Understanding Robber Barons & How To "Deal" With Them

leftchick

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Wed Mar-04-09 03:48 PM
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Understanding Robber Barons & How To "Deal" With Them

I found this very useful for the circumstances we are in today. Though this is 10 years old it is certainly relevant...

http://econ161.berkeley.edu/Econ_Articles/carnegie/DeLong_Moscow_paper2.html

Robber Barons

J. Bradford DeLong

University of California at Berkeley, and NBER

first draft October 13, 1997; second draft January 1, 1998
I. Introduction

"Robber Barons": that was what U.S. political and economic commentator Matthew Josephson (1934) called the economic princes of his own day. Today we call them "billionaires." Our capitalist economy--any capitalist economy--throws up such enormous concentrations of wealth: those lucky enough to be in the right place at the right time, driven and smart enough to see particular economic opportunities and seize them, foresighted enough to have gathered a large share of the equity of a highly-profitable enterprise into their hands, and well-connected enough to fend off political attempts to curb their wealth (or well-connected enough to make political favors the foundation of their wealth).

Matthew Josephson called them "Robber Barons". He wanted readers to think back to their European history classes, back to thugs with spears on horses who did nothing save fight each other and loot merchant caravans that passed under the walls of their castles. He judged that their wealth was in no sense of their own creation, but was like a tax levied upon the productive workers and craftsmen of the American economy. Many others agreed: President Theodore Roosevelt--the Republican Roosevelt, president in the first decade of this century--spoke of the "malefactors of great wealth" and embraced a public, political role for the government in "anti-trust": controlling, curbing, and breaking up large private concentrations of economic power.

Their defenders--many bought and paid for, a few not--painted a different picture: the billionaires were examples of how America was a society of untrammeled opportunity, where people could rise to great heights of wealth and achievement on their industry and skill alone; they were public benefactors who built up their profitable enterprises out of a sense of obligation to the consumer; they were well-loved philanthropists; they were "industrial statesmen."

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D.The Drying-Up of the Flow of Billionaires

Whatever else Depression-era financial reforms did (and there are those who think it crippled the ability of Wall Street to channel finance to new corporations) and whatever else the New Deal did (and it did a lot to bring social democracy to the United States and to level the income distribution), one important--and intended--consequence was that thereafter it was next to impossible to become a billionaire.

Not that it was ever easy to become a billionaire, mind you, but the channels through which lucky, skilled, dedicated, and ruthless entrepreneurs had ascended were largely closed off.

Power to commit large sums of money to industrial or other enterprises no longer rested in the hands of Wall Street financiers: there was no possibility for someone who was basically on operating company executive Leland Stanford or a Charles Schwab raising money on Wall Street or otherwise by large-scale borrowing: to borrow on a large scale you had to be an investment banker divorced from manufacturing or construction operations, or a commercial banker divorced from both operations and from securities issues.

My Question, Is there political will in Washington to confront this second Gilded Age?