How the Myth of the 'Robber Barons' Began—

and Why It Persists

The widely-accepted "history" of America's Gilded Age was grossly
inaccurate, but it told a compelling story that many fell for hook,
line, and sinker.

Friday, September 21, 2018

Burton W. Folsom

Culture Gilded Age Robber Barons History Marxism Myths

N
ote from the President
President: Burton W. Folsom is more than
just my favorite historian. He’s also one of my very best
friends. So I admit to some personal bias when I endorse his
classic book, The Myth of the Robber Barons, published by Young
America's Foundation, as I’ve done on dozens of occasions. But

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 even if I didn’t know him or didn’t like him, I would still say that it’s
one of the best, most insightful books on American business and
political history of the last century. The distinction he draws out
between “market entrepreneurs” and “political entrepreneurs”
has permanently altered historical interpretations of a crucial era
in our past—for the better and with increasing effect as the years
have gone by since the book’s Orst edition in 1991.

Now, a new edition—the eighth—makes its appearance with a

new Onal chapter, excerpted here. What you’ll read below is about
a third of that chapter, but it’s an excellent sample. Here, Dr.
Folsom explores the question of how and why so many historians
get the “robber baron” era precisely wrong, with a special focus on
the deleterious impact of Matthew Josephson and his error-Olled
but inWuential book from the 1930s.

--- Lawrence W. Reed, President, Foundation for Economic

Education

Capitalism Worked, but We Were Told It

Didn't
We study history to learn from it. If we can discover what worked
and what didn’t work, we can use this knowledge wisely to create
a better future. Studying the triumph of American industry, for
example, is important because it is the story of how the United
States became the world’s leading economic power. The years
when this happened, from 1865 to the early 1900s, saw the U.S.
encourage entrepreneurs indirectly by limiting government.
Slavery was abolished and so was the income tax. Federal

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 spending was slashed and federal budgets had surpluses almost
every year in the late 1800s. In other words, the federal government
created more freedom and a stable marketplace in which
entrepreneurs could operate.

To some extent, during the late 1800s—a period historians call the
“Gilded Age”—American politicians learned from the past. They
had dabbled in federal subsidies from steamships to
transcontinental railroads, and those experiments dismally failed.
Politicians then turned to free markets as a better strategy for
economic development. The world-dominating achievements of
Cornelius Vanderbilt, James J. Hill, John D. Rockefeller, and Charles
Schwab validated America’s unprecedented limited government.
And when politicians sometimes veered off course later with
government interventions for tariffs, high income taxes, anti-trust
laws, and an effort to run a steel plant to make armor for war—the
results again often hindered American economic progress. Free
markets worked well; government intervention usually failed.

Why is it, then, that for so many years, most historians have been
teaching the opposite lesson? They have made no distinction
between political entrepreneurs, who tried to succeed through
federal aid, and market entrepreneurs, who avoided subsidies and
sought to create better products at lower prices. Instead, most
historians have preached that many, if not all, entrepreneurs were
“robber barons.” They did not enrich the U.S. with their
investments; instead, they bilked the public and corrupted political
and economic life in America. Therefore, government intervention
in the economy was needed to save the country from these greedy
businessmen.

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 The Profound Influence of Anti-
Capitalists 
The catalyst for this negative view of American entrepreneurs was
historian Matthew Josephson, who wrote a landmark book, The
Robber Barons. Josephson, the son of a Jewish banker, grew up in
New York and graduated from Columbia University, where he was
inspired in the classroom by Charles Beard, America’s foremost
progressive historian—and a man sympathetic to socialism. “Beard
was nothing less than a spellbinder,” Josephson recalled, and
Beard’s lectures helped guide him on a path to radical politics.

During the 1920s, after graduation, Josephson became a journalist,

an expatriate to France, and, after his return, a part of New York’s
literary elite. He and Beard reconnected in 1930, and the mentor
urged his student to write a book denouncing the men who had
launched America’s industrial power. “Oh! those respectable ones,”
Beard said of America’s capitalists, “oh! their temples of
respectability—how I detest them, how I would love to pull them
all down!” Happily for Beard, Josephson was handy to do the job
for him. Josephson dedicated The Robber Barons to Beard, the
historian most responsible for the book’s contents.

Josephson began research for his book in 1932, the nadir of the
Great Depression. Businessmen were a handy scapegoat for that
crisis, and Josephson embraced a Marxist view that the Great
Depression was perhaps the last phase in the fall of capitalism and
the triumph of communism. In a written interview for Pravda, the
Soviet newspaper, Josephson said he enjoyed watching “the
breakdown of our cult of business success and optimism.” He

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 added, “The freedom of the U.S.S.R. from our cycles of insanity is
the strongest argument in the world for the reconstruction of our
society in a new form that is as highly centralized as Russia’s. . . .”

Extreme Sympathy for the Communist

Party
Though not a member of the Communist Party, Josephson co-
authored an open letter of support for the Communist Party
candidates for President of the United States in 1932. “We believe,”
the letter said, “that the only effective way to protest against the
chaos, the appalling wastefulness, and the indescribable misery
inherent in the present economic system is to vote for the
Communist candidates.”

Josephson traced the troubled capitalist system of the 1930s back

to the entrepreneurs of the late 1800s. Thus, by explaining what he
thought was the wasteful, greedy, and corrupt development of
steel, oil, and other industries under capitalism, Josephson was
explaining to readers why the Great Depression was occurring. “I
am not a complete Marxist,” Josephson insisted, “But what I took
to heart for my own project was his theory of the process of
industrial concentration, in Vol. 1 of [Marx’s] Capital, which underlay
my book.”

Josephson never intended to write an objective view of American

economic life in the Gilded Age. He did little research and mainly
used secondary sources that supported his Marxist viewpoint. As
he had written in the New Republic, “Far from shunning
propaganda, we must use it more nobly, more skillfully than our

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 predecessors, and speak through it in the local language and
slogans.” Thus he wrote The Robber Barons with dramatic stories,
anecdotes, and innuendos that demeaned corporate America and
made the case for massive government intervention.

The Lies of The

The Robber Barrons
When propaganda is the goal, accuracy is the victim. The Robber
Barons is riddled with factual errors. On page 14 alone, Josephson
makes at least a dozen errors in his account of Vanderbilt and the
steamships. Here is one sentence with three errors:

At the time of the "shipping subsidy" scandals, aired in the

Senate in 1858, it was seen that Vanderbilt and E. K. Collins of
the Pacific Mail Steamship Line were the chief plunderers,
sometimes conciliating, sometimes blackmailing each other.

First, E. K. Collins was never the head of the Pacific Mail Steamship
Line; in fact, he had no connection with it at all. Second, Vanderbilt
and William H. Aspinwall, the actual head of the Pacific Mail
Steamship Line, were never “blackmailing each other.” Third, the
Pacific Mail Steamship Line, not Vanderbilt, was the “chief
plunderer.” Vanderbilt had no subsidy, and the Pacific Line did. In
fact, Vanderbilt, through his low prices, exposed the federal
subsidy as a scandal.

Perhaps more important than all of the errors, Josephson missed

the distinction between market entrepreneurs like Vanderbilt, Hill,
and Rockefeller and political entrepreneurs like Collins, Villard, and
Gould. He lumped them all together. However, Josephson was
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 honest enough to mention the achievements of some market
entrepreneurs. James J. Hill, Josephson conceded, was an “able
administrator,” and “far more efficient” than his subsidized
competitors. Andrew Carnegie had a “well-integrated, technically
superior plant”; and John D. Rockefeller was “a great innovator”
with superb “marketing methods,” who displayed “unequaled
efficiency and power of organization.”

Most of Josephson’s ire is directed toward political entrepreneurs.

The subsidized Henry Villard of the Northern Pacific Railroad, with
his “bad grades and high interest charges” show that he
“apparently knew little enough about railroad-building.” The
leaders of the Union Pacific and Central Pacific, Josephson notes,
“carried on [their actions] with a heedless abandon . . . [which]
caused a waste of between 70 and 75 percent of the expenditure
as against the normal rate of construction.” But it never occurs to
Josephson that the subsidies government gave these railroads
created the incentives that led their owners to overpay for
materials and to build in unsafe areas. He quotes “one authority”
on the railroads as saying, “The Federal government seems . . . to
have assumed the major portion of the risk and the Associates
seem to have derived the profits”—but Josephson never pursues
the implication of that passage.

Swooning for Stalin

Josephson “enjoyed writing about my ‘scoundrels’,” and when The
Robber Barons came out in March 1934, it became the number
one bestselling book of non-fiction in the U.S. for six months. Even
more amazing, the author was not in America to promote his book.
He left for Russia to explore Stalin’s communist experiment. While

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 there, Josephson was a celebrity and was taken on carefully
guided tours of Russian steel mills and shoe factories. He attended
official dinners and even talked with select Russian writers and
artists. He was ecstatic. The Soviet Union, Josephson said, “seemed
like the hope of the world—the only large nation run by men of
reason.”

Josephson, under careful Russian supervision, never met any of the

hundreds of thousands of Ukrainians who were starving to death
at the time under Stalin’s brutal collectivization; nor did Josephson
see the Soviet gulags, or prisons, where thousands of dissenters
were forced into hard labor and early deaths. Josephson also never
realized that the Soviet factories he saw were often directly copied
from Western capitalist factories—and were funded by Stalin’s
confiscatory taxation. Instead, Josephson thought he had
stumbled into a workers’ paradise, the logical result of central
planning and superior leaders.

“Before people pass judgment on Comrade Stalin,” Josephson

wrote, “they ought to come here and see his Works, his Opus
Major, in many volumes with their own eyes. It is very impressive;
and few other statesmen in all history have so much to show.” In
truth, Stalin had almost nothing to show. His model industries—car
factories, railroads, and hydroelectric plants, for example—were
borrowed or built by Americans or Europeans, often with grain
confiscated from starving Soviet farmers.

The Falsehoods Became the Canon

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 With his best-selling book out, Josephson came back to America
to glowing reviews and massive sales. For example, historian Allan
Nevins called The Robber Barons a “tour de force” and the Virginia
Quarterly Review proclaimed it to be “required reading.” Even
more important to Josephson, his progressive vision of economic
history began infiltrating the writing of high school and college
texts. The term “robber barons” became the new label for
America’s leading entrepreneurs of the late 1800s—and beyond.
Historian Thomas Brewer, who in 1970 edited The Robber Barons:
Saints or Sinners? observed that the majority of writers “still
adhere to the ‘robber baron’ interpretation.” Historian David Shi
agrees: “For well over a generation, The Robber Barons remained
the standard work in its field.” For many textbook writers, it still is.
In the main study guide for the Advanced Placement U.S. history
exam for 2015, the writers say,

America [1877-1900] looked to have entered a period of

prosperity with a handful of families having amassed
unprecedented wealth, but the affluence of the few was built
on the poverty of many.

Having condemned American entrepreneurs and promoted more

government as the solution, Josephson began work on a sequel
called The Politicos, which described the politics of the Gilded Age.
Like his research for The Robber Barons, Josephson mainly did
quick reading of those secondary sources in sympathy with his
ideas. His book was hastily written and riddled with errors and
distortions. In fact, Josephson confessed to Charles Beard that “in
spite of all my precautions there might be a good many historical

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 inaccuracies in my book.” Beard retorted, “All works of history are
inaccurate,” and he urged Josephson to publish his book anyway,
which he did.

If Josephson’s research was so sloppy, and his interpretation so

biased, how did his Robber Baron view come to prevail in the
writing of U.S. history? First, Josephson published his book in 1934,
in the dark days of the Great Depression. Progressive historians
had begun to dominate the writing of history and they were eager
to blame a new generation of robber barons for the collapse of the
American economy. In doing so, these historians overlooked the
ruinous government interventions under Presidents Hoover and
Roosevelt that helped spark the Great Depression and cause it to
persist. Those harmful federal policies include the Federal
Reserve’s untimely raising of interest rates, making it harder to
borrow money; President Hoover’s blundering Farm Board; his
signing of the Smoot-Hawley Tariff, the highest in U.S. history; and
his disastrous Reconstruction Finance Corporation, which
dispensed massive corporate bailouts to political entrepreneurs.
Finally, Hoover muzzled investment by repealing the Mellon tax
cuts and promoting a huge tax hike. These various interventions
stifled market entrepreneurs and emboldened political
entrepreneurs. But historians have neglected that part of the story.

A second reason for Josephson’s triumph is that The Robber

Barons was embraced by key Marxist historians, who influenced
much of the historical profession after World War II. Richard
Hofstadter, for example, was a long-time professor at Columbia
University. He twice won the Pulitzer Prize, he wrote best-selling
history books, and he helped train a generation of prominent
historians. Yet Hofstadter had joined the Young Communist

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 League in college and later joined the Communist Party. “My
fundamental reason for joining [the Communist Party],” Hofstadter
said, “is that I don’t like capitalism and want to get rid of it.”
Although Hofstadter soon quit the Communist Party, he
maintained his hostility to capitalism and expressed it in Social
Darwinism in American Thought, in The Age of Reform, and in a
popular co-authored textbook, The United States: The History of a
Republic.

_____

(Editor’s Note: In the remainder of this chapter from the

newest edition of The Myth of the Robber Barons,, published by
Young America's Foundation, Dr. Folsom explores the
dubious contributions of other inWuential 20th-Century
historians including C. Vann Woodward, Thomas Bailey,
David Kennedy, and Lizabeth Cohen. You can order the
book here:

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