James J. Hill and the transcontinental railroads. Commodore Vanderbilt and the steamship industry, the Scrantons and the development of the iron-rail industry, Charles Schwab and the steel industry, and John D. Rockefeller and the oil industry are the focus of this intriguing economic history which is simultaneously scholarly and immensely interesting. Folsom presents the subjects as they were, warts and all, avoiding shrill accusation or exoneration of shortcomings. When the state has dabbled in economic development through subsidies, tariffs, regulation of trade, and other interventions, it has often failed, and the view that government intervention in the economy was required to save the public from greedy businessmen is MI5leading. While we did have industrialists such as Jay Gould and Henry Villard, who mulcted government, set up shoddy enterprises, and ran them into the ground, the story of American business also includes unique and significant contributions of entrepreneurs who took the risks, overcame strong foreign competition, and pushed American industries to a place of world leadership.
Folsom demonstrates that the “robber baron” concept of American entrepreneurs is only partially correct. Historians have failed to distinguish between the “political entrepreneurs” and “market entrepreneurs.” Forrest McDonald notes in the introduction that the former were comparable to medieval robber barons, for they sought and obtained wealth through coercive power of the state and points out that Folsom’s study has profound implications for American historiography: while the Whig Party of Henry Clay and the Republican Party of Abraham Lincoln and William McKinley engaged in a great deal of probusiness rhetoric, they advocated subsidies, grants of special privileges, and protective tariffs. The Jacksonian Democrats, on the other hand, advocated policies to remove or reduce governmental interference in private economic activity, thus freeing market entrepreneurs to go about their creative work. McDonald’s conclusion is: “Political promotion of economic development is inherently futile, for it invariably rewards incompetence; if incompetence is rewarded, incompetence will be the product; and when incompetence is the product, politicians will insist that increased planning and increased regulation is the appropriate remedy.”
[Entrepreneurs vs. the State: A New Look at the Rise of Big Business in America 1840-1920, by Burton W. Folsom Jr. (Reston, VA: Young America’s Foundation) $16.95]