The Myth of the Robber Barons: A New Look at the Rise of Big Business in America

Burton Folsom's The Myth of the Robber Barons is a short, but excellent book that argues that the mislabeled "Robber Barons" of the 19th century became wealthy not because they robbed anyone but because they offered quality products/services at record low prices. These productive giants made their fortunes because so many Americans chose to do business with them.

There are several values to gain from this book. First, you will learn several inspiring stories about how great industrialists amassed their fortunes through ingenuity, extended dedication and taking great calculated risks. You will learn about how Cornelius Vanderbilt defeated the Fulton NY/NJ steamship-transport monopoly by offering lower rates, earning a reputation for his punctuality, investing in faster and larger ships and providing ancillary services such as concessions. You will also learn about how Andrew Carnegie was obsessed with cutting costs, which led to him profitably carting off tons of steel shavings discarded from a competing steel plant owned by the Scrantons. Other business heroes covered in depth in this book are James J. Hill (who built the Great Northern Railroad without a penny of Federal aid), oil tycoon John D. Rockefeller, the Scranton steel family, Carnegie's right hand man Charles Schwab and Andrew Mellon, the Secretary of the Treasury whose laissez-faire policy recommendations allowed the 1920s to roar.

Another great value of this book is that it dispels a few common myths about capitalism. For one, Folsom correctly identifies that "Robber Barons" is an invalid concept. That is, "Robber Barons" includes market entrepreneurs (i.e., those who *created* their fortunes by revolutionizing an industry) with political entrepreneurs (i.e., those who made their fortunes through government aid or with political connections.) Examples of market entrepreneurs include Carnegie, Rockefeller, Hill, and Vanderbilt. Examples of political entrepreneurs include Henry Villard and Leland Stanford. Instead of subsuming all wealthy industrialists under a single category, Folsom suggests that we instead judge these industrialists based on *how* they made their fortunes.

A final great aspect of this book is that it offers a concise, essentialized history of what made these individuals great. Thus, an avid reader may absorb a healthy amount of introductory material without committing himself to reading an 800-paged biography.

If you enjoy this book, then I also highly recommend both Burton Folsom's "Empire Builders" and Andrew Bernstein's "The Capitalist Manifesto". To a lesser extent, I also recommend H. W. Brands' "Masters of Enterprise."

Folsom picks out six success stories - of Vanderbilt's success against government-chartered monopolies, of the Scranton's success in challenging English steel manufacturers, of J. J. Hill's victory over subsidized transcontinentals and subsequent undoing by anti-trust laws and rate regulation, of Rockefeller's nearly unknown struggle against foreign oil, of Charles Scwhabb's rise and fall as a steel manufacturer, and of Andrew Mellon's success as a taxcutting Treasury Secretary - and uses these to illustrate how historians lump economic entrepreneurs and political entrepreneurs together, and fail to teach us the correct lessons. Economic entrepreneurs are those whose vision, energy, talent, and willingness to take risk increase the size of the pie for all, while political entrepreneurs are those who beg for public assistance, squander it, resort to graft and influence peddling, and bring the wrath of the public down upon their ears as well as upon the economic entrepreneurs. Usually, it is the economic entrepreneurs that take the worst beating. In his effort to show the positive contributions of these individuals, Folsom fails to answer or even tell some of the infamy associated with men such as Vanderbilt ... but then, one of the points that he makes is that mainstream history books are full of this type of innuendo and rumor.

The reviewers complaining about the oversights fail to appreciate Folsom's intended audience or purpose. He is specifically pointing out problems with history texts, not trying to write an unassailable, definitive history of each of these industries.

After reading the earlier review (below this one), I must say that I enjoyed this book immensely, and I am not a Conservative, and especially not a member of the Religious Right. This book sets the record straight about the "Robber Barons" and the attacks on them by the Muckrakers. It should be read by people of various political stands, whether they are Democrat, Republican, Libertarian, Moderate, etc. I loved the chapters detailing the success stories of Cornelius "Commodore" Vanderbilt, James Jerome Hill, Charles M. Schwab, the Scrantons, John D. Rockefeller Sr., and Andrew Mellon. I must admit that I sort of wished there were also chapters on J. P. Morgan and Thomas Fortune Ryan, since I'm very curious about them. Anyway, reading this book really made me reflect on what I learned in school, and forced me to think about whether my teachers' moral condemnation of these entrepreneurs was actually justified. This book really makes you think.

Folsom's book is accessible, eye-opening, and compelling. It is, I believe, the very best short work that punctures the prevailing myth of the robber barons. As Folsom shows, many of the most reviled "robber barons" were incredible benefactors of humankind - J. D. Rockefeller included.

Folsom's chapter on Rockefeller is a special gem. In a few pages, Folsom demonstrates what a truly remarkable human being Rockefeller was. Everyone in the industrialized world today would be noticeably less-well-off had J. D. Rockefeller not lived, or if he had lived in a time and place that would have snuffed out his incredible entrepreneurial creativity.

Not all late-19th-century businessmen were admirable. Folsom capably identifies the most notable "political entrepreneurs" (Folsom's term). Political entrepreneurs made their fortunes by manipulating the political process - by persuading or cajoling government to transfer wealth from politically weak parties to themselves. Market entrepreneurs, in contrast, earned their fortunes by making consumers and workers better off.

This is a superb work of business and economic history.

Burton W. Folsom's "The Myth of the Robber Barons" is the ultimate apologist's essay on the early industrialists of the late nineteenth and early twentieth centuries. In fact, the title of the book suggests that Folsom intends to overturn the negative verdict handed down by Matthew Josephson in his seminal piece "The Robber Barons" (1934), although the author spends no time directly refuting Josephson's claims.

Folsom's highly revisionist tone should not detract from the fact that the he lays out an extremely concise (134 pages) but compelling argument that traditional history texts have unfairly lumped all early industrialists together as market predators and sources of political corruption and social upheaval. Folsom's thesis consists of two central points: 1) overall the early industrial captains did more good than harm because their efficiency brought a wide range of high quality, low cost goods to the average American consumer for the first time; and 2) what harm they did cause was more often than not a direct result of well-intentioned but poorly conceived and executed government market intervention.

The first two chapters of this book on the development of the steamship and railroad industries, respectively, are far and away the most interesting and convincing. Folsom uses these two industries to introduce his conception of the "good" and "bad" entrepreneur. The former he labels "market entrepreneurs" who, he argues, succeed in business through technological innovation and production efficiency. The latter he calls "political entrepreneurs," which are marked by their use of governmental subsidies and protection that ultimately retards industrial development and keeps prices artificially high. Folsom presents Cornelius Vanderbilt and James J. Hill as the paragons of "market entrepreneurship" for their track records of operating extremely efficient, innovative and successful businesses against competitors who had the "benefit" of government subsidies and protection.

Next, Folsom directly challenges this notion of federal subsidies as a benefit. He argues that federal support, particularly in the case of building the first transcontinental railroad, often motivated inefficient behavior and was accompanied by requirements that further debilitated the recipients. For example, Folsom maintains that the main form of subsidies for building the transcontinental railroad - land and loans per mile built - put a premium on speed of construction over quality. The end result was a transcontinental line that was permanently saddled with high fixed costs owing to sloppy original construction and overpaying for necessary building materials. Also, the nature of the federal support seemed to encourage graft and corruption, although Folsom concedes that the railroad executives deserve their share of culpability in events like the Credit Mobilier scandal. Finally, as recipients of federal largesse, the railroads had to agree to ship US mail at reduced rates, which lowered existing revenue, buy American construction materials even if they were of a higher price and lower quality, which increased costs, and were not allowed to build crucial feeder lines without Congressional approval, which prevented new sources of revenue. The end result, Folsom claims, was a vicious cycle: federal aid tied to miles of road constructed led to construction inefficiency and political corruption; the inefficiency and corruption led to consumer wrath; consumer wrath led to government regulatory intervention; and the regulation closed options and pushed the roads into bankruptcy.

Folsom's hypothesis is concise and neat -- perhaps too neat. Some of the data Folsom uses to support his arguments are debatable. For instance, to support his claim that uniform railroad rate regulation as laid down by the Hepburn Act seriously damaged US exports to Asia, particularly the market entrepreneur Jim Hill who never received any federal aid, Folsom cites the fact that US steel exports to Japan and China fell 40% between 1905 and 1907. Of course, during that time period the Russo-Japanese War also went from its height, when Japan was presumably importing massive amounts of foreign steel in support of its war effort, to a peaceful conclusion. Clearly then, much more influential forces than the Hepburn Act contributed to the fall in US exports over that time. Whether this oversight was an act of omission or commission on the part of Folsom is debatable.

Overall, while the scholarship of "The Myth of the Robber Barons" may leave a bit to be desired, the author's central thesis and main observations are compelling and should be considered with care. If you are interested in viewpoints on American economic and industrial development, you'll want to read this book.