; Koch Busi- first of several international agreements Koch Supply & Trading. by Koch Fertilizer likely to be an- ness Solutions, LP; Market-Based nounced this year. Management®, LLC; Koch Companies The numerous Koch companies with Services, LLC; and Koch International facilities and issues in Canada now turn Similar projects involving new deepwa- Shared Services, L.P. to Paul Brown, based in Ontario, for ter terminals or expansions of existing government and public affairs help. port operations in South America, As a shared services company, KCPS Europe and the Asia-Pacific region are can provide legal, government and “This is so much more efficient and ef- also in development. public affairs assistance to other Koch fective,” said Dubois. “Sharing informa- In 2008, Koch Fertilizer expanded companies domestically and, through tion and work product and presenting internationally by acquiring a U.K.- Koch International Shared Services, in integrated points of view to external based fertilizer import and marketing several international jurisdictions. entities really benefits all of us, includ- firm, and also entered into a terminal If a member of parliament happens to ing our counterparts in government. agreement involving Avonmouth Port have three different Koch companies with “Before this change, each Koch in the U.K. facilities in his district, a single KCPS company that did business in a given “Operating fertilizer terminals in ports employee can now answer questions or jurisdiction had to go through the same around the world enhances our global keep him up to speed on them all. learning curve. marketing, distribution and produc- Under this shared services model, “That can be very wasteful, and, quite tion network,” said Steve Packebush, Switzerland-based Thomas Dubois, frankly, inconsistent with MBM® prin- president of Koch Fertilizer, LLC. who originally joined INVISTA in ciple six, which is all about sharing and “It also puts us in a better position 2005, now serves as a central source leveraging knowledge.” 3 Lowering standards?

The production and use of transpor- “If a low carbon fuel standard is en- tation fuels accounts for about one- acted,” said Brad Razook, president of fourth of all carbon emissions in the Flint Hills Resources, “it would be very United States. bad news for our industry, our employ- By limiting the carbon “intensity” as- ees and our customers.” sociated with gasoline and diesel, Low Crude logic Carbon Fuel Standards proponents hope to reduce carbon emissions. “LCFS would not only mean higher costs at the pump,” said Razook, “it Ethanol and biodiesel are familiar would force us to purchase more crude examples of this kind of thinking. oil from the Middle East and less from Paying the bills our neighbors in Canada.” FHR’s Pine Bend Refinery in Minne- Although the emissions benefits of Relying on unproven technologies – such as those for producing sota is one of the most efficient refiner- LCFS are debatable, one thing is not: cellulosic ethanol – is risky and impractical, at least for now. ies in the world. It was specifically LCFS will increase energy prices. Converting sawgrass (above) into fuel is a promising concept, designed to process heavy, sour crude Consumers will pay those higher en- but it may not be commercially viable for many years to come, piped in from Canada. ergy prices in several ways. The first is especially in the quantities necessary to meet the demands of through tax dollars. “Low carbon fuel standards have a large cost the market at a reasonable cost. In the U.S., ethanol pro- Meanwhile, jobs will be lost in both duction is subsidized at in terms of efficiency and effectiveness.” the U.S. and Canada as highly effi- a whopping 45 cents of - American Economic Journal cient refineries and pipelines end up taxpayers’ money per gallon. with much less product to process or Another cost to consumers comes in If Canadian crude cannot be pro- transport. the form of increased fuel purchases. cessed in the U.S. because of LCFS, Conclusion Because ethanol delivers about one- that oil will probably be shipped (at a All Koch companies believe in the ef- third less energy than gasoline, drivers much higher cost) to countries with high demand but perhaps lower emis- ficient use of resources and maintaining have to buy more ethanol-blended fuel a clean and healthy environment. to travel the same distance they used to sions standards. get with a gallon of gasoline. The net result of that switch would be By ignoring such improvements and forcing a different approach, LCFS proposals have the potential to inflict a host of unintended consequences. “We don’t believe that many of our political leaders have a full under- standing of the implications of LCFS,” concluded Razook. “LCFS means higher energy costs for consumers, lower employment, less reliable foreign oil sources and prob- able fuel shortages. “Then, to make matters even worse, you have the prospect of even higher global emissions. Let’s face it: LCFS just doesn’t make sense.” Pine Bend Refinery in Minnesota was designed to process high-carbon Canadian crude. As LCFS is debated at the state and national level, Razook encourages all Unlike cap-and-trade (see page 9), an increase in global greenhouse gas Koch company employees in the U.S. which is essentially a tax, LCFS would emissions, including those from tanker to learn about this issue. also raise costs by making the energy ships moving crude oil halfway around “You can never be too aware of policies industry less efficient. the world. that affect your business,” said Razook. www.kochind.com/ViewPoint/lowCarbon.aspx 4 JANUARY MARCH

20 Crude oil prices drop Due to low jet fuel to $32.70 per barrel. 08 demand, FHR’s North Pole, Alaska, refinery 21 Barack Obama is shuts one of three jet inaugurated as the fuel processing units. 44th President of the United States. 18 The U.S. Federal Reserve decides to 30 Charles Koch’s inject $1 trillion into Discovery editorial the U.S. economy. compares proposed policy “solutions” with 18 FHR announces plans those that prolonged for a new central Texas the Great Depression. fuels terminal. 23 Koch Nitrogen completes upgrade and expansion of its Enid, Okla., plant.

Georgia-Pacific Professional named a Champion by the U.S. EPA for its tissue manufacturing 31 process and hand soap products. 26

FEBRUARY

05 The Bank of England cuts its lending rate to 1 percent, lowest rate since its creation in 1694. 05 INVISTA completes a $1.7 billion refinancing and recapitalization effort.

Dow Jones Industrial 19 Average sinks to 7,465.95, a 47 percent drop from its record high in Oct. ‘07. 26 President Obama proposes a $3.6 trillion budget with a $1.75 trillion deficit.

Flint Hills Resources announces plans INVISTA wins Norfolk Southern Railroad’s to contribute $400,000 for engineering Thoroughbred Chemical Safety award for scholarships at Texas A&M – Corpus Christi 05 safe shipping of hazardous products. MAY

FHR receives nine 13 National Petrochemical and Refiners Association safety awards.

General Motors stock 29 drops to 75 cents per share in anticipation of the company’s bankruptcy filing.

Koch Pipeline completes eight years Koch Nitrogen signs a new UAN agreement (6 million work-hours) of operation with Oklahoma’s Pryor Chemical Co. without a lost-time incident. 08

APRIL JUNE

Concern over an H1N1 04 John Zink Co. receives 27 (“swine flu”) outbreak two safety and health prompts precautionary awards from the measures at many Oklahoma Safety facilities around the Council. world. 24 Robert Pamplin, former 30 U.S. home prices drop chairman of GP, dies at an average of 19.1 age 97. percent, the largest quarterly drop ever. 30 GP’s gypsum business is assigned U.S. Patent #7,553,780 for panels with UV-cured moisture- resistant coating.

Grand opening of the billion-dollar Cowboy Stadium in Arlington, Texas, built with 3.4 million square feet of 22 Georgia-Pacific’s Gypsum Dens™ 06 and ToughRock® products. JULY SEPTEMBER

25 INVISTA’s manufacturing 09 Koch Nitrogen provides facility in Paulínia, a challenge grant to Brazil, celebrates 35 help fund the purchase years – more than 23 of rescue equipment million work-hours – for the Enid, Okla., fire without a lost-time department. injury. 10 INVISTA’s DACRON® fiber celebrates its 50th anniversary with product extensions and a new marketing campaign. 16 Koch Carbon’s pet coke facility in Long Beach celebrates California VPP Star status.

INVISTA announces OXYCLEAR™ scavenging resin, a high-performance PET oxygen barrier 01 for clear applications such as juice and water. 30

AUGUST 2009 YEAR IN REVIEW

Matador Ranch becomes the first contributor The Smithsonian announces the to commit to a video project documenting the David H. Koch Hall of Human Origins, history of Motley County, Texas. 31 scheduled to open in March 2010. NOVEMBER

13 An Illinois jury finds BP guilty of misrepresenting assets sold to Flint Hills Resources and awards FHR $41.7 million. 30 Koch Pipeline announces a 25 percent expansion of its South Texas crude transportation capacity.

INVISTA’s STAINMASTER® and ANTRON® Former KII president Sterling Varner, 89, dies. carpet fibers become the first to be certified 11 as Environmentally Preferable Products.

OCTOBER DECEMBER

01 Amount of U.S. natural 02 Gold trades at a record gas in storage reaches $1,218.40 per oz. a record 3.589 trillion cubic feet. 31 Koch Supply & Trading concludes its most 01 Koch Chemical successful year ever. Technology Group sells its Unifin International GP closes the books on unit to Wabtec Corp. 31 the most profitable year in its 83-year history. 21 Crude oil trades at its highest price for the 31 GP had two brands year: $82 per barrel. with more than $1 billion in sales in 31 U.S. unemployment 2009: Angel Soft© and hits 10.2 percent, the Quilted Northern© bath highest in 26 years. tissue.

Employees at FHR’s Corpus Christi complex celebrate nine years 14 without a lost-time incident. 23 Blowing smoke

We are often told our planet will be Correspondence indicates devastated unless we immediately make that when the data didn’t drastic reductions in man-made green- support their hypothesis, house gas (GHG) emissions. leading climate change advo- The list of possible climate catastrophes cates in England decided to caused by GHGs seems endless. change, hide, or, if necessary, destroy conflicting data. The BBC warns there may be no more fish in the sea in 50 years. Greenpeace The scientific process of frets that summer ice in the arctic could discovery is completely disappear completely by 2030. undermined if important information gets modified, The Intergovernmental Panel on Cli- manipulated, distorted or mate Change, a United Nations Organi- dropped if it contradicts a zation, asserted that Himalayan glaciers preferred outcome. may be gone by 2035. Scientists have also perverted Camden, S.C. – This INVISTA plant uses coal as a fuel, as do INVISTA plants Meanwhile, professors from Penn State the peer review process, in Chattanooga, Tenn., and Waynesboro, Va. Forcing plants to convert to University say polar bears are becoming doing everything possible to other energy sources would cost hundreds of millions of dollars, threatening extinct as we swelter through the hottest prevent opinions contrary to productivity, competitiveness and jobs. decade in history. the alarmist view from being heard. emissions trading program was estab- Interestingly enough, all of these claims Leonard Weinstein, a senior research lished in 2005. have been disproven or grudgingly scientist with 30 years of experience at The revenue stream expected by E.U. retracted. NASA, is one of those voices climate officials and many traders has failed to So why would a reasonable society rush change proponents are trying to silence. materialize. Instead, that revenue went to implement far-reaching (and costly) “Any reasonable scientific analysis” of to politically favored companies and climate change policies based on such man-made global warming, said Wein- developing countries. shaky understanding of the science? stein, “must conclude the basic theory And to make matters worse (especially Furthermore, are the actual outcomes of [is] wrong.” for consumers), prices for electricity and these policies even going to be beneficial? Rather than encouraging open and gasoline are now significantly higher. Feeble foundation honest scientific enquiry and debate Due to the E.U.’s disappointing results, about the issue, climate extremists Climate misinformation has gotten so many legislators and environmental are trying to shout down any and all activists are now urging a flat-out out of hand that a high court in London dissenters. has ruled the film “An Inconvenient tax on carbon emissions of any kind, Truth” amounts to promoting “partisan All of this should be a warning flag for whether from power plants, cattle or political views” and cannot be shown to anyone proposing actions to respond lawnmowers. schoolchildren unless its many factual to climate change on the mistaken as- As drastic as that sounds, others want to errors are addressed. sumption that “the science is settled.” go even farther. The director of the Euro- So why are such unproven or false Cap-and-trade pean Environment Agency has proposed claims promoted? not only taxing carbon in all forms, but In the United States, the most-discussed non-energy resources such as water. Al Gore’s explanation in a magazine proposal for addressing climate change interview was: “It is appropriate to have is a cap-and-trade scheme that involves Cause for concern an overrepresentation of factual presen- charging companies for permits to emit Cap-and-trade is essentially a stealth tax tations…for opening up the audience.” greenhouse gases. on energy. As such, it inevitably leads to Advocates of GHG proposals want us to Cap-and-trade advocates claim this will higher energy costs and job losses. believe they have a monopoly of scien- gradually diminish GHG emissions and The U.S. Office of Management and tific thought on their side. generate large revenues without damag- Budget, a non-partisan government ing the economy. But what the recent “Climategate” scan- agency, calculates cap-and-trade propos- dal at the University of East Anglia may Experience proves otherwise. als would add at least 77 cents to the have illustrated is just how suspect many In Europe, overall emissions went up, cost of a gallon of gasoline. of those scientific assumptions may be. not down, after the world’s largest Spain learned the hard way that only one 9 in ten new “green” jobs tend to last even carbon emissions will quadruple. expect from government, which has a a year. And each new green job displac- That’s because emerging countries, history of not keeping hands off.” es more than two “traditional” jobs. such as India and China (which already True costs In 2009, White House officials estimat- emits 30 percent more carbon than Last year, the Minnesota Pipeline Sys- ed the value of cap-and-trade revenues the U.S.), will inevitably increase their tem spent close to $9 million on fuel in their budget proposal at $646 billion emissions as their economies grow. and power. That line item for energy is over ten years. Subsequent estimates Utilities “will pass that [cost] on to consumers one of the largest of its oper- have tripled that amount. ating expenses. under my plan of a cap-and-trade system. For any government running record “If our throughput and crude deficits and burdened with unprece- Electricity rates would necessarily skyrocket.” quality remain the same but dented levels of debt, such a huge source - Barack Obama, 2008 interview electricity prices go up 129 of new revenue must be enticing. But is percent because of cap-and- it worth devastating the economy? It takes energy to achieve economic trade,” said Kim Penner, president growth and quality-of-life improve- Policymakers have a history of using of Koch Pipe Line Co., “we could be ments for a society. No developing new revenue streams to promote pet looking at roughly $20 million per year nation on earth – large or small – is projects and punish what they consider for power. That’s a huge increase for a likely to reduce its carbon emissions if business our size.” to be “bad” industries. it means suffering economically. If company plants with coal-fired boil- If, for example, the U.S. Congress wants Opportunity or obstacle? to reduce all CO2 emissions, why would ers or generators – such as those owned proposed regulations penalize refining Mark Dobbins, executive vice presi- by INVISTA and Georgia-Pacific – emissions at six times the rate of emis- dent for Koch Supply & Trading in have to switch to other fuels because sions from utilities? Houston, is helping develop corporate of new policies, hundreds of millions strategies for emissions trading. of dollars will be spent on conversion Wrong focus projects with little or no return. “It’s clear from the data that the sci- Richard Muller, a physics professor at ence on greenhouse gases is not really The enormous amount of capital spent the University of California, Berkeley, settled,” said Dobbins. “But, at the same on those conversions would then be has raised serious concerns about the ef- time, emissions trading has already been unavailable for projects that could cre- fectiveness of proposed climate change launched in the U.K. and E.U., and on a ate permanent jobs and products that policies in North America and Europe. regional basis here in the U.S.” people value. Estimated costs of a U.S. cap-and-trade Emissions markets are fundamentally What should be done? program with a goal of 70 percent different from other markets because Last November, Kenneth Green, an they’re mandated by government. CO2 reduction environmental scientist, testified before “So it’s essentially a compliance market the Senate Committee on Finance 4 million jobs lost that wouldn’t exist if not for govern- about global warming. His conclusions $7,000 less annual ment. But a second-order effect of that are worth repeating: household income is government can always change the “The earth’s climate is prone to sharp rules.” Court challenges from unhappy changes over fairly short periods of 129 percent increase parties can add to the uncertainty. time. Plans that focus simply on stop- in electricity prices “With emissions we’re talking about ping climate change are unlikely to suc- Sources: U.S. Energy Information Administration, commitments five or ten years out. ceed; fluctuations in the earth’s climate SAIC, Heartland Institute There’s no confidence if the rules can predate humanity. change in a way that would modify or “Rather than trying to make the climate Regardless of what developed nations eliminate these markets. static, policymakers should focus on do about climate policy, he says, emerg- “In Europe, they’ve continually tin- implementing resilience strategies to ing nations are the real issue. kered with the rules. In the middle of a enable adaptation to a dynamic, chang- Even under a “best case scenario,” with scheme one nation suddenly gets a few ing climate.” the U.S. reducing carbon emissions by more credits, which then upsets the In other words, since we can’t control 80 percent and other developed nations supply/demand balance. Mother Nature, let’s figure out how to by 60 percent, Muller believes global “It’s very scary, but it’s what you’d get along with her changes. www.kochviewpoint/climatechange 10 Looking Back Namesake Noteworthy and mentor

Getting Off Track – by John B. Taylor Charles de Ganahl Koch, The subtitle of this slender book speaks chairman and CEO of volumes: “How government actions Koch Industries, thinks it and interventions caused, prolonged is quite unusual for some- and worsened the financial crisis.” body to name a child after Taylor, a former economic advisor to a business associate. several Presidents (Republicans and And yet, that is exactly Democrats alike), is a senior fellow at what Charles Koch’s father — and This congratulatory telegram the Hoover Institution and a professor grandfather — did when their second was sent following the birth of economics at Stanford. sons were born. of Charles de Ganahl Koch Taylor’s thesis Newspaper publisher Harry Koch, a on Nov. 1, 1935. is simple. If Dutch immigrant, settled in Quanah, you can avoid a Texas, in 1891. One of his first acquain- said David Koch, boom, he says, tances there was a local businessman, Charles’ brother you can avoid Fred Chase. and executive vice a bust. And When Harry and Margaret Koch’s sec- president of Koch avoiding a bust ond son was born Sept. 23, 1900, Industries. “I’m is essential for he was named Fred Chase Koch. sure that father Charles de Ganahl (1869 - 1939) avoiding a crisis. Similarly, Fred C. Koch’s second son, thought of Charles de Ganahl almost as a second father.” In less than 90 Charles, was named after Charles de pages, Taylor makes several simple but Ganahl, a Texas-born entrepreneur Fred and Mary Koch visited de Ganahl devastating arguments. who, in 1924, hired Fred Koch to help in Kenya in 1933. Fred also corre- design and build a refinery in England. sponded with de Ganahl, and his sons First, without the government-spon- Frank and Carl, for many years. sored boom in the housing market, “My father developed great admiration there would have been no bust. for Mr. de Ganahl,” said Charles Koch. Second, misguided U.S. government “He believed he was an excellent en- policies intended to address the bust trepreneur with great integrity. He was only deepened and prolonged the crisis. also very intense, very disciplined and a As a result, global economies derailed, very generous person. uncertainty increased and a great deal of “So my father ended up naming me harm was inflicted upon millions. after him.” Taylor makes a point of offering con- Charles de Ganahl died in 1939, less structive processes, too. than four years after his namesake was If, writes Taylor, the Federal Reserve born. Following de Ganahl’s death, Dr. Bank had stuck with the monetary poli- James Ewing of Memorial Hospital in cies that led to stability (and growing New York wrote a moving tribute. prosperity) from the early 1980s through It said, in part: “At the end of a busy life the middle of this decade, the current (Left - right) Charles, Fred and Harry Koch. he had organized enterprises on three Both Harry and Fred named their second economic crisis could have been avoided. continents, in sugar production, river sons after business associates. transportation, oil production, ship “Parliamentary reform and financial re- By the time Koch completed his work building, exploration, gold mining in Af- regulation will treat the symptoms, not on that project, de Ganahl was calling rica and in British Columbia, and finally the cause. … Without a shared moral Fred “the soundest chemical engineer in airplane manufacture – thus complet- code there can be no free society.” in the world.” ing one of the most versatile careers in Too True Too - Lord Sacks of Aldgate “There was a mutual respect there,” the history of American industry.” 11 Charles G. Koch Perspective Chairman and CEO, Koch Industries, Inc.

As a lifelong student of history, I have citizens demoralized and powerless, and Nations that have benefitted from freedom always been eager to learn from our past. their economy in a shambles. and prosperity are now saddled with gov- History clearly shows that societies have Argentina now ranks 105th in the world ernments that want to assert ever-increas- benefitted from the encouragement when it comes to economic freedom. ing control over every aspect of our lives. of certain principles. Those principles (Hong Kong is first, Zimbabwe is last.) Supporters of these policies are enriched include personal accountability, political Annual inflation is estimated at 22 percent and ennobled; opponents and detrac- freedom, the rule of law, and current unemployment at 23 percent. tors are punished and demonized. sound money, open Venezuela In the U.S., where economic freedom markets and respect for and the standard of living have tradition- property rights. For nearly 40 years (from 1920 to 1957) ally been among the world’s greatest, the To the extent that na- Venezuela was a prosperous and thriving push for centralized government control tions have embraced nation, with growth rates even greater is unprecedented. these freedoms and dis- than those of West Germany, Europe’s In just one year, the U.S. government ciplines, their citizens economic powerhouse. has bought a stake in or bailed out more have benefitted in every In 1960, the gross domestic product per than 600 firms. Entire industries have measurable way, includ- Venezuelan worker was equal to that of essentially been taken over, enabling ing longer lives. Canada, Australia and Switzerland. bureaucrats to dictate who earns what, But, as is often the case Venezuela’s downhill slide began when who makes what and who gets to stay in with history, we can new administrations (including those of business. learn at least as much from the world’s Betancourt and Perez) instituted a series Like Chavez, who recently lectured failures as we can from its successes. Let of devastating policies. Taxes went up, Venezuelans on limiting their showers to me share two such examples with you. the government began to bloat and run- three minutes of cold water, Washington Argentina away budget deficits became the norm. and Brussels are throwing cold water on their citizens. All these governments are At the beginning of the twentieth cen- In 1976, President Carlos Andres Perez nationalized the oil industry, taking taking control away from individual con- tury, Argentina was one of the freest and sumers regarding how resources are used. most prosperous nations on earth. control of projects largely developed and funded by British, Dutch, French, Such centralized control comes at an When my parents visited Buenos Aires Norwegian and U.S. companies. enormous cost. In the U.K., the govern- during their honeymoon, Argentina Living conditions in Venezuela have de- ment swung from a budget surplus of was one of the 10 wealthiest nations in £2.2 billion to a deficit of £7.7 billion in the world. teriorated under current President Hugo Chavez, whose policies have included just one year. Net debt as a percentage of For half a century, annual incomes there the U.K.’s GDP has more than doubled. further nationalizations, wage and price grew by an average of 7 percent per year German officials recently admitted their (essentially doubling every decade). controls, media censorship and suppres- sion of dissent. budget gap for 2010 will exceed E.U. This began to change in the 1920s and limits by more than 33 percent. France, Venezuela now ranks 138th in economic completely changed when Juan Peron Spain, Ireland and Greece are also out of freedom, suffers from 30 percent annual came to power in 1946. compliance by even larger percentages. inflation and has negative growth rates. Peron’s government nationalized entire Meanwhile, the current U.S. administra- Although rich in natural resources, industries, censored media critics, pro- tion is on the biggest spending spree in including several forms of energy, moted runaway budget deficits, multi- history, dwarfing even the huge increas- plied government programs and increased Venezuela suffers routine power outages. es piled up during the Bush administra- taxes. It also demonized successful busi- Food shortages are becoming more tion. In fact, this year’s U.S. budget defi- nesses and the wealthy. widespread as the economy collapses cit is larger than the combined budget and freedoms are being curtailed. As a result, the Argentine Republic was deficits of the past eight years. transformed – and not for the better. Parallels The new administration says it wants Unemployment jumped, as did inflation, Today, regardless of whether we prefer to to “fundamentally transform America.” which hit 50 percent in 1956 and soared focus on policies coming out of Brussels Given what we’ve seen so far, which looks even higher in later years. or Washington, there are too many alarmingly similar to failed policies of the Even after Peron was eventually de- disturbing parallels with South America’s past, is this the kind of transformation we posed, a series of military coups left failures to overlook. really want? 12