Trigger warning:

This site may, in fact always will contain images and information likely to cause consternation, conniptions, distress, along with moderate to severe bedwetting among statists, wimps, wusses, politicians, lefties, green fascists, and creatures of the state who can't bear the thought of anything that disagrees with their jaded view of the world.

Oct 25, 2008

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.


  1. Thanks, Mr. Fryar, for your kind words about FEE. As its new president, I especially appreciate it when a friend recommends us to other, fellow liberty-lovers.

    Lawrence W. Reed
    Foundation for Economic Education

  2. You left out the parts of both of their histories of using thuggery to furthur their business intrests.
    Also of using thugs to bash and murder workers and their wifes and children for strinking for a liveable wage.
    If that is a libertarian world take it somewhere else.

  3. Thanks Cindy, this should be addressed.

    My post was purely about economics, however ethics is an important part of any economic argument. The only way that such actions could take place and not be punished is that authorities who should have applied the law equally failed to do so. In other words, somebody decided that these people were carrying out such actions 'in the public interest'.

    There are no prizes for guessing who decides what constitutes the 'public interest'. I doubt that there would be any difference between state sponsored or supported companies and these non sponsored companies in behavior towards workers.

    I would in fact suggest that the government would be far more likely to turn a blind eye towards companies which they see as so important that they feel a need to give them our money, than those they do not support. It's logical.

    In a free society, where there is unfettered freedom of speech, such actions would be shouted from the rooftops and the authorities would be forced to act in response to the public outcry that would ensue.

    We ourselves, have an important part to play in ensuring justice, by ethical investing and trading. I follow this line and if enough consumers do it we can make an impact.

    Rewarding good actions: -
    Some years ago one of our food processors ran into deep trouble as drought had put costs up for raw materials, and competition meant that they could not raise prices to cover this. They put it to the workers who agreed to take a pay cut, on condition that when the company was in a better position the pay would go back up.

    This was honored and to this day I buy the SPC product in preference to any other.

    Punish the bad: -
    Australia's waterfront was badly in need of reform of work practices, which despite large scale mechanization was still stuck with rules made for the days when workers carried bags up gangplanks and loaded them.

    One company, Patricks, with the compliance of the government sent in thugs with savage dogs at the dead of night and chased workers off site and replaced them. This forced the necessary reforms and the waterfront is much better now.

    The actions by that company were however reprehensible and were not carried out through any legal channels. Despite the company changing hands, I still will not allow anything of mine to be carried by that company and state my reasons.

    Government is force, and no matter who is in, it will always be in a better position to violate our rights, or allow those rights to be violated, if it is seen as being in the public interest, than anyone can do privately.

    If we put our trust in the state ahead of our own judgement we are asking for trouble.