This illuminating new study of the history of American industry from 1840 to 1920 identifies two opposite types of businessmen. The first, says author Burton Folsom, was the “market entrepreneur, ” who relied on a free market for his success; the second was the “political entrepreneur,” who survived by means of special privileges and protection granted by the government. It was the first type, Folsom demonstrates, who was productive, Innovative and efficient, and who created the wealth that dramatically lifted the standard of living in that period; it was the second who was corrupt, parasitical and incompetent, and whose only accomplishment was to drain resources and to retard economic growth.
This book presents the stories of five famous names in industrial history— Vanderbilt, Hill, Scranton, Schwab and Rockefeller—and explains what made them so successful. It shows that these individuals prospered not only in the absence of any government assistance, but in spite of huge government subsidies showered upon their competition. Cornelius Vanderbilt, for example, began by operating a steamship line between New York and New Jersey, in defiance of a state- granted monopoly to Robert Fulton. (The flag of Vanderbilt’s ship read: “New Jersey Must Be Free.”) Vanderbilt was able to provide better and cheaper service, and eventually prevailed in the courts as well. James J. Hill disdained government aid as he built the Great Northern Railroad, while his competitors were scrambling to obtain subsidies and franchise protection from state legislatures. Yet Hill’s line was the most efficient and was the only transcontinental railroad that did not enter bankruptcy.
Folsom demonstrates the pernicious effects of government involvement in 25 business. He notes that substituting political for market considerations “Invariably rewards incompetence; If incompetence is rewarded, incompetence will be product; and when Incompetence is the product, politicians will insist that Increased planning and increased regulation is the appropriate remedy.” The major drawback of this book is the frequency with which the author expresses conservative views on capitalism. He suggests that certain economic Interventions by the state are beneficial? he stresses the entrepreneurs’ philanthropy as justification for their accumulation of money and he bestows moral praise upon Rockefeller not for his productive activities but for his religious convictions.
These, however, are Folsom’s errors, the enormous value of this book is that it enlightens the intelligent reader with the facts about an era that virtually every history book shrouds in falsehoods. Entrepreneurs vs. the State reveals the great accomplishments possible to men of unusual ability—if they remain free of government harnesses.