In his speech, Burt Folsom recounts U.S. history to paint a more truthful story about "Robber Barons" and the Gilded Age. In his speech, Folsom gives example after example of how the robber barons took advantage of government subsidiaries with the promise of pushing industrialism and boosting the economy to match Great Britain's at the time.
The Truth
To establish how this lucrative subsidiary cycle was created, Folsom starts at the beginning of the U.S. The constitution was created to limit the size of the government and provide a free market that incentivizes entrepreneurs. However, the U.S. seemed to be stagnant in economic growth, while Britain began their industrial revolution. This is where people began to question if entrepreneurs could really stimulate the market naturally or if government intervention was needed.
It was Edward Collins who asked the government for 385,000 dollars annually as start ups/investment (in the form of a subsidy) towards a steamship company with the promise of economic growth and development for the U.S. Some called to question how constitutional this proposal was. So, Collins found a loop hole, in which the government can fund the postal services. With this loop hole, the steam ships became as a "mail carrier" and it deemed the business to be constitutional.
This was the beginning of the dangerous cycle of demanding more and more subsidiaries for his business. With this, Vanderbilt entered the picture promising to do the work for half of what Collins was asking for. Congress was somewhat skeptical of Vanderbilt and continued to give Collins what he asked for. Time and time again, loss after loss, Collins requested more and more money to remain competitive in the market. It was finally after selling his million dollar ship for 10,000 dollars, Collins demanded 990,000 dollars to build a new ship that Congress denied his request and let the Collins Line die.
Lesson Learned?
In the midst of the ridiculous subsidiaries arose Vanderbilt and his cheaper, more effective and competitive businesses without the help of Congress. Folsom described Vanderbilt as a market entrepreneur who helped develop and improve the economy. Whereas, the Collins Line was an example of a subsidiary entrepreneur who proved the ineffectiveness of government in the free market. However, this cautionary tale was not enough to keep the U.S. from making the same mistake again later on in WW2. With the hopes of building a transcontinental railroad, Congress gave two companies subsidies with the hopes that they would compete against each other.
Instead of competing against each other, the companies began to find lucrative ways to milk the subsidies. From building on ice so that they have to rebuild later on, to building curving railroads to take up more mileage, and blowing up competing railroad tracks, these companies were ineffective in what they were established to do.
Market Entrepreneurs
Following in the footsteps of Vanderbilt, James J. Hill built and funded his own transcontinental railroad, that was more effective and actually went across the mountains. He accepted no subsidies and was the only transcontinental railroad to not go broke in the 1800s. After this, Congress was determined to stop giving out subsidiaries and start relying on entrepreneur and the free market. From here Rockefeller, Carnegie and others rose up and drove the economic growth that was needed for the U.S. to move up in the world leadership.
My Insight
This speech from Burt Folsom provided much insight to Robber Barons that was not explained in my education. Looking back on things, it is always so much easier to see why something was not working than it is to recognize it in the moment. So, I can not say that I would have been smarter than Congress at the time but I can say I would not given the Collins Line so many tries. Especially, when other options (Vanderbilt) were so easily accessible and ready.
Economic growth flourishes in the absence of a strong hand and it is hard for governments to accept that. Hence, why the U.S. was able to flourish and grow so quickly once Congress accepted the value of competition and entrepreneurs in the market. Our government went wrong with assuming that there needed to be incentive or help with achieving these great goals. These great feats in the American history were lucrative in themselves and much better when left to compete in the free market. I actually laughed out loud to hear that the competing railroad companies began to blow up each others railroads so that they could try to gain more subsidies than the other.
Overall, I found Burt Folsom's speech to be very lighthearted in tone but purvey an important story that showcases why our country is great and continues to be a world leader. Providing help/subsidiaries/etc. to this large businesses do not create a healthy market but create dangerous entrepreneurs who are likely to abuse their power. Entrepreneurs want to make money, so why would they finish a job if the government would continue to pay more the longer they take to finish?
Foundation for Economic Freedom.(2011). The Myth of the Robber Barons with Burt Folsom. YouTube. Retrieved April 12, 2023, from 