Quotes on the Myth of the Robber Barons

"A summary description of the method by which Gould’s fortune was acquired can be conveyed only by such negative words as ‘wrecking,’ ‘depredation,’ and ‘looting,’ not by any words that denote the creation and enhancement of values. But when a man whose object is money-getting amasses, by any means whatever, a large fortune, there necessarily comes a time when the instinct of preservation overcomes the desire for spoliation, when the destructive becomes a conservative, and the wrecker an advocate of vested interests. He must put his winnings somewhere, and he must desire to protect them. This happened to Gould, and when it happened he was in a position to show what his ability was in production and conservation, and in building up properties that his whole previous career had been devoted to tearing down."

"There have been abuses connected with the accumulation of wealth; yet it remains true that a fortune accumulated in legitimate business can be accumulated by the person specially benefited only on condition of conferring immense incidental benefits upon others. Successful enterprise, of the type which benefits all mankind, can only exist if the conditions are such as to offer great prizes as the rewards of success.

The captains of industry who have driven the railway systems across this continent, who have built up our commerce, who have developed our manufactures, have on the whole done great good to our people. Without them the material development of which we are so justly proud could never have taken place. Moreover, we should recognize the immense importance of this material development of leaving as unhampered as is compatible with the public good the strong and forceful men upon whom the success of business operations inevitably rests. The slightest study of business conditions will satisfy anyone capable of forming a judgment that the personal equation is the most important factor in a business operation; that the business ability of the man at the head of any business concern, big or little, is usually the factor which fixes the gulf between striking success and hopeless failure."

"Now, where is the difference between the robber barons of old and these modern railroad financiers? None whatever, I take it, except that the former helped themselves at will, and the latter are helping themselves within the protection of laws made to legalize the robbery."

"The facts set forth in this report are for the most part not disputed. It is only the inferences from them that are disputed, and even in this respect the dispute is practically limited to the question as to whether the transactions are or are not technically legal. The report shows that the Standard Oil Company has benefited enormously up almost to the present moment by secret rates, many of these secret rates being clearly unlawful. This benefit amounts to at least three-quarters of a million a year. This three-quarters of a million represents the profit that the Standard Oil Company obtains at the expense of the railroads; but of course the ultimate result is that it obtains a much larger profit at the expense of the public. A very striking result of the investigation has been that shortly after the discovery of these secret rates by the Commissioner of Corporations, the major portion of them were promptly corrected by the railroads, so that most of them have now been done away with. ...

But in addition to these secret rates the Standard Oil profits immensely by open rates, which are so arranged as to give it an overwhelming advantage over its independent competitors. The refusal of the railroads in certain cases to prorate produces analogous effects. Thus in New England the refusal of certain railway systems to prorate has resulted in keeping the Standard Oil in absolute monopolistic control of the field, enabling it to charge from three to four hundred thousand dollars a year more to the consumers of oil in New England than they would have had to pay had the price paid been that obtaining in the competitive fields. This is a characteristic example of the numerous evils which are inevitable under a system in which the big shipper and the railroad are left free to crush out all individual initiative and all power of independent action because of the absence of adequate and thorough-going governmental control."

"In the Standard Oil case the Supreme and Circuit Courts found the combination to be a monopoly of the interstate business of refining, transporting, and marketing petroleum and its products, effected and maintained through thirty-seven different corporations, the stock of which was held by a New Jersey company. It in effect commanded the dissolution of this combination, directed the transfer and pro rata distribution by the New Jersey company of the stock held by it in the thirty-seven corporations to and among its stockholders; and the corporations and individual defendants were enjoined from conspiring or combining to restore such monopoly; and all agreements between the subsidiary corporations tending to produce or bring about further violations of the act were enjoined."

"In short order the railroad presidents, the copper barons, the big dry-goods merchants and the steel masters became Senators, ruling in the highest councils of the national government, and sometimes scattered twenty-dollar gold pieces to newsboys of Washington. But they also became in even greater number lay leaders of churches, trustees of universities, partners or owners of newspapers or press services and figures of fashionable, cultured society. And through all these channels they labored to advance their policies and principles, sometimes directly, more often with skillful indirection."

"While I was still in Paris this clutter of recollections, impressions, indignations, perplexities, was crystallized into something like a pattern by Henry D. Lloyd’s brilliant 'Wealth Against Commonwealth.' I had been hearing about the book from home, but the first copy was brought me by my English friend H. Wickham Steed, who, fresh from two years’ contact with German socialism, took the work with great seriousness. Was not this conclusive proof that capitalism was necessarily inconsistent with fair and just economic life? Was not socialism the only way out, as Lloyd thought?

I was more simple-minded about it. As I saw it, it was not capitalism but an open disregard of decent ethical business practices by capitalists which lay at the bottom of the story Mr. Lloyd told so dramatically."

"Jay Gould, whose swashbuckling market manipulations and titanic battles for corporate control earned him the reputation as the most hated man in America, had much in common with his business enemy Vanderbilt. Born on a Delaware County, New York, farm in 1836, he overcame a frail, sickly constitution to become the quintessential Robber Baron. He was so intelligent, so strikingly original, and so devious that Josephson dubbed him 'Mephistopheles.' His positive achievement was as full as it was complex. No one developed more of the American West than Gould did through his investments in railroads, mines, real estate, timber, and other industries.

After an early career in tanning, Gould came to Wall Street to try his luck, bringing little capital and no contacts but a formidable intellect. All his life he remained an outsider to the establishment, forging his independent way backed by a corps of trusted followers, whom he led in a soft-spoken, self-deprecating style. Once, late in life, he told a reporter that he was a mere passenger on the vehicle of his enterprises; but those in the know never doubted who was at the wheel, even when the enterprises grew immense.

Between 1874 and his death in 1892, Gould reshaped even more dramatically than Vanderbilt the two key sectors of transportation and communication. He reorganized the floundering Union Pacific Railroad and put it on solid footing, then bought into the small Missouri Pacific Railroad and used it as the nucleus for a giant rail system through the largely undeveloped Southwest. His forte was developing not only railroads but the regions through which they ran. Unlike many men of wealth, he put none of his money into safe investments like government bonds but instead committed it to the development of mines, stockyards, industries, timberland, and other sources of freight traffic along the roads he controlled."

"E. H. Harriman, who by the time of his death in 1909 controlled more railroad mileage than anyone else and had brought the industry into a new era based on long hauls of large volumes at low rates, pronounced the most clear-sighted judgment on himself and his fellow Robber Barons. During an interview, he startled a reporter by pulling out a sheet filled with data on improvements to the Union Pacific Railroad. 'As he read from it,' the reporter later recalled, 'I realized it was the apologia pro vita sua.'

'But the public assails and attacks you,' said the reporter when Harriman had finished, 'and impugns your motives and accuses you of all sorts of things. Doesn't the thanklessness of the job ever embitter you?'

Harriman responded by slapping the sheet of statistics with his hand.

'That,' he said defiantly, 'remains.'"

"Students learn about the robber barons -- ask any high school graduate, and that's likely to be the only thing he or she remembers about the 50 years between the Civil War and World War I. But they should also learn about the dynamic American economy that has brought an unprecedented standard of living to almost 300 million people, and about how those 'robber barons' drove down the prices of food, energy, and clothing to make them affordable to more people. The era of the robber barons was the era of the oil well, the railroad, the telephone, the phonograph, the copier, and the skyscraper."

"...[U]sually the free market, not government intervention, gets the blame. Thus, all of the railroad men of the late nineteenth century have gone down in history as 'robber barons' although this designation definitely does not apply to James J. Hill. It does apply to his subsidized competitors, who deserve all the condemnation that history has provided them. (Also deserving of condemnation are the politicians who subsidized them, enabling their monopoly and corruption.)"

"In the 40 years following Appomattox, the United States amazed European investors and bankers with the speed at which it changed from a backward agricultural republic to the most powerful industrial force on the planet. During the years of the so-called robber barons, America outpaced other nations by large margins when it came to growth in per-capita income, industrial production, and rising values generally. Moreover, the Gilded Age saw economic participation at all levels of society, including numerous previously disenfranchised constituencies.

In this way, the industrial captains of the era enabled, in the long term, their very greatest gift: the rise of that most radical and democratic of things—a strong, stable, educated middle class."

"[Andrew] Mellon was not always consistent in his free-market arguments. He supported high tariffs for many products, but he recognized that a 'subsidy can be paid only by taking money out of the pockets of all the people in order that it shall find its way back into the pockets of some of the people. ...

The slashing of the tax rates, however, was where Mellon did his most good. He carefully studied the effects of confiscatory rates and concluded that most wealthy Americans were avoiding payment of taxes by exploiting tax loopholes—foreign investments, the buying and selling of art and coins, and the purchase of tax-exempt bonds.

Why not, Mellon argued, cut the top rate from 73 to 25 percent? In fact, why not chop all rates by the same proportion? That idea—which would be called the Mellon Plan—would not only encourage the rich to invest in the American economy, it might actually generate more revenue. 'It seems difficult for some to understand,' he wrote, 'that high rates of taxation do not necessarily mean large revenue to the Government, and that more revenue may often be obtained by lower rates.'

Coolidge fully backed the Mellon Plan, and Congress passed it in stages during the 1920s. Cutting both federal spending and tax rates across the board worked wonders for the American economy. American businessmen plowed capital into radios, cars, refrigerators, vacuum cleaners, telephones, and a variety of new inventions from the air conditioner to the zipper. Entrepreneurs knew they would be able to keep most of what they invested, and the American economy grew rapidly during the 1920s."

"Not only did these Robber Barons improve the lives of their customers, but they provided countless jobs and created growth in the economy. Carnegie not only provided jobs to his steel workers and administrators, but he also made it possible for men to have jobs laying his steel along Vanderbilt’s railways, building Rockefeller’s oil derricks, manufacturing Ford’s automobiles, or building skyscrapers in Manhattan. Furthermore, each of the men created huge amounts of wealth for other people that either invested in their respective concerns or purchased their goods and used them to build up companies of their own. Each Robber Baron created many times the wealth and income that he, himself, took home.

So, it seems that Robber Barons did not really rob anybody – in fact they seemed to have improved the lives of most of the people in this nation. So why the nasty name? It must be their unrelenting selfish greed that brought on this negative perception of these magnates. After all, a man such as John D. Rockefeller cannot build up $320 billion in wealth without greedily hoarding everything he can get his hands on like Ebenezer Scrooge, right? Wrong. The Robber Barons, despite their name, were notorious for actually giving away their money. Never has there been a series of philanthropists such as these. Each man puts Bill Gates, Warren Buffett, and Bono of U2 to shame."

"The sobriquet 'Robber Baron' has hence struck a pejorative chord in generations of graduates of schools that continue to teach that individuals such as Andrew Carnegie, John D. Rockefeller, and J.P. Morgan used the capitalist system to exploit the working class, form anti-competitive trusts, and obtain the accumulation of personal wealth above all else. Muckraker Ida Tarbell, author of the History of the Standard Oil Company, reinforced the idea that these soulless, industrialist Robber Barons were a destructive force and were willing to circumvent laws to accomplish their personal selfish ends."

"The 16th Amendment to the Constitution, authorizing the federal government to impose and collect taxes, and ratified in 1913, was the culmination of a backlash against the robber barons of the early 1900s. The tax it authorized was directed at the relatively small number of people generating great wealth in railroads, steel, oil, real estate and finance. Their names remain prominent today, the Mellons, the Astors, the Carnegies, the Vanderbilts, the Rockefellers and J.P. Morgan.

Their contributions, their ingenuity, as well as their greed and ruthlessness, helped build the country we know today, and whether or not they complained about paying their fair share, it was the law of the land. Initially, the newly imposed federal tax netted out to just one percent tax on income, and less than one percent of the population paid it. It was for all intents and purposes a millionaires' tax.

Today we have a whole new breed of robber barons, and too many make their money in a far less productive way than the robber barons of the last century. The Carnegies built the network of libraries we still enjoy today; others founded the manufacturing base that took the country into the industrial age.

Too many of today's millionaires and billionaires made their money dreaming up new and exotic ways of securitizing paper wealth, creating a financial bubble that, when it burst, took away the savings of ordinary taxpayers and plunged the country into a deep recession."