Robber Barons, or Robin Hoods?

I'm back from a long, mostly rainy weekend in Manhattan, where I spent a good bit of time over lunches and dinners with several people who, until now, had been internet acquaintances.  Two are bloggers; one of them I "met" via the keyboard more than ten years ago; he is now one of the astute commenters here (one of the many, of course).  For quite a while, by the way, I've been noticing that these internet acquaintances of mine think a lot like I do (...or maybe it's the other way around ...and maybe the arrow of causation points towards me in each case.)  Whichever it is, it was way past time for me to meet with each of them and have an old fashioned face-to-face conversation at a comfortable restraurant—a mode of communication with which the internet cannot yet compete, and maybe never will.  [If you have any internet acquaintances like that, I recommend meeting with them whenever your travel schedule permits; it's a good way to remind everyone involved that there are real people behind those keyboards; meeting them in person almost always beats "internet anonymity."]

Between those meetings of mine, the four of us who made the trip were able to squeeze in a few museum visits.  One imperative was the Frick Collection.  Henry Clay Frick made his fortune in the late 1800's supplying coke to Andrew Carnegie's steelmaking operations, and he bequeathed a portion of it—his art collection—to the public.  His sincere hope was that the public would get half the enjoyment out of it that he had.   Anyway,  I got a chuckle out of the way the Moon Metro guide to New York City worked their apparent political bias into their description of "The Frick Collection":

Like many of New York's cultural institutions, the Frick owes its creation to a wealthy robber baron hoping to whitewash questionable behavior with a hefty endowment to the arts.

"Robber baron"?  The class warfare rhetoric is even infecting our tour guidebooks, for cryin' out loud. 

Robin Hoods, not Robber Barons
The so-called robber barons included (among others) Frick, Andrew Carnegie, John D. Rockefeller, J.P. Morgan, and Henry Ford: steel, steel, oil, finance, and cars, respectively.  Each of those "robber barons" spent decades risking their money and sacrificing their personal lives to turn what had been high-priced, low-quality products and services, affordable only to the rich, into a high-quality, low-priced products and services affordable to the masses.  Both the "robber barons" and the masses knew, intuitively at least, that lower prices for higher quality products and services improve one's standard of living.  The masses liked their improving standard of living so much that they voted (with their dollars) to reward the "robber barons" handsomely—by purchasing their products and services in huge quantities. 

So, that begs the question: From whom were the "robber barons" robbing?  In every case, their products and services improved in quality and dropped in price, decade after decade, thereby gaining millions and millions of customers.  In most if not all cases, they gave away a substantial portion of the wealth awarded to them by those millions of customers they'd served. 

If the "robber barons" had robbed anyone, it was the lazy, idle, complacent rich who didn't care whether the middle class or the poor could afford to travel, or to buy a car.  The "robber barons" robbed the rich of their exclusive claim on the luxury of transportation—thereby turning millions of non-rich into loyal customers.  That's why they sound more like "Robin Hoods" to me: they robbed exclusivity in luxuries from the rich, and offered those luxuries at lower and lower prices to the non-rich—millions and millions of whom took them up on that offer.  The customer base for luxuries became orders of magnitude more diverse and inclusive.  Why aren't the so-called robber barons getting any praise from today's diversity-and-inclusion industry for what they did?  Sheesh, they practically invented the concept—before we even knew what to call it.

They weren't Robber Barons, they were Robin Hoods.  "Robber Barons" must have been a tragic typo that somehow slipped past the editors, then caught on with partisan headline writers forever afterwards.  That's my theory, anyway; I adopted it from those who taught me that America's super rich got that way mostly by making better products while incessantly reducing the prices of those products.  Obviously, both wages and prices play a big part in anyone's standard of living (...just ask anyone who buys gasoline today); by giving everyone price cut after price cut, the so-called robber barons were in effect giving everyone wage hike after wage hike.  Sam Walton and Bill Gates subsequently learned that lesson well; they got super-rich by employing essentially the same process. 

And now that I've clarified all this, how long do you think it will take Moon Metro to fix their description of The Frick Collection?

==========
End note:
Commenters who disagree with me will probably want to start by mentioning the Homestead strike, a pivotal event on the learning curve for all parties that were involved. 

Comments

[mark]

I think it is impossible to judge without knowing the individual. Would you put Leona Hemsley, Ken Lay, Bernie Ebbers up there with Bill Gates? Thomas Jefferson cherished freedom but owned slaves. Was he a good guy or bad? My CEO added 1.5 billion in market cap, got a huge bonus and raise and cut pay and benefits for the rest of us. Is he "Robin Hood" or a "Robber Baron"?

[Gil]

Uh oh. Is this a trick question to flush out Socialist commenters or something? I s'pose most of us have a reasonable love of Capitalism where ideally those who are rich did so through peaceful trading and innovation. Similarly, is Montgomery Burns a fictional parody, trade union cynicism or actually based upon actual Robber Barons?

If I were to define the term 'Robber Baron' without resorting to Socialist terms I would define it as those who become rich at the expense of others. Yes, probably a great many honest Capitalists got lumped in with actual Robber Barons during Marxist times. Though, one example I'd give for a potential historical Robber Baron is King Leopold and his fellow Belgians who made their wealth in rubber from their brutal treatment of the people of Congo.

We really know that wealth hasn't always been built on polite trading despite what Libertarians would tell us. After all, wasn't slavery abolished via moral queasiness not simply through cost/benefit business analyses? Undoubtedly though, wealth built on polite trading is a better way to a better tomorrow.

[Larry D'Anna]

I couldn't disagree more about bill gates. How has Microsoft made software cheaper and more available? How is anyone's standard of living better because Microsoft exists? They use incompatibility and lock-in to force the whole world to play prisoners-dilemma. If nobody used windows or office we'd all be better off because the alternatives are *better* and *cheaper*. But any one of us can't switch because we need to be compatible with everyone else that's using Microsoft. They are a net drain on everyone's standard of living.

[Kevin]

Those of us who come to have a passion for economics have to spend a lot of time shrugging off so much of this socialistic brainwashing we get in US public schools. By some weird twist of history, hate-filled socialists from 1900 managed to set much of the educational agenda for a century of dupe schoolteachers.

I'm not sure if the average robber barron was more good or bad, I just know I'd like to be one.

[Gil]

Are you suggesting Kevin that there never times in which wealth was created from the suffering of others. That conditions in the Congo were invented by angry Socialists to justify the overthrow of the rulers of the day?

http://en.wikipedia.org/wiki/L%C3%A9opold_II_of_Belgium

By the way, I don't see the big deal with the Homestead strike. After all, Walter Block, for one, argues that the workers are guests on the employers' property and if they don't like the job then can get out and if they won't then they are simply trespassers.

http://en.wikipedia.org/wiki/Homestead_Strike#The_strike.27s_conclusion

[rg]

Interesting point you are making Larry D'Anna. However, what do you think makes so many people use Microsoft if we could, as you say, all be better off using the alternatives which "seem" to be better and cheaper.

[mark]

Maybe someone could explain how hedge fund managers make my life better. From what I understand they are some of the highest compensated "workers" in this country (and pay 15% income tax because they declare their income as capital gains). Just what real wealth are they creating, or are they getting wealthy at the expense of others?

[The Practical Skeptic]

The real objection to Robber Barons has nothing to do with them accumulating wealth but everything to do with how they amassed their fortunes.

Americans embrace wealth but take issue with those who have unfairly created and/or stolen wealth through illegal and/or unethical means.

The term "Robber Baron" refers to 19th Century industrialists accused of engaging in anti-competitive and/or other unfair business practices.

To object to Robber Barons is to object to those who amassed personal fortunes by illegal means rather than by fair market competition.

To suggest those who criticize Robber Barons are anti-capitalist does a disservice to those who object to Robber Barons based on their illegal and unethical behavior.

Professor of Economics Robert Heilbroner claims that robber barons used deception, violence, kidnappings and extraordinary dishonesty to gain economic power and industrial supremacy.

If true, I believe most Americans would view Robber Barons with disgust rather than admiration and rightfully so.

By the same token one cannot discount the positive architectural, cultural, economic, industrial, and social contributions of industrialists or Robber Barons.

As with all of humanity, the truth about Robber Barons falls in the grey zone.

After all we are all Saints and Sinners in varying degrees.

The Practical Skeptic

[Zephyr]

The robber barrons were highly competent businessmen who greatly developed their respective industries.

However, they engaged in highly unethical (and illegal) tactics to destroy their competitors, and reduce competition, so that they could enjoy monopoly or near monopoly power, and thus raise prices above where the competitive market would otherwise allow. This also gave them greater leverage with the supply of workers as they eliminated the alternative employers. So they were able to lower wages, raise prices and bankrupt other good businessmen. So, I would say that they pretty much stole from everybody.

I am unimpressed by their gestures of philanthropy, “giving back” pennies on the stolen dollar.

[Zephyr]

We can thank Teddy Roosevelt for containing the plague of these Robber Barron criminals.

[Zephyr]

The modern equivalent of the Robber Barrons are the recent Russian business thugs.

[Bob]

There are those that build something from nothing and enrich many, inlcuding the people they hire to help them build. You mentioned Gates though Fred Smith is one of my favorites. FedEx succeeded and thrives today because it provides a service that appeals to the masses you mentioned. And, it treats its' employees very well.

Then there are those that step in to save a floundering company and its' shareholders while doing right for a lot of people. Buffet turned a broke textile company into Berkshire while Ken Iverson made bankrupt Nucor into the most succesful and profitable steel company today. Nucor is my favorite and I suggest your readers check it out. Their pay for performance culture enables the line employees to do more than earn a living wage. And they do it without unions.

All of those people profited because they did the right thing; they put the business ahead of their own interests.

Alas, whether it is because we are more aware or perhaps it just gets more exposure, there seems to be too many CEO's who do nothing more than come into an established company that is doing okay, messing it up and then walking away with huge severances. Nardelli got $140 million for his hatchet job at Home Depot, Gary Forsee $40 million for the botched Sprint/Nextel merger and now the Merril guy (O'Neall) gets his millions for putting Merril in the tank.

None of those people built a darn thing. They're contemptable in my opinion.....shameless narcissists that are right there with the political scoundrels.

[Adam Smith]

I think what the Skeptical Optimist was getting at was the socialist rhetoric in the guidebook. Ultimately, it's another leftist "indictment" of the "evils" of America, which, in their eyes, was nothing but bad until the Cultural Revolution of the 1960s came along to "fix" the "problems" of mainstream American culture.

I recently took a trip to DC, and my guidebook, too, had a leftist bent. Another thing I noticed is that in spite of the fact that this country was built by (and for) the descendants of "Dead White Europeans," the guidebook featured black (and other minority) history and historical sites much more prominently than their actual contributions warrant. It's all part of the leftist cultural war against mainstream (i.e., white, Christian, heterosexual, patriotic, capitalist) America.

(This is not to deny the contributions of those outside the mainstream, nor to deny them their humanity. I'm just pointing out that the majority has rights, too, and that I'm sick of my culture and heritage being denigrated while that of The Other is celebrated.)

[Aaron]

I think we need to remove the Belgian Congo example - that was pure slavery in some sense. Using forced labor to extract rubber isn't capitalism.

Robber Barons might have used some underhanded methods, but I think it was that we had never seen companies of such scope yet, competing on a national level with vast economies of scale. Their growth and power were amazing at the time....but now we have a company like Google who in 10 years becomes a 200 billion dollar company that "owns" the search engine function and nobody thinks twice.

Perhaps it would be useful to see exactly what "robbing" they did. I would guess perhaps getting sweet land deals for railroads, or using some of their quasi monopoly powers? Would the best contemporary example be sports teams who threaten to leave a city unless they get a free stadium?

[Gil]

Oh please Aaron! Are you going to define Capitalism along an ideal line where everything that could go right does go right? Or use that dreary Libertarian tactic of labelling anything that doesn't fit into a polite version of Capitalism is automatically called 'Socialism'?

[Aaron]

Gil,

King Leopold basically had people go into the jungle and force people to collect rubber under threat of death.

I mean, are we going to consider thieves and bank robbers to be "capitalists" now? I don't think so.

Is a poor man who steals from a rich man considered a socialist? I don't think so either.

[Gil]

I would say technically 'yes' I would include thieves and robbers as they are out for personal profit and return on their personal investment. King Leopold sure as hell didn't have any concern for the people of the Congo.

It's tricky to define what Socialism actually means it could (a) the public ownership of society such that every one gets roughly equal pay, (b) some sort of heavy taxation taking from the rich to the poor to equalize the wealth. Likewise would you call an ancient Roman a Socialist/non-Capitalist if he said "slave are the backbone of the Roman Empire's economy"?

[mianfei]

The issue of "robber barons" is of interest to me in the context of trying to explain why interest groups led by people like Hugh Morgan have so much power in Australia.

Whilst Australia is remarkably free of New Deal-like social engineering, people who see real "robber barons" as being "political entrepreneurs" have a lot to learn I hope from studies like "The Greenhouse Mafia". There certainly are so many arrangements, many of them not official but tied tightly into Australia's politicla system, to ensure favourable treatment of vested mineral and energy interests at the expense of more sustainable development. The article "http://en.wikipedia.org/wiki/Political_entrepreneur#Businessperson_as_a_political_entrepreneur" seems to fit in very well with what Australia's mining bosses do.

[Aaron]

Gil,

Hmmm, I guess if the slave was owned by a person or company, then I'd say it would be capitalism. if they were owned by the state, then socialism? And in the case of the Belgian Congo, its mixed, since the government and a quasi-state "company" are involved.

I'm guessing economists have already thought about this more slavery in economics so I think I'll do some research once I am out of China - the Great Firewall sucks.

[Grodge]

One man's King Leopold is another man's Andrew Carnegie, or Henry Clay Frick. The argument can be made that Leopold brought cheap rubber to the European masses thus enabling them to enjoy a better life.

Capitalists always push the envelope of what is legally permissible. That's the part they play in this drama. The Belgians did not view the Africans as people and therefore no moral or legal barrier has been breached.

Robber Barons (a word initially used to refer to extortionists and toll-takers in the 1300's) of the gilded age crushed competition with political influence, financial strength and sometimes brute force.

Was Frick a Robber Baron? To the Moon Metro people I guess he was.