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May 30, 2011

The Myth of the Robber Barons

A New Look at the Rise of Big Business in America
Burton W. Folsom, Jr. - ISBN - 978-0963020314

This book has been reissued from time to time over 25 years, and takes a look at the "Robber Baron" school of historians who, by and large, got some of the story right, and much of it wrong, but were never able to discriminate between the good guys and the bad. To be sure there were "robbers," but they did not include most of the people identified, as such: Carnegie, Rockefeller, Frick, Ford, Mellon, etal. Rather, Cunard and Collins (bad guys in boat-mail transport to California) used their government authorized monopolies to hamstring mail deliveries while Vanderbilt moved around them and beat them in their game despite their subsidies; he became the primary passenger line as well, beginning in New York. Vanderbilt (definitely one of the good guys) became the richest man in America, proving that federal aid was a curse which killed the competitive spirit. The book offers detailed information.

So it was with the transcontinental railroads. Some insisted that if such was to be, the government would have to subsidize it, or build it. The UP and the CP battled over subsidies and built a railroad full of errors and marked by substandard construction, which rail/bridges/etc. had to be rebuilt while lines were in service at a later date, costing still more money. There was, however, a man named James J. Hill who was building his transcontinental line from St. Paul to Seattle with no federal aid. His proved to be the best built and the least corrupt, not to mention the best run. After initial construction was completed, the UP and CP, even with 44 million acres of free land and over $61 million in loans were nearly bankrupt. Meanwhile Hill was chugging along quite profitably--with lower fares. The primary difference was that the UP and CP undertook to get over/thru hostile territory and environments rapidly (and at government expense); Hill expanded slowly and profitably, since he developed the areas along the way so that there was, at each new termination, a market for his service. He gave settlers free cattle so that he could later move the beef back East. He facilitated wheat farming in order to handle the product for export. As well, he was on site when routes were determined and construction being done. No poor choices of distance, curvatures or grade; no inferior materials or shoddy construction. (It was, after all, his and his investor's money.) In later years this added up to fewer repairs and delays; better service and more loyal customers. And he escaped the regulations which congress imposed upon the others using "government money,"

Political promotion of economic development is futile, for it invariably rewards incompetence. Adam Smith authored this concept over 200 years ago, and all one needs to do today to confirm it is to honestly view what government has subsidized in recent years. Fannie Mae and Freddie Mack brought the world economy low; wind power is enormously expensive and largely unproductive; Carter wasted billions on synfuels; solar power is a joke--it has almost single-handedly bankrupted Spain, etc. One does need to be honest, however !!

Read the book and be enlightened. Therein are multiple examples of why government is seldom the answer to questions beyond its ken, which doesn't include business.

Posted by Curmudgeon at May 30, 2011 11:39 AM