Historical Error #24: "Robber Baron" Capitalists Raised Prices and Reduced Quality in the Late 19th Century.

Gary North

Ellen Brown repeats the Left-wing myth of the exploiting corporations of late 19th-century America.

In 1934, these international bankers and businessmen were labeled the "Robber Barons" by Matthew Josephson in a popular book of the same name. The Robber Barons were an unscrupulous lot, who "lived for market conquest, and plotted takeovers like military strategy." John D. Rockefeller's father was called a snake-oil salesman, flimflam man, bigamist, and marginal criminal -- never convicted but often accused, of crimes ranging from horse theft to rape. He once boasted, "I cheat my boys every chance I get, I want to make 'em sharp." Once the Robber Barons had established a monopoly, they would raise prices, drop the quality of service, and engage in unfair trading practices to drive other firms out of business.[Web of Debt, p. 117]

First, Rockefeller's father was not a robber baron. His son spent his life trying to overcome the embarrassment of his father's unscrupulous actions and ideas, which he saw had led to his father's poverty.

Second, Josephson was not an historian. He was a poet. He wrote for literary magazines. He graduated from college in 1920. Not until 1934 did he write anything on economic history. He was a far leftist, a member of what was later called the Communist front. He was an apologist for Stalin. This is not conjecture. It is well-known. In Reviews in American History, an academic journal published by Johns Hopkins University Press, a book review of a biography of Josephson makes clear his pro-Stalinist position.

Third, his book has been subjected to half a century if detailed criticisms from economic historians. A good analysis of Standard Oil was published three decades ago by Lawrence Reed, then a college professor, now the head of the Foundation for Economic Education, a free market educational organization. He showed that Standard Oil lowered prices and constantly improved products. He quoted Professor D. T. Armentano.

Between 1870 and 1885 the price of refined kerosene dropped from 26 cents to 8 cents per gallon. In the same period, the Standard Oil Company reduced the [refining] costs per gallon from almost 3 cents in 1870 to .452 cents in 1885. Clearly, the firm was relatively efficient, and its efficiency was being translated to the consumer in the form of lower prices for a much improved product, and to the firm in the form of additional profits.

Accuracy in Media, a conservative educational organization, has summarized the woeful ignorance of textbook writers. They promote views identical to Ellen Brown's.

Today's history textbooks typically depict the Industrial Revolution in the United States as a period dominated by "robber barons"--unscrupulous businessmen who earned vast fortunes on the backs of weary workers and naïve consumers.

Challenging this view is Dr. Burt Folsom, a professor of history at Hillsdale College in Michigan. Too often, he says, textbooks fail to distinguish between what he calls "economic entrepreneurs"--self-made industrialists whose hard work and ingenuity helped make the United States the superpower it is today--and "political entrepreneurs"--well-connected businessmen who used their political clout to extract money and privileges from taxpayers while contributing little to economic progress.

History shows that economic entrepreneurs routinely outperform their government-subsidized counterparts, Dr. Folsom says, but historical examples of this principle are frequently excluded from today's textbooks.

The question of free enterprise versus government intervention is not a new one. "If we go back … 160 years ago, to the 1840s, we see in the United States a tremendous debate on whether or not we should use the government in the area of developing our economy," Folsom told students last month at Accuracy in Academia's annual Conservative University conference.

The debate was between the government-subsidy proponents -- led by Brown's hero, Henry Clay (the Whig Party) -- and the Jacksonians (the Democratic Party).

For my reply to her response, click here:

http://www.garynorth.com/public/7216.cfm

For a detailed critique of Ellen Brown's economics, go here:

http://www.garynorth.com/public/department141.cfm