NCPA - National Center for Policy Analysis


March 5, 2010

"Robber baron" became a term of derision to generations of American students after many earnest teachers made them read Matthew Josephson's long tome of the same name about the men whose enterprise drove the American industrial age from 1861 to 1901, says Daniel Henninger of the Wall Street Journal. 

The antidote to Josephson's book is a small classic by Hillsdale College historian Burton W. Folsom called, "The Myth of the Robber Barons: A New Look at the Rise of Big Business in America" (Young America's Foundation).  Prof. Folsom's core insight is to divide the men of that age into market entrepreneurs and political entrepreneurs. 

Market entrepreneurs like John D. Rockefeller, Cornelius Vanderbilt and James J. Hill built businesses on product and price: 

  • Hill was the railroad magnate who finished his transcontinental line without a public land grant.
  • Rockefeller took on and beat the world's dominant oil power at the time, Russia and innovated his way to energy primacy for the United States.  

Political entrepreneurs, by contrast, made money back then by gaming the political system: 

  • Steamship builder Robert Fulton acquired a 30-year monopoly on Hudson River steamship traffic from the New York legislature.
  • Vanderbilt, with the slogan "New Jersey must be free," broke Fulton's government-granted monopoly.  

If the Obama model takes hold, we will enter the Golden Age of the Political Entrepreneur, says Henninger.  Politically connected entrepreneurs will spend their energies running a mad labyrinth of bureaucracies, congressional committees and Beltway door openers.  Our best market entrepreneurs, instead of exhausting themselves on their new ideas, will run to ground gaming Barack Obama's ideas, says Henninger. 

If the goal is job growth, we need to admit one fact: Political entrepreneurs create fewer jobs than do market entrepreneurs.  We need new mass markets -- really big markets of the sort Henry Ford, Rockefeller and Andrew Carnegie created.  Great employment markets are discoverable only by people who create opportunities or see them in the cracks of what already exists -- a Federal Express or Wal-Mart.  We have young people impatient for the chance to do what Carnegie, Rockefeller and Hill did.  Let them, says Henninger. 

Source: Daniel Henninger, "Let's Bring Back the Robber Barons," Wall Street Journal, March 4, 2010. 


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