The term "robber baron," typically conjures up images of Gilded-Age tycoons in the steel, railroad, steamship and oil industries. We all learn that business is made up of bad guys, and if it wasn't for benevolent politicians and antitrust attorneys protecting us, we would all be ground down to poverty by grasping capitalists who monopolize markets and restrict output to raise prices.
The 19th century surely did have its villains. True robber barons, such as Governor Leland Stanford, Henry Villard, Grenville Dodge, and many others in the railroad industry, did not use private capital, but rather used government subsidies to build their transcontinental railroads. Being granted tens of millions of acres of land, they wasted tens of millions of dollars (a lot of money in those days) on shoddy lines laid down as quickly as possible because they were being paid by the mile. They used the United States Army to clear out the "savages" of the western plains. Politics guided the building and operations rather than economics, and many people argued at the time that it was necessary for government to get involved to open up the west. Indeed, President Abraham Lincoln pushed through continental railroad legislation early in his office. It may be noted that Lincoln didn't just walk into the White House from his law office in Illinois. He worked his way up as a very well paid attorney and lobbyist for the railroad industry, and, by some astonishing coincidence, just happened to have invested in land at Council Bluffs, Iowa, the Eastern terminus of the Union Pacific Railroad, the selection of which, also coincidently, was the privilege of the President.
The Great Northern Railroad, by contrast, was built by James J. Hill, a businessman rather than political entrepreneur. He bought the land, built carefully and efficiently and encouraged business and commerce all along the route, making it profitable as he went by serving as many people as possible. In spite of all of the subsidies and help the other transcontinentals received, Hill's Great Northern was the only one that didn't go bankrupt in the depression in the 1890s. The West had been opened up to commerce, but it didn't take an act of Congress to do it. The act of Congress created corruption, influence peddling, and theft from the productive people of the country.
Standard Oil, the biggest whipping boy of the time, actually did the opposite of everything that monopolists are accused of doing. They made operations incredibly efficient, developed hundreds of new products, and drove prices down to a fraction of what they were, while maintaining good profitability. They continually expanded output and improved quality, even against stiff competition overseas. Cornelius Vanderbilt took on the official subsidized monopolies in the steamship industry which kept prices high and catered to the wealthy. He drove prices of steamship travel down to the level where any almost anyone could afford them. He made a good profit with no subsidies while heavily subsidized Edward Collins continually squandered taxpayer money and eventually went bankrupt.
There are plenty of examples in most other industries. When market entrepreneurs became wealthy, it was because they served more people better. Antitrust actions are almost always brought about by inefficient business owners trying to hobble a competitor who has found a way to do it cheaper, faster, or better. The efficient competitor can make profits at lower prices, while the others squeal of unfair competition.
Today's robber barons still have their hands in your pocket. The often go by the name of "Too Big To Fail. Goldman Sachs and most other large investment banking companies are the darlings of Washington politicians. Security companies making billions from sweet deals with FEMA and other agencies while compromising your privacy and security are obvious career paths for high level government employees with the proper connections. Oil, alternative energy, steel and other corporate welfare moochers get a big boost from you, the taxpayers.
Just as in the post Civil-War era, market competition is an unrealized ideal. Politicians make sure they get their backs scratched, and the lobbyists know just where it's itchy. It is an obvious absurdity to blame the problems we have on Laissez-Faire when it doesn't exist. It never will exist, but the closer we can get to it, the better off we will be. The less power that politicians have to wield, the less power that political entrepreneurs can use against their honest competitors. The problem is big government, the solution is markets.
Dan McLaughlin is a columnist for The Post-Journal. Contact him at danmcl999@roadrunner.com.