Friday, September 12, 2008

Book Review of 'The Myth of the Robber Barons' by Burton Folsom

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, prolonged dedication and calculated risks. In an age when successful businessmen are vilified, an informative book that recognizes the heroism of prodigious business accomplishments is a rare treasure.

From reading this book, 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. Although this work does not get into Vanderbilt's days as a railroad tycoon, you will still learn about his many other ventures as a steamship entrepreneur, including his role in ferrying traffic during the 1849 gold rush as well as his spirited offer to sink the infamous confederate submarine, the Merrimac, during the U.S. Civil War.

From reading this book, you will also learn about how steel magnate 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. Although the fourth chapter actually focuses on Carnegie's fascinating and clever right-hand man Charles Schwab, there are plenty of good Carnegie stories in this book.

This book also contains the riveting story of how James J. Hill built the Great Northern Railroad without a penny of federal aid while his competitors either lobbied for monopoly status or collected subsidies by building uneconomical railroad lines. This story is particularly important to know, as the railroad network is often (wrongfully) cited as "too big" to be left to free markets.

There is also plenty of information on John D. Rockefeller in this book. You will learn about how Standard Oil made it cheap for households to stay illuminated at night during an age when domestic activity was constrained by darkness. You will also learn about how Rockefeller too was obsessed with efficiency, which led to him recommending that his barrels of oil be sealed with 39 drops of solder instead of 40.

Other business heroes covered in depth are the Scranton family who built up the steel industry Eastern Pennsylvania and Andrew Mellon, the Secretary of the Treasury whose low-tax, limited government policy recommendations allowed the 1920s to roar.

Although he does not use Rand's terminology, Folsom correctly identifies that "Robber Barons" is a package deal. That is, the concept "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.

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 on these giants 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, which is similar in spirit but has a less interesting selection in subject manner. I am anxious awaiting the release of Folsom's New Deal or Raw Deal?, which explores the true legacy of the FDR administration.

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Anonymous said...

great piece there. I remember in junior high how we spent a lot of time in 'social studies' class on the "robber barons." I had forgotten the phrase since until this posting. I do recall how they stressed how bad those men were. And at that time, I had lived in the 3rd most conservative county in the country at that time. I can only imagine how worse it was in other districts.

Rainman said...

For my social studies class 19th century was basically just Civil War and Reconstruction then onto the Progressive Era.

Joseph Kellard said...

Thank you, Doug, for reminding me what a wonderful book this is. When I first read it a few years ago, it helped concretize for me Ayn Rand's principles, and showed me real-life business heroes that I found in her novels.

Doug said...

Thank you all for the warm responses. They are all very appreciated.