Tycoons or Robber Barons

The big business boom in the United States in early 1900s was seen by many as a bane and others as a blessing. Those who labeled it a disease were also those who called the owners of big businesses "robber barons" and those who felt the opposite called them "tycoons." John Tipple was with the robber barons label and he justified his position in these words:

Who were the originators of the Robber Baron concept? Not the injured, the poor, the faddists, the jealous or dispossessed elite. Rather, it was a frustrated group of observers led at last by protracted years of harsh depression to believe that the American dream of abundant prosperity for all was a hopeless myth."(p. 510)

So who thinks they were tycoons. For one, they themselves thought they were doing the world a great service and hence should not be criticized.

John D. Rockefeller, Jr., explained to young gentlemen of the YMCA: "The growth of a large business is merely a survival of the fittest.... The American Beauty rose can be produced in the splendor and fragrance which bring cheer to its beholder only by sacrificing the early buds which grow up around it. This is not an evil tendency in business. It is merely the working-out of a law of nature and a law of God."

Let us decide what they were in the light of economic and political history.

The social sanctions under which businessmen operated changed nearly as much during the nineteenth century as businessmen themselves. At the outset of this period, the variety of political and social functions performed by merchants and their unquestioned status allowed them to assume the role of trustees for society at large. The social value of the entrepreneurial function and the ethical standards with which it was carried on were subjected to no hostile investigation or criticism. The profit motive was accepted as a necessary and even laudable manifestation of human nature. The uses to which a businessman put his property were considered to be his affair alone, and the more property he accumulated, the more he enhanced his reputation for astuteness. He was required only to adhere to commonly accepted standards of honesty and morality; but even here such sanctions applied much more to his dealings with business associates and correspondents than to his dealings with government.

But as the century advanced, the sanctions operating upon businessmen became more restrictive. With the adoption of democratic reforms in state government, the old landed and mercantile aristocracy lost much of its power and in governmental positions was compelled increasingly to act as the people's agent rather than a trustee of their interests. Certain types of business activity were subjected to increasingly harsh criticisms. Absentee land grabbers and the beneficiaries of lucrative corporate charters purchased from complaisant legislatures found themselves denounced as monopolists, and opprobrium was heaped upon wildcat bankers and financial intermediaries such as billbrokers -- particularly if they went bankrupt. Actually, the criticism of land speculators, bankers, and brokers marks the beginning of the attacks upon business in the United States which have persisted to the present day. Yet the businessman's role was not otherwise submitted to much scrutiny, and he was judged largely in accordance with his personal qualities.

The accumulation of the first great fortunes, coinciding with the humanitarian reform movement of the antebellum period, helped to plant the idea that the possession of great wealth carried with it commensurate social responsibilities. Although this concept was not to become generally accepted until a much later date, it probably intensified post-mortem criticism of John Jacob Astor, who died in 1848 without leaving a significant amount of his fortune for public purposes. The Whig aristocrat, Philip Hone, labeled Astor "a self-invented money-making machine," and others went beyond personal criticism to challenge the close relationship of wealth and virtue and the parallelism of private wealth and public gain so often assumed in the past. The acidulous James Gordon Bennett anticipated Henry George's denunciation of unearned increment by asserting that at least one-half of Astor's fortune belonged to the people of New York, whose labors had raised the value of his vast real estate holdings.

The progress from "self-invented money-making machine" to "robber baron" was accomplished in the two decades after the Civil War during the rise of big business, and critics now concentrated their attacks on the manner in which great wealth was being made. The phrase, "robber baron" was apparently first applied to Commodore Vanderbilt about 1857. The implication was that businessmen of great wealth, particularly those who had effected combinations, performed no creative role but instead, like the Raubritter of the Middle Ages, preyed upon commerce and levied a heavy toll on farmers, industrial workers, consumers, and government. Actually the robber barons were to some extent at least a scapegoat for the periodic dislocation and distress caused by a rapidly growing but uncontrolled economy. It is almost axiomatic in history that the loudest complaints against existing conditions come not from the totally deprived but from groups whose situation is improving, yet not fast enough to keep pace with rapidly mounting expectations. Gross national product rose from $9.11 billion to $37.1 billion between 1869 and 1901, and per capita income tripled during the period, yet this groundswell of prosperity was much less palpable than the two major panics followed by prolonged depressions which took place between 1865 and 1914. When exaggerated expectations failed to materialize, according to John Tipple, thousands of Americans "then succumbed to their own delusions. Having identified myth as reality, they concluded that the whole structure of American political economy was breaking down, and they joined in an angry search for the wrecker." (P. 511)

Yet the high decibel volume of the criticism, and the harsh stridency with which it was uttered, gave an exaggerated notion of the number of individuals participating in the chorus. Actually, farmers and their organizations such as the Populist party and the Granges called the tune, and articulate, self-appointed reformers from the middle- and upper-classes drew the indictment. The image of the robber baron was kept in focus by such writers, economists, and politicians as Henry George, William J. Ghent, Robert LaFollette, Thomas Lawson, Henry D. Lloyd, Gustavus Myers, Charles E. Russell, Theodore Roosevelt, Ida Tarbell, Thorstein Veblen, and Lincoln Steffens. The muckrakers among them labored to uncover corrupt connections between business and politics.

Certainly the legislative investigations of the eighties and nineties revealed much reprehensible conduct on the part of many businessmen, but creators of the robber baron stereotype distorted the record by treating unproved charges as fact, by employing inferences to establish intention, and by ignoring degrees of culpability. Also, critics often based their judgments on ethical standards much more rigorous than those contained in the operating code of business at the time, and condemned big businessmen for actions relatively unnoticed when perpetrated by lesser brethren of the business world. Perhaps the most misleading aspect of the robber baron concept was the inference that economic growth was an autonomous, evolutionary process which was thrown out of joint by the operations of big businessmen seeking to manipulate it for their own advantage -- a concept exactly the reverse of Schumpeter's theory of economic growth. Certainly some big businessmen were mere parasites -- Jay Gould is a good example -- but others, while not guiltless of sharp practice, were creative builders whose financial rewards, large as these might be, were much smaller than the benefits they conferred upon the economy. But condemnation and not evaluation was the objective of most critics, and ironically, these men were indirectly aided by their victims. Businessmen under attack proved less resourceful in defending their reputations than their business interests. Anxious to maintain the privacy of their operations, they made only sporadic and usually ineffective attempts at rebuttal. Sometimes they covertly subsidized newspaper and magazine accounts giving their side of the story, and sometimes well-known champions like S.C.T. Dodd, general counsel for Standard Oil, published impressive defenses of their conduct. Down to the present day, however, this literature has never been given the attention it deserves, and has been shouldered out of history textbooks by the more flamboyant work of the critics.

Business leaders were particularly alarmed by the demands for governmental controls which often accompanied the condemnations of robber barons and the revelations of unfair competitive practices. Viewing themselves as the creators of national wealth and the engineers of progress, they resented being blamed for the sometimes harsh operation of what they considered to be natural laws over which they had no control. Periodic panics and depressions were as distressing to businessmen as to workers and farmers, but these setbacks represented merely the price of progress. Business spokesmen insisted that government intervention would at best be fruitless, since no human agency could over an extended period alter the natural laws of economics, and at worst it would bring the delicate machinery which created wealth to a stop and frustrate…