The Myth of the Robber Barons

This essay provides some excellent lessons on the folly of government subsidizing private companies and individuals. Several years ago, I heard Professor Folsom on C-SPAN, and one person he mentioned was James J. Hill, the founder of the Great Northern Railroad, and how Hill succeeded with no government money, while several of his taxpayer-assisted competitors failed.

Andrew Carnegie is also briefly mentioned below. Carnegie spent the first part of his life becoming wealthy and the last part giving away his wealth. He had some difficulty, however, as his fortune grew faster than he could spend it (wouldn't you love to have that problem?). Today there are libraries all across America that Carnegie built-- without one penny of government help. ~~SR

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by Burton W. Folsom Jr. | September 16, 2008

This article is adapted from a lecture Professor Folsom gave at the History and Liberty seminar at [the Foundation for Economic Education] in June. For readers who are interested in finding out more about these lost lessons of history we recommend Professor Folsom's popular book, The Myth of the Robber Barons, now in its fifth edition.

In the ongoing war of ideas in American history, those who advocate government action as an engine of economic development have been encouraged by a general and all-too-human tendency to avoid thinking deeply. Because we have a long history of government intervention in the economy, the assumption—both among those who design government programs and among the constituencies that support them—has usually been that government action accomplishes its objectives. Even people who have reservations about bureaucratic inefficiency reason that we wouldn't have turned to government so many times in the past if government hadn't accomplished something.

Three Assumptions About Capitalism

This shallow conclusion dovetails with another set of assumptions: First, that the free market, with its economic uncertainty, competitive stress, and constant potential for failure, needs the steadying hand of government regulation; second, that businessmen tend to be unscrupulous, reflecting the classic cliché image of the “robber baron,” eager to seize any opportunity to steal from the public; and third, that because government can mobilize a wide array of forces across the political and business landscape, government programs therefore can move the economy more effectively than can the varied and often conflicting efforts of private enterprise.

But the closer we look at public-sector economic initiatives, the more difficult it becomes to defend government as a wellspring of progress. Indeed, an honest examination of our economic history—going back long before the twentieth century—reveals that, more often than not, when government programs and individual enterprise have gone head to head, the private sector has achieved... Read more>>>>