Monday, September 25, 2006
The Mises Institute has posted a great article about the "robber baron" era of American history, often cited by opponents of the market as an example of why capitalism is bad and government can be good by controlling its ill effects. The article (an excerpt from How Capitalism Saved America) makes an important distinction right from the outset:
As common as it is to speak of "robber barons," most who use that term are confused about the role of capitalism in the American economy and fail to make an important distinction — the distinction between what might be called a market entrepreneur and a political entrepreneur. A pure market entrepreneur, or capitalist, succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, direct or indirect. The key to his success as a capitalist is his ability to please the consumer, for in a capitalist society the consumer ultimately calls the economic shots. By contrast, a political entrepreneur succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors.
In some cases, of course, the entrepreneurs commonly labeled "robber barons" did indeed profit by exploiting American customers, but these were not market entrepreneurs. For example, Leland Stanford, a former governor and US senator from California, used his political connections to have the state pass laws prohibiting competition for his Central Pacific railroad, and he and his business partners profited from this monopoly scheme. Unfortunately, the resentment that this naturally generated among the public was unfairly directed at other entrepreneurs who succeeded in the railroad industry without political interference that tilted the playing field in their direction. Thanks to historians who fail to (or refuse to) make this crucial distinction, many Americans [and non-Americans -- Tom] have an inaccurate view of American capitalism.
The fact that I seem to be unable to get others to understand this distinction (and others like it) largely explains why I've essentially given up discussing economics anywhere except here at this site. I spend so much time trying to get others to understand some basic concepts and definitions that my point is lost in the crossfire. I'm tired of having conversations where the parties spend all their time talking past one another, and as a result am having fewer conversations. Apparently, the price of sanity is loneliness.
Posted by Tom, 9/25/2006 6:18:55 AM (Permalink). 0 Comments. Leave a comment...