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‘Robber Barons’ Did Not Rob Anyone

Trevor Klein

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Amazon is driving niche retailers like Toys “R” Us, Sports Authority, and Brookstone out of business. Some have even branded CEO Jeff Bezos as a ruthless profit-seeker, with the Washington Post describing him as a modern day “robber baron.” According to Forbes, Bezos has a net worth of $154.8 Billion, making him the richest man in the world by nearly $60 Billion as of Aug 10.

In the American Industrial Revolution of the 19th Century, John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, J.P. Morgan, and other businessmen led America to prosperity through industrialization. Because of their unmatched prowess in their respective industries, the businessmen amassed expansive fortunes, leading to a general feeling of resentment towards them.

The general public came to know these men as “robber barons,” meaning that they unjustly acquired their money by “taking” from society. But, these men did not take anything unfairly; rather, they earned their money by improving others’ lives.

For example, John D. Rockefeller created his wealth by inventing a cheap process of extracting kerosene from a crude oil. Before kerosene was widely used, most people had to go to sleep at sundown because of the lack of artificial light.  By providing cheap kerosene, Rockefeller provided average Americans with the first practical method of lighting their homes, which gave them extra hours of their lives every day. 

Rockefeller did not force anyone to buy his kerosene; people chose to buy it because they wanted to be able to stay up past sundown.

Rockefeller, the owner of Standard Oil, was arguably the most infamous of all the “robber barons” for his policy of horizontal integration. That meant that Rockefeller specialized in solely refining crude oil, primarily into kerosene, rather than controlling the entire production process from drilling for oil to delivery of the final product.

Most importantly, under horizontal integration, Rockefeller took control of small refineries all across the country since the small refiners knew Rockefeller would drive them out of business due to his due to his high volume and superior economies of scale.

Many people claim that taking over the small refineries was immoral of Rockefeller, but Rockefeller actually did a favor for the local refiner and for Standard Oil. Rockefeller could have built his own refineries all over the country, retained all the profits, and driven small refineries out of business in the process. This would have been very expensive and time-consuming, so Rockefeller chose to keep small refineries in business in order to aid Standard Oil’s growth.

Thus, Rockefeller’s empire should be described as innovative, efficient, and generous towards the small refineries.

The Industrial Revolution itself immensely improved the lives of Americans. Economic progress has increased human life expectancy from about 30 years in the mid-eighteenth century to about 75 years today, according to prominent economist George Reisman.  

J.P. Morgan also faces criticism because of his success as a financier. To this day many Americans view finance as a largely useless profession in which greed harms the common man.

In the 1987 Oscar-winning blockbuster Wall Street, the infamous fictional financier Gordon Gekko says, “I do stock and real estate speculation. I create nothing. I own.” Just like Gekko himself, this statement is fictional because the financial industry is vital in a robust economy.  

Barack Obama made a similar error when in a Bloomberg Businessweek interview, he said, “Too many potential physicists and engineers spend their careers shifting money around in the financial sector, instead of applying their talents to innovating in the real economy.”

Every time Morgan invested in a new businessman or product he took on the risk of losing money and his reputation as a prudent investor. Morgan was rich because he financed successful companies far more often than he did failing ones. It takes talent to find entrepreneurs who will ultimately be successful.

Financiers direct the savings of millions of people into the most productive, profitable industries leading to a more efficient economy. This does a service to the individuals, who invested their savings and to society as a whole.

Critics called Morgan the “Octopus” because his business was a part of so many different industries that it was like he had his tentacles wrapped around everyone.

Morgan actually provided an invaluable service to the economy. For example, when Thomas Edison first invented the light bulb and developed the power system to electrify homes on a widespread basis, most people thought his idea was crazy and impractical. Edison proved to be a great success, but he would not have been able to do so without Morgan’s funding.

Morgan’s help enabled Edison to pursue more inventions including movies, radios, and the phonograph. Without finance, many world-changing inventions would not be possible and thus would not reach consumers. Contrary to Obama’s claim, finance can be innovative just as scientifically-oriented businesses can.

Carnegie and Vanderbilt gained their fortunes through the steel and transportation industries respectively. Carnegie engineered a method to strengthen steel and provide it at a far lower cost than ever before. Vanderbilt increased the efficiency of travel through faster boats and trains and added amenities, such as serving food on board.

People liked the products that Carnegie and Vanderbilt provided because the products made lives easier and more enjoyable. Carnegie and Vanderbilt earned their profits and never stole a dime from anyone. These men were rich because people chose to buy their products.

After examining the infamous “robber barons,” it is clear that they did not actually “rob” anyone. Rather, their general role in society was simple: they bettered people’s lives in exchange for money. That is exactly what Jeff Bezos does today.

Amazon makes lives better by providing access to a wide variety of products at low prices quickly, with free 2-day shipping on many items.

One may say that Bezos is wrong for driving traditional stores like Toys “R” Us and Circuit City out of business, but that is all part of creative destruction, a fundamental economic concept establishing that innovation must force outdated companies out of business in a healthy economy.

Creative destruction is painful for the failing businesses and their employees, but it is best for society because consumers ultimately can buy better products at lower prices from new companies than the ones the outdated businesses can offer. It is easier for consumers to order goods on Amazon rather than searching for them at a variety of niche retailers and department stores.

Bezos is successful because Amazon provides the best service out of any of its competitors, thus he truly earned his fortune by pioneered his remarkable virtual market. Bezos may be the most talented businessman in the world as he built a $910-billion conglomerate out of a garage in Seattle. Bezos should receive admiration rather than hatred because he makes lives easier on a global scale.

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‘Robber Barons’ Did Not Rob Anyone