"There's a big difference between entrepreneurs who make a fortune in the market, and those who do so by gaming the government."
Quotes on the Myth of the Robber Barons
"All this we say is likely to happen. So far as the special interests of the Pacific Mail Company are concerned, we have not a word to say in deprecation of any mischief which may overtake them in the course of their conflict with the great steamboat Sepoy. They have for years contributed to his coffers, to his influence, to his confidence in his own power to brave public opinion and override the moral instincts of the commercial community; and they have done this that they might keep their own hold more firmly upon the necessities of the public. Like those old German barons who, from their eyries along the Rhine, swooped down upon the commerce of the noble river, and wrung tribute from every passenger that floated by, Mr. Cornelius Vanderbilt, with all the steamers of the Accessory Transit, held in his leash, has insisted that the Pacific Company should pay him toll, taken of all America that had business with California and the Southern Sea, and the Pacific Company have submitted to his demand. There are honorable and highminded merchants, American gentlemen of the best stamp among the Directors, who have thus bowed the knee to this man’s dictation, and they must doubtless have writhed under the consciousness of the true part that they were playing. Nevertheless they played it; and they must now take the consequences."
"A summary description of the method by which Gould’s fortune was acquired can be conveyed only by such negative words as ‘wrecking,’ ‘depredation,’ and ‘looting,’ not by any words that denote the creation and enhancement of values. But when a man whose object is money-getting amasses, by any means whatever, a large fortune, there necessarily comes a time when the instinct of preservation overcomes the desire for spoliation, when the destructive becomes a conservative, and the wrecker an advocate of vested interests. He must put his winnings somewhere, and he must desire to protect them. This happened to Gould, and when it happened he was in a position to show what his ability was in production and conservation, and in building up properties that his whole previous career had been devoted to tearing down."
"Another topic in which our people rightfully take a deep interest may be here briefly considered. I refer to the existence of trusts and other huge aggregations of capital the object of which is to secure the monopoly of some particular branch of trade, industry, or commerce and to stifle wholesome competition. When these are defended, it is usually on the ground that though they increase profits they also reduce prices, and thus may benefit the public. It must be remembered, however, that a reduction of prices to the people is not one of the real objects of these organizations, nor is their tendency necessarily in that direction. If it occurs in a particular case it is only because it accords with the purposes or interests of those managing the scheme.
Such occasional results fall far short of compensating the palpable evils charged to the account of trusts and monopolies. Their tendency is to crush out individual independence and to hinder or prevent the free use of human faculties and the full development of human character. Through them the farmer, the artisan, and the small trader is in danger of dislodgment from the proud position of being his own master, watchful of all that touches his country's prosperity, in which he has an individual lot, and interested in all that affects the advantages of business of which he is a factor, to be relegated to the level of a mere appurtenance to a great machine, with little free will, with no duty but that of passive obedience, and with little hope or opportunity of rising in the scale of responsible and helpful citizenship.
To the instinctive belief that such is the inevitable trend of trusts and monopolies is due the widespread and deep-seated popular aversion in which they are held and the not unreasonable insistence that, whatever may be their incidental economic advantages, their general effect upon personal character, prospects, and usefulness can not be otherwise than injurious."
"There have been abuses connected with the accumulation of wealth; yet it remains true that a fortune accumulated in legitimate business can be accumulated by the person specially benefited only on condition of conferring immense incidental benefits upon others. Successful enterprise, of the type which benefits all mankind, can only exist if the conditions are such as to offer great prizes as the rewards of success.
The captains of industry who have driven the railway systems across this continent, who have built up our commerce, who have developed our manufactures, have on the whole done great good to our people. Without them the material development of which we are so justly proud could never have taken place. Moreover, we should recognize the immense importance of this material development of leaving as unhampered as is compatible with the public good the strong and forceful men upon whom the success of business operations inevitably rests. The slightest study of business conditions will satisfy anyone capable of forming a judgment that the personal equation is the most important factor in a business operation; that the business ability of the man at the head of any business concern, big or little, is usually the factor which fixes the gulf between striking success and hopeless failure."
"Such were the conditions five centuries ago, and now in the twentieth century come the modern robber baron, and evolution of the original article, in the shape of the railroad financier; he swoops down from his office like his ancient prototype from his castle, and by obtaining control of this or that railroad property, after he has assured himself that it is on a sure paying basis, takes everything in sight by means of the Holding Company, or the Securities Company, which he and his robber baron friends arrange to organize within the law, to the detriment of the surprised and unwilling minority owners of the property."
"Now, where is the difference between the robber barons of old and these modern railroad financiers? None whatever, I take it, except that the former helped themselves at will, and the latter are helping themselves within the protection of laws made to legalize the robbery."
"The present position of the Standard Oil Company is one of abundant prosperity and power. It is opposed by a combination— the Pure Oil Company — which works in harmony with an independent seaboard pipe-line—the United States PipeLine— and with sixty-six independent refineries. The Standard controls ninety per cent. of the export trade and eighty per cent. of the domestic trade. By its control of the pipe-line situation it has become quite independent of the railroads. By its preponderant purchases of crude oil it has been able to steady and roughly direct the course of prices of petroleum. By its advantages in locating its refineries near their several markets and in utilizing byproducts it has effected enormous economies in transportation and manufacture, and increased its dividend from twelve per cent. in 1892, when the Standard Oil Trust was dissolved, to forty-eight per cent. in 1901. The power of the Standard Oil Company is tremendous, but it is only such power as naturally accrues to so large an aggregation of capital; and in the persistence with which competition against it has continued, in the quickness with which that competition increases when opportunity for profit under existing prices appears, and in the ever-present possibility of competition which meets the Standard Oil Company in the direction of every part of its policy, lie the safeguards against the abuse of this great power."
"The facts set forth in this report are for the most part not disputed. It is only the inferences from them that are disputed, and even in this respect the dispute is practically limited to the question as to whether the transactions are or are not technically legal. The report shows that the Standard Oil Company has benefited enormously up almost to the present moment by secret rates, many of these secret rates being clearly unlawful. This benefit amounts to at least three-quarters of a million a year. This three-quarters of a million represents the profit that the Standard Oil Company obtains at the expense of the railroads; but of course the ultimate result is that it obtains a much larger profit at the expense of the public. A very striking result of the investigation has been that shortly after the discovery of these secret rates by the Commissioner of Corporations, the major portion of them were promptly corrected by the railroads, so that most of them have now been done away with. ...
But in addition to these secret rates the Standard Oil profits immensely by open rates, which are so arranged as to give it an overwhelming advantage over its independent competitors. The refusal of the railroads in certain cases to prorate produces analogous effects. Thus in New England the refusal of certain railway systems to prorate has resulted in keeping the Standard Oil in absolute monopolistic control of the field, enabling it to charge from three to four hundred thousand dollars a year more to the consumers of oil in New England than they would have had to pay had the price paid been that obtaining in the competitive fields. This is a characteristic example of the numerous evils which are inevitable under a system in which the big shipper and the railroad are left free to crush out all individual initiative and all power of independent action because of the absence of adequate and thorough-going governmental control."
"It is unfortunately not true that the Standard Oil Company is the only great corporation which in the immediate past has benefited, and is at this moment benefiting, in wholly improper fashion by an elaborate series of rate discriminations, which permit it to profit both at the expense of its rivals and of the general public. The Attorney-General reports to me that the investigation now going on as to the shipments by the sugar trust over the trunk lines running out of New York City tends to show that the sugar trust rarely if ever pays the lawful rate for transportation, and is thus improperly, and probably unlawfully, favored at the expense of its competitors and of the general public."
"In the Standard Oil case the Supreme and Circuit Courts found the combination to be a monopoly of the interstate business of refining, transporting, and marketing petroleum and its products, effected and maintained through thirty-seven different corporations, the stock of which was held by a New Jersey company. It in effect commanded the dissolution of this combination, directed the transfer and pro rata distribution by the New Jersey company of the stock held by it in the thirty-seven corporations to and among its stockholders; and the corporations and individual defendants were enjoined from conspiring or combining to restore such monopoly; and all agreements between the subsidiary corporations tending to produce or bring about further violations of the act were enjoined."
"But to tell only how the captains of industry 'made themselves and the country rich' would be to leave out much of the story. We must turn aside from their purely mercenary operations to picture to ourselves for a moment how these barons of coal, iron, or pork, by a natural and concomitant effort to which many interests led them and many voices called them, extended their sway throughout the social order; how like earlier invading hosts arriving from the hills, the steppes or the sea, they overran all the existing institutions which buttress society; how they took possession of the political government (with its police, army, navy), of the School, the Press, the Church; and finally how they laid hands upon the world of fashionable or polite society, which in all times seems to persist as a 'kept class' attached to the ruling power yet holding a subtle sway over this power as well as over the manners and opinions of the people."
"In short order the railroad presidents, the copper barons, the big dry-goods merchants and the steel masters became Senators, ruling in the highest councils of the national government, and sometimes scattered twenty-dollar gold pieces to newsboys of Washington. But they also became in even greater number lay leaders of churches, trustees of universities, partners or owners of newspapers or press services and figures of fashionable, cultured society. And through all these channels they labored to advance their policies and principles, sometimes directly, more often with skillful indirection."
"While busy carving up the country into baronies, overrunning the social capitals, penetrating the schools and the churches, the captains of industry worked also with unremitting vigilance in the field of political action. Here public opinion, as it accepted the pecuniary doctrines of the railway or industrial magnate, seemed also to welcome his penetration, through the government, into the highest assemblies of the country: the Congress, the Senate, and even sometimes the President’s cabinet. ...
Paradox arose from the existence of democratic institutions, universal suffrage, equality before the law and equality of privileges. The masters of industry, though imperialists in their daily business, were confronted with democratic and individualistic lawmaking bodies and their judiciary and police departments. They quickly developed a technique for dealing with the democracy. Having virtually completed the conquest of the nation’s resources and possessed themselves of lordly properties or seized the 'narrows' of trade, the barons were thereafter most happy to advocate complete laissez faire within the nation. They were uncommonly eager to have existing private-property rights sanctified and protected by all the authority of the country. Having won extraordinary economic privileges in the conduct of their business, they saw no objection to leaving to the people at large the residue of individual liberties and rights; they would keep the whole charter of so-called popular liberties intact. Finally, as a fiscal policy for the nation they advocated a 'sound currency'; to 'raise the standard of living' they successfully urged the protective tariff; and to keep marauders of other races or colors away, to safeguard both here and abroad their growing investments, they generally insisted upon a big navy."
"While I was still in Paris this clutter of recollections, impressions, indignations, perplexities, was crystallized into something like a pattern by Henry D. Lloyd’s brilliant 'Wealth Against Commonwealth.' I had been hearing about the book from home, but the first copy was brought me by my English friend H. Wickham Steed, who, fresh from two years’ contact with German socialism, took the work with great seriousness. Was not this conclusive proof that capitalism was necessarily inconsistent with fair and just economic life? Was not socialism the only way out, as Lloyd thought?
I was more simple-minded about it. As I saw it, it was not capitalism but an open disregard of decent ethical business practices by capitalists which lay at the bottom of the story Mr. Lloyd told so dramatically."
"[Standard Oil]—and [Mr. Henry Rogers, director at Standard Oil who met with Tarbell] probably—never understood how much he had done to make me realize the legitimate greatness of the Standard Oil Company, how much he had done to make me understand better the vastness and complexity of its problems and the amazing grasp with which it dealt with them.
Their complaint against me, Mr. Rogers' complaint, was that I had never been able to submerge my contempt for their illegitimate practices in my admiration for their genius in organization, the boldness of their imagination and execution. But my contempt had increased rather than diminished as I worked.
I never had an animus against [Standard Oil's] size and wealth, never objected to their corporate form. I was willing that they should combine and grow as big and wealthy as they could, but only by legitimate means. But they had never played fair, and that ruined their greatness for me."
"Jay Gould, whose swashbuckling market manipulations and titanic battles for corporate control earned him the reputation as the most hated man in America, had much in common with his business enemy Vanderbilt. Born on a Delaware County, New York, farm in 1836, he overcame a frail, sickly constitution to become the quintessential Robber Baron. He was so intelligent, so strikingly original, and so devious that Josephson dubbed him 'Mephistopheles.' His positive achievement was as full as it was complex. No one developed more of the American West than Gould did through his investments in railroads, mines, real estate, timber, and other industries.
After an early career in tanning, Gould came to Wall Street to try his luck, bringing little capital and no contacts but a formidable intellect. All his life he remained an outsider to the establishment, forging his independent way backed by a corps of trusted followers, whom he led in a soft-spoken, self-deprecating style. Once, late in life, he told a reporter that he was a mere passenger on the vehicle of his enterprises; but those in the know never doubted who was at the wheel, even when the enterprises grew immense.
Between 1874 and his death in 1892, Gould reshaped even more dramatically than Vanderbilt the two key sectors of transportation and communication. He reorganized the floundering Union Pacific Railroad and put it on solid footing, then bought into the small Missouri Pacific Railroad and used it as the nucleus for a giant rail system through the largely undeveloped Southwest. His forte was developing not only railroads but the regions through which they ran. Unlike many men of wealth, he put none of his money into safe investments like government bonds but instead committed it to the development of mines, stockyards, industries, timberland, and other sources of freight traffic along the roads he controlled."
"The Robber Barons put their stamp on cultural as well as business institutions in New York and most other cities. There is scarcely a museum, art gallery, concert hall, orchestra, theater, university, seminary, charity, or other social or educational institution that does not owe its beginnings and support to these men. Whatever their motives, the enduring results remain one of the most impressive monuments to the Robber Barons' careers."
"E. H. Harriman, who by the time of his death in 1909 controlled more railroad mileage than anyone else and had brought the industry into a new era based on long hauls of large volumes at low rates, pronounced the most clear-sighted judgment on himself and his fellow Robber Barons. During an interview, he startled a reporter by pulling out a sheet filled with data on improvements to the Union Pacific Railroad. 'As he read from it,' the reporter later recalled, 'I realized it was the apologia pro vita sua.'
'But the public assails and attacks you,' said the reporter when Harriman had finished, 'and impugns your motives and accuses you of all sorts of things. Doesn't the thanklessness of the job ever embitter you?'
Harriman responded by slapping the sheet of statistics with his hand.
'That,' he said defiantly, 'remains.'"
"James Jerome Hill, builder of the Great Northern railroad, was the only railroad entrepreneur of the nineteenth century who received no federal subsidies to build his railroads. All other builders, such as Cornelius Vanderbilt, received aid. Perhaps more than any other American, Hill helped to transform the American northwest by opening it to widespread settlement, farming, and commercial development. In the process, he became one of the wealthiest men of the Gilded Age, amassing a fortune estimated at $63 million."
"Students learn about the robber barons -- ask any high school graduate, and that's likely to be the only thing he or she remembers about the 50 years between the Civil War and World War I. But they should also learn about the dynamic American economy that has brought an unprecedented standard of living to almost 300 million people, and about how those 'robber barons' drove down the prices of food, energy, and clothing to make them affordable to more people. The era of the robber barons was the era of the oil well, the railroad, the telephone, the phonograph, the copier, and the skyscraper."
"As common as it is to speak of 'robber barons,' most who use that term are confused about the role of capitalism in the American economy and fail to make an important distinction — the distinction between what might be called a market entrepreneur and a political entrepreneur. A pure market entrepreneur, or capitalist, succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, direct or indirect. The key to his success as a capitalist is his ability to please the consumer, for in a capitalist society the consumer ultimately calls the economic shots. By contrast, a political entrepreneur succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors."
"...[U]sually the free market, not government intervention, gets the blame. Thus, all of the railroad men of the late nineteenth century have gone down in history as 'robber barons' although this designation definitely does not apply to James J. Hill. It does apply to his subsidized competitors, who deserve all the condemnation that history has provided them. (Also deserving of condemnation are the politicians who subsidized them, enabling their monopoly and corruption.)"
"The lesson here is that most historians are hopelessly confused about the rise of capitalism in America. They usually fail to adequately appreciate the entrepreneurial genius of men like James J. Hill, John D. Rockefeller, and Cornelius Vanderbilt, and more often than not they lump these men (and other market entrepreneurs) in with genuine 'robber barons' or political entrepreneurs. ...
Political entrepreneurs and their governmental patrons are the real villains of American business history and should be portrayed as such. They are the real robber barons.
At the same time, the market entrepreneurs who practiced genuine capitalism, whose genius and energy fueled extraordinary economic achievement and also brought tremendous benefits to Americans, should be recognized for their achievements rather than demonized, as they so often are. Men like James J. Hill, John D. Rockefeller, and Cornelius Vanderbilt were heroes who improved the lives of millions of consumers; employed thousands and enabled them to support their families and educate their children; created entire cities because of the success of their enterprises (for example, Scranton, Pennsylvania); pioneered efficient management techniques that are still employed today; and donated hundreds of millions of dollars to charities and nonprofit organizations of all kinds, from libraries to hospitals to symphonies, public parks, and zoos. It is absolutely perverse that historians usually look at these men as crooks or cheaters while praising and advocating 'business/government partnerships,' which can only lead to corruption and economic decline."
"In the 40 years following Appomattox, the United States amazed European investors and bankers with the speed at which it changed from a backward agricultural republic to the most powerful industrial force on the planet. During the years of the so-called robber barons, America outpaced other nations by large margins when it came to growth in per-capita income, industrial production, and rising values generally. Moreover, the Gilded Age saw economic participation at all levels of society, including numerous previously disenfranchised constituencies.
In this way, the industrial captains of the era enabled, in the long term, their very greatest gift: the rise of that most radical and democratic of things—a strong, stable, educated middle class."
"One measure of prosperity is the misery index, which combines unemployment and inflation. During Coolidge’s six years as president, his misery index was 4.3 percent—the lowest of any president during the twentieth century. Unemployment, which had stood at 11.7 percent in 1921, was slashed to 3.3 percent from 1923 to 1929. What’s more, Mellon was correct on the effects of the tax-rate cuts—revenue from income taxes steadily increased from $719 million in 1921 to over $1 billion by 1929. Finally, the United States had budget surpluses every year of Coolidge’s presidency, which cut about one-fourth of the national debt."
"[Andrew] Mellon was not always consistent in his free-market arguments. He supported high tariffs for many products, but he recognized that a 'subsidy can be paid only by taking money out of the pockets of all the people in order that it shall find its way back into the pockets of some of the people. ...
The slashing of the tax rates, however, was where Mellon did his most good. He carefully studied the effects of confiscatory rates and concluded that most wealthy Americans were avoiding payment of taxes by exploiting tax loopholes—foreign investments, the buying and selling of art and coins, and the purchase of tax-exempt bonds.
Why not, Mellon argued, cut the top rate from 73 to 25 percent? In fact, why not chop all rates by the same proportion? That idea—which would be called the Mellon Plan—would not only encourage the rich to invest in the American economy, it might actually generate more revenue. 'It seems difficult for some to understand,' he wrote, 'that high rates of taxation do not necessarily mean large revenue to the Government, and that more revenue may often be obtained by lower rates.'
Coolidge fully backed the Mellon Plan, and Congress passed it in stages during the 1920s. Cutting both federal spending and tax rates across the board worked wonders for the American economy. American businessmen plowed capital into radios, cars, refrigerators, vacuum cleaners, telephones, and a variety of new inventions from the air conditioner to the zipper. Entrepreneurs knew they would be able to keep most of what they invested, and the American economy grew rapidly during the 1920s."
"In a capitalistic free market, as was seen in the time of the Robber Barons, the only way to build true, long-lasting wealth is to offer a product of greater quality and/or lower price than one’s competitors to as many people as possible. As such, a capitalist is only able to amass wealth by providing his fellow man with something that he would otherwise not be able to enjoy or afford."
"Not only did these Robber Barons improve the lives of their customers, but they provided countless jobs and created growth in the economy. Carnegie not only provided jobs to his steel workers and administrators, but he also made it possible for men to have jobs laying his steel along Vanderbilt’s railways, building Rockefeller’s oil derricks, manufacturing Ford’s automobiles, or building skyscrapers in Manhattan. Furthermore, each of the men created huge amounts of wealth for other people that either invested in their respective concerns or purchased their goods and used them to build up companies of their own. Each Robber Baron created many times the wealth and income that he, himself, took home.
So, it seems that Robber Barons did not really rob anybody – in fact they seemed to have improved the lives of most of the people in this nation. So why the nasty name? It must be their unrelenting selfish greed that brought on this negative perception of these magnates. After all, a man such as John D. Rockefeller cannot build up $320 billion in wealth without greedily hoarding everything he can get his hands on like Ebenezer Scrooge, right? Wrong. The Robber Barons, despite their name, were notorious for actually giving away their money. Never has there been a series of philanthropists such as these. Each man puts Bill Gates, Warren Buffett, and Bono of U2 to shame."
"Not only did these men provide cheap goods and services, countless jobs, and unprecedented wealth, but they also gave more to charity than anyone before or since. The free market set the sky as the limit for these men and they capitalized on it. By doing so, they improved this nation and the lives of its citizens. It is time we stop referring to these men as 'Robber Barons' and call them what they are: Capitalists."
"The sobriquet 'Robber Baron' has hence struck a pejorative chord in generations of graduates of schools that continue to teach that individuals such as Andrew Carnegie, John D. Rockefeller, and J.P. Morgan used the capitalist system to exploit the working class, form anti-competitive trusts, and obtain the accumulation of personal wealth above all else. Muckraker Ida Tarbell, author of the History of the Standard Oil Company, reinforced the idea that these soulless, industrialist Robber Barons were a destructive force and were willing to circumvent laws to accomplish their personal selfish ends."
"John D. Rockefeller had a rare business mind. He was at once a visionary, foreseeing a world in which his kerosene illuminated millions of homes, and an accountant obsessed with day-to-day penny-pinching. Upon buying his first refinery in 1863 at the age of 23, Rockefeller started optimizing every part of his business, from his storage facilities to his refining methods to the number of non-kerosene-refined products (waxes, lubricants, etc.) that could be squeezed from every barrel.
In pursuit of efficiency, Rockefeller employed then-rare business strategies such as vertical integration and economies of scale. For example, by purchasing his own forest and producing his own barrels, Rockefeller lowered per-barrel costs from $3 to $1 while increasing reliability and quality. To transport oil, Rockefeller obtained large rebates from railroads, not through corrupt conspiracies (the typical explanation) but by dramatically lowering the railroads’ costs. Where others offered railroads unreliable, highly variable traffic, Rockefeller offered guaranteed daily fleets of Standard-owned tank cars, loaded and unloaded by Standard-provided facilities, for straight-line trips from Cleveland to New York. The Lake Shore Railroad’s James Devereux testified that Standard Oil lowered transport costs from $900,000 to $300,000 a trip.
Rockefeller was simply a man ahead of his time — and his competition."
"The 16th Amendment to the Constitution, authorizing the federal government to impose and collect taxes, and ratified in 1913, was the culmination of a backlash against the robber barons of the early 1900s. The tax it authorized was directed at the relatively small number of people generating great wealth in railroads, steel, oil, real estate and finance. Their names remain prominent today, the Mellons, the Astors, the Carnegies, the Vanderbilts, the Rockefellers and J.P. Morgan.
Their contributions, their ingenuity, as well as their greed and ruthlessness, helped build the country we know today, and whether or not they complained about paying their fair share, it was the law of the land. Initially, the newly imposed federal tax netted out to just one percent tax on income, and less than one percent of the population paid it. It was for all intents and purposes a millionaires' tax.
Today we have a whole new breed of robber barons, and too many make their money in a far less productive way than the robber barons of the last century. The Carnegies built the network of libraries we still enjoy today; others founded the manufacturing base that took the country into the industrial age.
Too many of today's millionaires and billionaires made their money dreaming up new and exotic ways of securitizing paper wealth, creating a financial bubble that, when it burst, took away the savings of ordinary taxpayers and plunged the country into a deep recession."