Another Age of Robber Barons
Robber barons thrive again, leveraging wealth and government influence to dominate markets and politics. Democracy demands action against these excesses to prevent another Great Depression.
By Jeremi Suri
Democracy cannot survive excess. The founders of the United States understood this. Although they were mostly wealthy landholders, often with slaves, they disdained European aristocrats' opulent lifestyles and peasants' penury. The American ideal was a man like George Washington who became rich as a farmer and a land speculator but continued to work and learn for his own benefit, and the benefit of the community that he relied upon. Wealth in a democracy, the founders believed, should encourage social improvement, not the decadence and self-centeredness displayed by kings and barons abroad. Modest comfort anchored people to community, Thomas Jefferson and James Madison both believed. Excessive wealth encouraged individual aggrandizement and tyranny. Those with too much would not feel a need to share government with others, the founders feared.
The Civil War marked the final death of the founder’s democracy. The Union victory and the end of slavery opened unmatched opportunities for wealth creation among a class of non-farmers from the North. Cornelius Vanderbilt, Andrew Carnegie, and John Davison Rockefeller – their names still adorn major institutions – used new technologies and ruthless business practices to create powerful industries and enormous fortunes. Vanderbilt dominated steamship and then train travel, Carnegie controlled steel production, and Rockefeller owned or managed most of the nation’s oil. These men (and others) built the transportation networks, factories, and skyscrapers that made the United States a leading nation in the world. They made themselves the unelected leaders of that nation.
There were few things their money could not buy, and they paid virtually no taxes. (The United States did not have an income tax until 1913.) Vanderbilt, Carnegie, and Rockefeller were generous benefactors of public museums, libraries, and schools, but they also used their wealth to buy compliant politicians. When workers at their factories went on strike, these men consistently relied on state and federal forces to put down unrest, often violently, and return workers to their jobs. When small companies tried to compete with them, they turned to judges and other government officials to undermine that competition and then take it over. These men built business empires with federal subsidies and then worked with the government to rewrite laws to favor their empires – modern American corporate law. “Corporate citizenship” gave their businesses more protections, against liability for harm for instance, than the protections accorded many human citizens. And when foreign businesses tried to compete with the biggest American corporations, they supported tariffs to shield their products and protect their monopolies.
Critics called these nineteenth-century titans “robber barons.” They were skilled businessmen who did more than make superior products for sale and profit in a capitalist economy. They were “robbers” because they used their market dominance to steal legally from anyone who tried to challenge them. They were “barons” because they had attained positions of aristocrat-like influence well beyond their businesses, particularly in government. Federal, state, and municipal authorities served the robber barons more than anyone else.
The biggest myth in American history is that business leaders want less government. Absolutely false. Business leaders always seek more government help for their activities when possible; less for everyone else. The federal government, for example, gave the railroads their land and bought much of the steel and oil. Then courts protected those businesses from legal action. Congress passed tariffs to ensure their dominance.
Two developments brought the first age of robber barons to an end. First, citizens who felt they had lost control of their democracy organized first in cities, then states, and then nationally to limit the power of the super-rich. Anti-trust laws that constrained corporate consolidation and anti-collusion laws that promoted competition within industries passed state legislatures and Congress. Many states adopted minimum wage laws and labor union protections that eventually passed Congress as well. “Progressives,” as they called themselves in the early twentieth century, championed these and other measures to protect democracy from concentrated greed. The Supreme Court initially sided with the robber barons, but it too faced public pressure and eventually conceded to the constitutionality of many of these measures. In 1913 the country ratified the Sixteenth Amendment to the Constitution that finally created an income tax, intended only for the wealthiest individuals and corporations at the time.
Second, the Great Depression destroyed the robber barons. The United States experienced a series of economic downturns throughout the late nineteenth and early twentieth centuries, but the near complete collapse of the American economy after 1929 motivated the largest redistribution of wealth in the country’s history since the Civil War. The massive loss of invested capital combined with new laws taxing wealth to pay for transfers to the poor leveled down even the richest families. The New Deal gave control over government largely to technical advisers and politicians who ran programs that helped communities get back on their feet and then prepared the country for war. After 1945, the regulatory institutions of the New Deal that managed investments (the Securities and Exchange Commission), workers’ rights (the National Labor Relations Board), corporate power (the Federal Trade Commission), and other programs became mainstays of an American society that was still unequal, but unfriendly to robber barons.
There are many legitimate concerns about how federal regulatory powers from the New Deal have expanded too far and become too constraining on businesses in the twenty-first century. The call to “blow up” the regulatory state, however, is not a thoughtful desire for reform, but a demand to unleash robber barons again. They are the main people pushing it: Elon Musk, Peter Thiel, David Sacks, and Joe Lonsdale, among others. These are very smart men who – like Vanderbilt, Carnegie, and Rockefeller – have used new technologies and ruthless business practices to establish enormous fortunes. They have relied heavily on government subsidies and contracts. Musk’s Space X, for example, has received almost $20 billion from NASA. Lonsdale’s Palantir does much of its multi-billion dollar business with federal agencies, especially the Department of Defense.
The contemporary robber barons have cozied up to both political parties in the last decade, but most recently they have used Donald Trump as a vehicle to pursue their interests. They financed his most recent campaign, they attacked his adversaries, and they exploited their access to Trump to promote people and policies that will benefit them most of all. They want to eliminate federal regulatory powers as the government continues to spend heavily on them, defends their corporations in court, and levies tariffs against their competitors. None of these moves will help consumers or address inequality; all of these moves will increase the wealth and influence of the robber barons.
Sometimes politics is simple: the super-wealthy promote their own wealth and power. The excesses that have allowed robber barons to emerge are clearly weakening our democracy. Robber barons will surely continue to attack institutions that constrain them and turn the government to their selfish interests. We can, however, expect that those actions will encourage citizens to oppose them and support candidates who will reign in their excesses with policies that redistribute wealth to those left behind. That is the natural agenda for the Democratic Party moving forward.
We must hope that people will mobilize around an anti-robber baron agenda before a repeat of the worst economic suffering from the Great Depression. Just as democracy cannot survive excess, neither can capitalism.
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Jeremi Suri holds the Mack Brown Distinguished Chair for Leadership in Global Affairs at the University of Texas at Austin. He is a professor in the University's Department of History and the LBJ School of Public Affairs. Professor Suri is the author and editor of eleven books on politics and foreign policy, most recently: Civil War By Other Means: America’s Long and Unfinished Fight for Democracy. His other books include: The Impossible Presidency: The Rise and Fall of America’s Highest Office; Liberty’s Surest Guardian: American Nation-Building from the Founders to Obama; Henry Kissinger and the American Century; and Power and Protest: Global Revolution and the Rise of Détente. His writings appear in the New York Times, Washington Post, Wall Street Journal, CNN.com, Atlantic, Newsweek, Time, Wired, Foreign Affairs, Foreign Policy, and other media. Professor Suri is a popular public lecturer and comments frequently on radio and television news. His writing and teaching have received numerous prizes, including the President’s Associates Teaching Excellence Award from the University of Texas and the Pro Bene Meritis Award for Contributions to the Liberal Arts. Professor Suri hosts a weekly podcast, “This is Democracy.”
A brilliant glimpse at the coming new age of ascendant robber barons. Well done.