The Civil War marks a deep cleavage in American life; the increasingly industrialized America of the latter decades of the 19th century was quite different from pre-Civil War America. The economy of the first part of the last century did of course engage in some manufacturing, but the businessman of the period was typically a merchant and a trader rather than a factory owner or mine operator. Men of ambition made money shipping lumber to China and returning with tea, opium, mandarin screens, and the like. American whalers plied their arduous trade all over the world. The Yankee clipper, sailing out of eastern ports from Baltimore to Salem, was the most beautiful thing afloat, and the swiftest vessel on the seven seas till after the Civil War.
Most Americans, during this period, lived in villages and small towns; farming was the major occupation, and rural life was a struggle for survival. Poverty was widespread, giving rise to the old New England maxim: Use it up, wear it out, make it do, or do without. Herman Melville’s great novel, Moby Dick, tells how dirty and dangerous life was on board a whaling ship. Imagine then, if you will, what it was like trying to wrest a living out of the rocky soil of New England if life aboard a whaler was the preferred alternative!
No one would refer to the early decades of the last century as “The Era of Free Enterprise Individualism.” It is the post-Civil War period that is usually labeled so. “Free Enterprise” and “Individualism” are two very slippery terms. In any event, the decades under evaluation here are bounded, on the one side, by the Presidency of Ulysses S. Grant, and on the other, by William McKinley; roughly from 1869 to 1901. This was America’s Gilded Age, so labeled by Mark Twain in his novel of that name. The Gilded Age expressed Mark Twain’s disillusionment over the decline in his nation from the decent, old, kindly America he remembered from his boyhood to the America of Black Friday, Credit Mobilier, Boss Tweed, Tammany, and the hustle for the fast buck.
The Changing Scene
Mark Twain, in collaboration with his neighbor, Charles Dudley Warner—called “Deadly Warning” by his friends—published The Gilded Age in 1873. The theme of this novel is announced in the Preface: “In a State where there is no fever of speculation, no inflamed desire for sudden wealth, where the poor are all simple-minded and contented, and the rich are all honest and generous, where society is in a condition of primitive purity, and politics is the occupation of only the capable and the patriotic, there are necessarily no materials for such a history as we have constructed.” But we no longer have people of this character, Mark Twain is telling us; corruption has eaten so deeply into the hearts and minds of people that he and Warner have ample material for the 453-page fictionalized history he and his friend have constructed.
In chapter 18 the authors venture a conjecture as to how this mutation in the American character had come about: “The eight years in America from 1860 to 1868 had uprooted institutions that were centuries old, changed the politics of a people, transformed the social life of half the country, and wrought so profoundly upon the entire national character that the influence cannot be measured short of two or three generations.” The Gadarene progress was more rapid than Mark Twain had anticipated; it worked itself out close to the bitter end before he died thirty- seven years later.
Twain’s satire was merely a prologue; the play followed, and the main characters are all well- known names. There was Commodore Vanderbilt (who conferred that naval distinction on himself because he ran a ferryboat between Staten Island and the Battery); and Jay Gould, who built himself a mansion just up the road from the property which now houses The Foundation for Economic Education. There was Daniel Drew, and Jim Fisk, and Andrew Carnegie; there was Huntington, Stanford, Harriman, Rockefeller and Morgan. I’ve listed here ten names; add ten more if you wish, or a thousand more. The point is that these “robber barons,” as they’ve been called, were a mere handful of men whose deeds and misdeeds have been lovingly chronicled by three generations of journalists and muckrakers.
Conniving with Politicians
These extravagant characters have been represented as exemplars of unrestrained individualism at its worst, fiercely competitive, practitioners of undiluted laissez faire capitalism. They were nothing of the sort. So far were they from wanting a genuinely free market economy that they bought up senators and paid off judges in order to stifle competition. They did not want a government that would let them alone; they wanted a government they could use. Had they been able to understand the original idea of laissez faire they would have opposed it. They were- not individualists; they did not believe in a fair field and no favor; they stacked the odds against their competitors.
The last thing Vanderbilt, Gould, Carnegie and the others wanted was open competition in a game where the best man wins. To the contrary! They connived with politicians to obtain advantages for themselves by controlling government and the law; they manipulated the public power for private gain. And the government was eager to oblige.
This was done openly, and virtually everyone knew about it. Witty commentators referred to certain politicians as the Senator from coal, or the Senator from railroads, or the Senator from steel. Observing the situation in Pennsylvania, one critic was led to remark that Standard Oil had done everything with the legislature—except refine it! Such political practices were a far cry from the vision of James Madison, who had declared that “Justice is the end of government, and justice is the end of civil society.” The Gilded Age was a throwback to the age-old practice of using political power for the economic advantage of those who hold office, and for their friends.
If you want the story of these men and their times, a good place to start is Gustavus Myers’ History of the Great American Fortunes. First published in 1907, this book went through several editions here and in England. It was published in a large inexpensive edition in 1936 as a Modern Library Giant. I bought my secondhand copy in 1953; the original purchaser bought his in 1939 and it contains a gracious inscription by Myers himself: “May you be included in my next- supplement to this tome.”
Myers tells the reader that he was just a reformer when he began his research, eager to reveal the unsavory tactics of rapacious men in business and industry in the absence of government supervision of economic life. Only later did he conclude that a radical restructuring of society—some form of socialism—was the only answer. The conclusion is a strange one. Myers demonstrates throughout his book that such powers as government exercised in this nation during the Gilded Age were misused so as to wrongfully give monetary advantage to some at the expense of others. If this government with a little power did harm, there is no reason at all to assume that a new government wielding a lot of power will do good!
I have gone through Myers’ book and underlined every passage which describes a sinister alliance between politicians and these fortune hunters; there are some hundred and fifty such passages. Let me offer you a representative sample.
. . . peculiar special privileges, worth millions of dollars.
. . . as a free gift from government.
. . . the free use of the people’s money, through the power of government.
. . . a notorious violator of the law, invoking the aid of the law to enrich himself still further.
. . . causing public money to be turned over to his private treasury.
By either the tacit permission or connivance of government.
The simple mandate of law was sufficient authorization for them to prey upon the whole world outside their charmed circles.
. . . while it was essential to control law-making bodies, it was imperative to have as their auxiliary the bodies that interpreted the law. [That is, the courts.]
I think you catch the flavor of Mr. Myers’ book. He is a moralist; he is indignant; he preaches a hell-fire and brimstone sermon against the wicked men who took advantage of their fellow Americans by subverting the law from its proper role of administering an evenhanded justice between person and person. They bent the law into an instrument of plunder. But Myers is not a philosopher; he does not shape his material according to a coherent theory of the economic and political orders.
Gaudy tales about these few unprincipled buccaneers distract our attention away from the millions of Americans on the farm and in the workshops. These hard working people constituted the real American economy during the Gilded Age. This bustling, surging economy of ours received immigrants from Europe at a rate of about a million a year, and it absorbed them on our farms and in other places of work. The standard of living was rising all the while; wages doubled between 1870 and 1900.
It was an age of invention. During the eighty years from 1790 to 1870, the U.S. Patent Office had granted just over 40,000 patents; during the next thirty years it granted just over 400,000. New types of farm machinery transformed agriculture. To cite one instance: not one bushel of wheat had been raised in the Dakota Territory before 1881; by 1887 its wheat crop was sixty-two million bushels. In 1870 there was nothing that could be called an American steel industry; by 1900 we were producing more than ten million tons of steel annually—more than all the rest of the world combined.
The economic opportunity in America attracted millions of foreigners to these shores during these decades. These men, women and children did not uproot themselves from Europe, leaving family and friends, then undertake an uncomfortable ocean voyage, in order to be exploited; they came here because they could, by their own efforts, forge a better life for themselves in the freest economy the world had yet known.
An Economy of Opportunity
The economy was not wholly free, else there would not have been a single robber baron. But the fact that certain sharp operators piled up large fortunes by means of legally sanctioned thievery means that there was already wealth here to be stolen. The wealth they filched from the taxpayers was created by millions of industrious Americans laboring under conditions that approximated the free market. Compared to working conditions in Europe, we had an economy of opportunity. Thirty million immigrants told us so by coming to these shores, where they found a better and freer life for themselves and their descendants.
Let me retrace our steps to the place where I alleged that Gustavus Myers was long on indignation, but somewhat short on theory. He tells the sordid tale of a gang of private citizens in cahoots with government to operate a scam against the public. His fortune hunters are supposed to represent “free enterprise,” but in reality, the robber barons are to the market economy what Jesse James and the Dalton brothers were to the hardy homesteaders who settled the western territories. In other words, they were more predators than producers.
We need to come to some understanding of the political order appropriate to a society of free people. By the same token, we need to know how the free economy operates, and the role of the businessman within a market economy.
Politically, I call myself an old-fashioned Whig. I’m a believer in equal justice under the law, and something of a Jeffersonian, so let me quote a few lines from Jefferson’s First Inaugural Address describing the society he strove for: “Equal and exact justice to all men; of whatever state or persuasion, religious or political; peace, commerce, and honest friendships with all nations,—entangling alliances with none . . . freedom of religion; freedom of the press; freedom of person under the protection of the habeas corpus.”
Later in the same Address Jefferson praised “. . . a wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.”
The function of government, in the Jeffersonian scheme, is to secure the God-given rights of all persons, to deter and redress injury, and otherwise let people alone.
The American Constitution is more explicit in what it forbids government to do than in what it authorizes government to do; the words “no” and “not” in restraint of governmental power occur forty-five times in the first seven Articles and the Bill of Rights. Limiting the scope and power of government maximizes individual liberty and gives us a society of free people. Government, in a free society, has no power to confer economic advantage on some at the expense of others, which eliminates “robber barons,” be they individuals or groups, rich or poor. The government of a free people does not misuse its power to tax by taking wealth from those whose labor produced it and allocating it to the pressure groups who possess political influence.
Limited government under the Rule of Law maintains an evenhanded justice; it keeps the peace of the community by curbing those who break the peace. It lets people alone, and it punishes any individual who refuses to let other people alone.
A free government is distinguished from other forms of government by the use it makes of the law; it employs lawful force against criminals in order that peaceful people may go about their business. This is force used in self defense. Every other political system uses legal violence against peaceful people—for any sort of reason the users of violence may conjure up. This is the aggressive use of force. The distinction is between law and tyranny, as the Greeks put it. “Let no man live uncurbed by law; nor curbed by tyranny,” said the playwright Aeschylus.
Given the law order of a free society, the economic activities of men and women, as they go about the business of earning a livelihood, is necessarily free market and voluntary.
Consumer Sovereignty and the Free Society
In a genuinely free society, a laissez faire society in the early sense of this much abused phrase, the businessman is a mandatory of consumers; the customer is boss. Consumer sovereignty! Is this the way the businessman likes it? Of course not. Our businessman would like to think of himself as the man in charge, a captain of industry running a tight ship. But who’s he kidding? He doesn’t even have the power to set wages and prices. His competition, his employees, and his customers make those decisions for him. If he tries to lower wages he will lose his best workers to his competitors who pay the going rate or more. If he tries to raise prices, people buy elsewhere. He’s stymied, and that’s why he’s tempted on occasion to persuade some politician to bend the rules in his favor, just enough to give him what a friend of mine called, ironically, a “fair advantage.”
But when a businessman yields to this temptation he forfeits his standing as a businessman and becomes something else—a branch of the government bureaucracy. He has left the economic order, and is now part of the State. As a businessman he had no power over anyone; as a part of the State he shares, with government, the power to tax. People now have to pay for his products whether they buy them or not.
Was there “free enterprise” during the Gilded Age? Yes, there was—but not much of it on the part of the “robber barons” who were in cahoots with government. Was there “individualism” during the period? Well, there was individuality, but the kind of individualism which means equal freedom for every person to pursue his private goals was not a guiding policy.
But who are we, as we go stumbling down the road to serfdom, to cast the first stone?