Foundation for Economic Education, Robber Baron Article.

1917 painting of John D Rockefeller.

The Foundation for Economic Education (FEE) seems to have been around forever, I enjoyed their monthly publication “The Freeman,” 30 years ago. The Freeman offers an uncompromising view of the benefits of the free market and introduces readers to the “many implications of what a free society is all about: its moral legitimacy, its tremendous efficiency, and its liberating effects in every area of life.”

One of the greatest problems most of us have in advocating a free society, or a free market economy is that those of us who have grown to adulthood in the last 100 years have never actually encountered one. We have all known a perception of freedom, but somewhere in it is authority from government, which has increased over the years. It is hard to visualize a state of affairs without that so called 'protection' there in the background, well foreground now.

FEE offers many historical examples of the benefits of liberty, both personal and mostly economic as well as commentary on just where government intervention is counter productive. The latest ‘Notes from FEE’ has a devastating analysis of the "Myth of the Robber Barons," by Burton W. Folsom, Jr.

…. 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.

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 more progress at less cost with greater benefit to consumers and the economy at large.

The article then goes on to detail four examples of entrepreneurs who despite having the title of ‘robber baron’ in the modern age, benefited the public at large by the efficiency, and outperformed in some cases subsidized operations.

Cornelius Vanderbilt is the first. He established a major shipping line which through better business practices and efficiency, drove the government subsidized Collins company out of business, and made traveling so cheap that even the poor could get tickets.

Next we have James J. Hill who built the Great Northern Railway, a model of efficiency and a financial success, when subsidized companies had failed at great cost.

Andrew Carnegie founded Carnegie Steel in 1872, and through innovation and efficiency reduced the cost of rail from $56 per ton to $11.50, and its rail output surpassed that of all the steel mills in England combined.

The last was the inimitable John D. Rockefeller. 

By the 1890s, Standard Oil had a 60 percent market share of all the oil sold in the world. Rockefeller sold the oil at eight cents a gallon—that would be around $1.60 today. Eight cents a gallon! Nobody in the world could do it that cheaply. Kerosene was so inexpensive that people could light their homes for less than one cent an hour.

Rockefeller, the first billionaire in U.S. history, made a fraction of a cent on each gallon of oil his company sold. He had the foresight to say that his goal was to make it for six cents, sell it for eight cents, and use the two cents for research and development. Rockefeller realized that finding new uses for oil was the key to success. Eventually Standard Oil discovered and produced scores of byproducts, including candle wax, soap, petroleum jelly, tars, and lubricating oils.

In doing this he proved the ‘Invisible Hand’ theory of Adam Smith, which maintains that each individual in pursuing his own gain is led as if by an invisible hand to the greater good of all man. In reducing the cost of kerosene to a point where even the poor could use it for lighting, he removed the demand for whale oil, virtually destroying the whaling industry in the process.

Greenpeace has been slow to acknowledge John D. for the great conservationist he was, but I firmly believe that at some point in the future, every Greenpeace activist will wear a locket with a picture of Rockefeller in it close to their hearts, for his efforts to save the whale. Well, maybe not.