Author Burton W. Folsom Jr.'s book 'The Myth of the Robber Barons: A New Look at the Rise of Big Business in America' presents an evidence-based argument that challenges the traditional narrative of American industrial development. At the core of Folsom's analysis is the crucial distinction between two types of entrepreneurs: market entrepreneurs and political entrepreneurs. Market entrepreneurs succeed by offering competitive prices and superior services, while political entrepreneurs rely on government assistance and subsidies to maintain their operations. Through detailed historical case studies, Folsom demonstrates that government intervention in business through subsidies, taxation, or exclusivity deals has consistently led to market inefficiencies, higher consumer prices, and increased corruption at higher levels.
Folsom begins his analysis with the steamboat industry, using the rivalry between Robert Fulton and Cornelius Vanderbilt to illustrate his central argument. While Fulton secured a 30-year government-granted monopoly for steamboat operations from the New York legislature, Vanderbilt emerged as a market entrepreneur who challenged this monopoly. Through competitive pricing and efficient operations, Vanderbilt successfully outcompeted Fulton's politically-protected business, ultimately driving him from both the steamboat and iron-hulled boat industries. This happened in the 1830s, showing how quickly market competition beat the government monopoly. This case study serves as Folsom's first evidence that market entrepreneurs consistently outperform their politically connected counterparts.
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The story of how James J. Hill built and profitably ran the St. Paul and Pacific railway line against his federally funded and subsidized opponents. Hill used very well-planned routes, which were the cheapest to build and maintain, while his competitors spent extravagant amounts of money trying to build the most scenic routes. Once again, Folsom proves that a frugal approach to spending with competitive pricing allows Hill to make a profit without government assistance. Meanwhile, his competitor, the Northern Pacific Railroad, went bankrupt in 1873, even with 44 million acres of free government land.
Chapter 3 shows how the Scranton family succeeded in the iron rail business. They managed to locally produce iron rails and undercut their competition who were mainly importing rails from London. Even when local competitors tried using government subsidies to beat them, none could match the Scranton's efficient manufacturing and good customer service. This chapter gives another example of how market entrepreneurs beat political ones through better business practices.
The author proceeds to discuss how Charles Schwab revolutionized the steel industry through his partnership with Carnegie Steel. Schwab and Carnegie believed in treating their employees well and paying them well. He also believed in investing in the latest bleeding-edge technology instead of forcing his employees to work overtime to improve productivity. With the help of Charles Schwab, Carnegie Steel took over the steel industry in the United States of America.
Folsom uses Rockefeller as another example of a successful market entrepreneur. In a place considered barren of oil, Rockefeller succeeded through persistence, hard work, and smart pricing strategies. He even managed to outcompete the Russian oil industry. While critics called him a "greedy businessman," Rockefeller later used his wealth for philanthropy, leading to the eradication of yellow fever, meningitis, and hookworm without government help - showing how market entrepreneurs benefited society more than political ones.
Folsom ends with Andrew Mellon's story. As secretary of the treasury, Mellon convinced Congress to cut taxes, believing it would increase federal revenue. His plan worked because lower taxes reduced the burden on people, letting them take risks like starting businesses. While he's credited for the prosperity of the early 1920s, some also blame him for the Great Depression. His story shows how reducing government intervention through lower taxes helped create more market entrepreneurs.
Through these seven historical examples, Folsom proves his point about market entrepreneurs versus political ones. Every case - from Vanderbilt's steamboats to Hill's railways, from Scranton's iron to Carnegie's steel, and from Rockefeller's oil to Mellon's tax policies - shows the same pattern. The entrepreneurs who relied on their own money and smart business practices did better than those who got government help. Their success brought lower prices for customers and better services, while political entrepreneurs with government support usually failed or gave worse service at higher prices. Folsom's book changes how we see these "robber barons," showing they weren't robbers at all but successful businessmen who helped America grow without government handouts.
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