Source: Self made
The Lecture over The Myth of Robber Barons by Dr. Burt Folsom discusses the importance of entrepreneurs in developing the domestic economy of the United States from the mid-1800s to the early 1900s. In the lecture specifically he discusses how damaging subsidies and government intervention were to the natural development of the economy through organic competition. Once these subsidies were removed from the equation, and government intervention mostly reduced to a few tariffs, the economy of the United States was able to develop rapidly and greatly increase the United States world power. Closely examining the impact of the governments extensive intervention during this time period before eventually deciding to rely on entrepreneurs alone illustrates why the government should stay out of the economy.
As illustrated in the lecture, the government used subsidies and grants in an effort to try and stimulate the economy and foster competition. They figured that businesses would need extra financial incentives and funding in order to compete with high efficiency. This line of thought was flawed though, as natural competition would prove to be sufficient. Additionally, they failed to recognize the value in providing subsidies to the entrepreneurs who could accomplish the job for the least cost. As described in the lecture, the government provided Collins with millions in subsidies over multiple years despite him repeatedly being less efficient and less successful than Vanderbilt, who had offered to do the same job for half of the price Collins was asking. This was not the only failure of subsidies either, as in reality, subsidies and grants just provided loopholes and methods of exploitation for businesses to get extra funds from the government. Dr. Folsom uses the example of Union Pacific Railroad company and Central Pacific Railroad company, who both exploited the per-mile subsidies provided to them by the government to get more money while providing a worse infrastructure, simply aiming to make the longest tracks they could without worrying about how efficient or even how useable the railroads would be. This is the core problem of government intervention, it props up failures and allows for schemers to net extra money from tax payers by abusing faults and loopholes in the stipulations of the subsidies. If a competitor cannot naturally compete, then they should not be given extra funding in the effort of promoting competition. There is some underlying reason that prevents them from being able to compete, and generally speaking no amount of funding will make it so they can compete more effectively than their competitors who are causing them to need to be propped up by the government. If a competitor has an advantage, then there is a reason for that advantage which in turn results in a benefit for the consumer as this advantage either results in a better product, a reduced price, or both.
When the government stopped intervening so heavily, the better entrepreneurs were able to naturally push the United States economy into a new age. With men like Rockefeller and Carnegie at the helm being allowed to grow their businesses in a more free economy, the United States economy boomed. Dr. Folsom points out that because of Rockefeller, the price of gas was eight cents a gallon. However, it is also worth pointing out that Rockefeller paid his workers an exceptionally good wage as well. He was able to do this because he had captured so much of the American oil industry, and higher wages encouraged workers to come work for him rather than his competitors, while lower prices drew consumers away from his competitors. This is evidence of how the less restrained a capitalist economy is, the more beneficial it is for all parties. The natural order of capitalism is to profit, and the only way to profit without government intervention is by innovating to be better than the competition. This can only serve to further development of an industry, and the economy at large, all while providing a better product to the consumers.
As stated earlier, this half century period of United States history is a perfect showcase of why government intervention only serves to stifle the economy. Collins cost the government millions of dollars trying to compete with Vanderbilt, only to go bankrupt once he stopped receiving funding. Union and Central pacific both exploited the governments subsidies to provide a worse product and at a higher cost. Then, finally when the government realized that these subsidies did not seem to be working out and they allowed entrepreneurs to compete under more natural conditions, the economy flourished. Given all this, it is plain to see why the government should stay out of the economy.