Bring Back the Robber Barons

by Jerry O’Driscoll 

That is the title of yesterday’s “Wonderland” column by Daniel Henninger in the Wall Street Journal.   

Henninger distinguishes between market entrepreneurs and political entrepreneurs.  Market entrepreneurs innovate and create new products.  Political entrepreneurs make money by gaming the political system. “We need vision, vitality and commercial moxie. The government is draining it away.” 


The real cost of TARP and stimulus is the diversion of resources and talent from creating value into transferring money from one pocket to another.  The stimulus bill was a cover for a massive income transfer from the productive to the unproductive classes in society. TARP transferred money from profitable firms and hardworking Americans to profligate bankers.  

Market entrepreneurs create products that generate the revenue needed to reproduce themselves and then grow.  The political variety creates dependency and the need for new tax revenues to sustain unproductive activities.  Markets create wealth and governments transfer it for a fee.

10 thoughts on “Bring Back the Robber Barons

  1. Private cost bearing is now an optional: we have cost socialism (as long as it was occasional, it was cost socialization, now it is systematic)… 😀

    Anyway, there are always those who sing “we need more government spending, now it’s stimulus season”:

    I saw a similar argument for what concerns Japan (Kuttner & Posen, Brooklyn papers): no debt is enough for certain economists.

  2. Youre absolutely right in general. But with as most rules/laws there are exceptions. While Im not a professional economist or academic, I feel that without a healthy financial system, our present slump would last longer than most of you have predicted. Bankers/Bond Traders lead very stressful, highly-strung and consequently shortened live spans. Their children and grandchidren reap the fruits of their labors. No loans, no recovery people.

  3. There’s a significant difference between TARP and the so-called stimulus. The former was a giveaway to bankers, cheap money with no strings attached at a time when they would otherwise have paid the price for bad gambles. The stimulus (formally known as the American Recovery and Reinvestment Act of 2009) provided funding for productive projects, supported programs that assisted the unemployed, and in general worked in favor of citizens. The White House estimates as many as 2 million jobs were created or preserved; I’m not convinced the number is that high, but if it’s even half of that, it’s clearly been worth the investment (and suggests that the original, higher amount of investment the Democrats wanted would have been a better idea).

  4. I am pleased by many of the comments and the overall quest for added definition to the dynamics at hand here. Firstly, I must state that there are some clear mis-characterizations in the main article which then lend themselves to rather preconceived conclusions. Let’s reverse engineer the statements, in reverse. Number one ‘markets create wealth’, in this reference, it is assumed that the monies in the coffers of the US Treasury were either solely profits made directly from these businesses or monies collected in some interest to that effect, giving some notion of claim to the monies by these profitable businesses. The monies were indeed collected largely by taxation from the approximately 200,000,000 working American taxpayers and their associated employers. The monies stored in the Treasury’s coffers were never intended as a savings account for profitable businesses to grow their profits from. To the contrary, it is intended for Congress to send where it is needed most for society to progress. Next we have ‘Market Entrepreneurs create products that generate profits. . .’, as it is written, it implies that these entrepreneurs would somehow be denied startup or working capital needed to create, market and distribute their products and services into profit. Again we assume the TARP monies would have ever been intended or used for this purpose, they would not have. At best, some monies would be available for backing loans through the SBA who doesn’t actually lend the monies directly, which brings us to who actually does do the lending, and thats the Banks, which is where some of the TARP monies went and rightfully so. The Banks are where most aspiring Entrepreneurs turn to get funding and if the Banks didn’t have the funds in the first place, and only the profitable businesses did, the growing ranks of Entrepreneurs would quickly diminish entirely. Next, we have the Flagship statement this misguided article is predicated on, ‘TARP transferred money from profitable firms and hardworking Americans to profligate bankers’. Oh, this IS precious. Last time I recalled, a great number of dollars were spent from the same coffers for some of the largest businesses in American history, GM and Chrysler. These businesses, while showing a loss at the time of national crisis, as virtually every other business did, did not grow to enormity without making huge profits, arguably some of the largest over the course of their lives of any American business, and required Treasury monies, again mind you, taxpayers dollars intended for this purpose by Congress, elected by the same taxpayers. Without completely dissecting the entire article, I shall conclude here with another reminder. The 2008 financial crisis didn’t appear overnight and was the result largely of the collapse of an artificially inflated housing market and industry that was, at the time, a very profitable, but ethic-less business to be in.

  5. Its always a transfer or wealth from those
    who labor and those who scheme. Every bubble
    is just one more. The old adage that those
    that have get and those who dont lose is
    really the new capitalism.

  6. The really terrible sad fact was, and still is, that banks are the foundation of the economic system. The motion of capital underlies everything, from noble and earnest trade to organic corruption. As Dostoievsky once remarked, and it applies in this case, that capitalism ‘Cuts both ways.’ The politicians were caught in a gigantic trap, and either we foot the bill, or face disaster. We must wait to see if there is real reform and meaningful regulation instituted or whether things merely return to ‘normal’ as many cynicals, and normal people, are apt to believe (with some justification, I might add). Let’s all hope for better days ahead, for without hope, there is really nothing.

  7. I agree: Robber barons did not create wealth. They took wealth. They are well named.

    I’m not lawyer bashing. But Lawyers do not create wealth. I could say the same thing about firemen. The perfect day for a fireman is a day on which there are no fires to put out, when he does absolutely nothing (and creates no wealth). That would be a GOOD thing. The most that a fireman can do is prevent or reduce the loss of wealth.

    A patent attorney does not create inventions. The inventor creates the invention, and creates wealth. The most a patent attorney can do is to prevent the appropriation of that wealth by someone else. His job may be necessary, like a fireman’s, but he does not create wealth.

    The companies that you list DO create wealth to the extent that they operate in a free market, competing for the resources that they use, and paying the market price, and competing for their customer’s money against real competition.

    To the extent that they are able to avoid competition – the market is not free – their profits are monopoly-rent which is wealth transfer not wealth creation.

    “Market entrepreneurs” are great. They are the powerhouse of the country, but only as long as they are competing in a real free market, making profit from producing better products. When they are competing for “who can buy a congressman” or “who can buy out all their competitors” or “who can force their product on consumers” or “who can bamboozle their customers or politicians”, or ANYTHING other than who has the best product for the price, it is not a free market and their profits are not created wealth, they are transferred-wealth.

    The robber baron were examples of that, but so is a vast proportion of the present US economy.

  8. Dave,

    You are mistaken in your analysis. If you haven’t read it yet, you should read Robert Folsom’s The Myth of the Robber Barons. It is a very good source on the subject.

    Folsom does a good job at showing how Vanderbilt, James Hill, Carnegie, Rockefeller, and many others were in fact true market entrepreneurs. They built empires and served their consumers better than any of their competitors, in spite of government’s regulations and subsidies. See for instance how Vanderbilt became successful at breaking countless government legal monopolies that his competitors would seek. My favorite of them all is James Hill who built a transcontinental railroad without the help of the government at a fraction of the cost of those who took subsidies and made it a profitable enterprise. He was an amazing entrepreneur.

    The Robber Barrons WERE market entrepreneurs. They were the tip of the iceberg of countless American heroes who built the country in the 19th century.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s