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In Defense of Decades of Greed

In Defense of Decades of Greed

6 Mins
September 4, 1992

Description: Matthew Josephson’s 1934 best-seller, The Robber Barons, with its damning portraits of great industrialists and Marxist analysis, became a kind of instant classic, and its epithet-title achieved a currency out of all proportion to the book's merit.

The following essay, by IOS Trustee Walter Donway, appeared on the Editorial Page of the Wall Street Journal, Friday, September 4,1992. It is reprinted here by permission of the Wall Street Journal. © 1992 Dow Jones & Co. All rights reserved.

When a public figure is slandered, he can hope to defend himself. But who will defend a historical period when it is maligned? If we are not careful, the 1980's—a period of sustained economic growth, resurging markets, and socialist collapse—will go down in history as "The Decade of Greed," symbolized by the exploits of its boldest financier, Michael Milken. Before that happens, we would do well to examine a similar case of historical mislabeling.

Late 19th century America enjoyed an unprecedented economic boom. Yet it is known as the era of the Robber Barons, with all the connotations of rapacity and greed. The phrase has become the label in the public mind for business activity in our most successful capitalistic era. How did this transformation come about?

The credit belongs to Matthew Josephson, the left-wing journalist whose book The Robber Barons was published in 1934. The book was selected by the Book of the Month Club and enjoyed a six-month stint on the best-seller list.

The Robber Barons was rumored to be required reading among New Dealers, who saw Josephson's greedy tycoons as emblems of the corrupt economic system that had brought about the Great Depression. And, as bank failures avalanched and the Depression's misery set in, it was handy to have Josephson's gallery of villains—and his taunting evocations of their riches—to divert attention from the Federal Reserve System's role in the economic collapse and the protectionist folly of the Smoot-Hawley Act. With its damning portraits and Marxist analysis, The Robber Barons became a kind of instant classic, and its epithet-title achieved a currency out of all proportion to the book's merit.


Unfortunately, historical clichés are difficult to dislodge from the popular mind. Few Americans for whom the phrase “Robber Barons” sums up the 19th century capitalism realize that a half century of scholarship has discredited virtually every key fact Josephson put forward. His case histories, his interpretations, his ideas about how the American economy works—almost none of them survives scrutiny.

But accuracy was never the point of the book. As Josephson wrote to his editor, Alfred Harcourt, in 1932, when The Robber Barons was just an idea: "I wish to place the brand of obloquy squarely upon the masters of capital in 1870-1890," to focus upon "the whole character of their construction, rotten at the core by virtue of the profit-making motive." Knowing his thesis before he began, Josephson went on a grim treasure hunt for every allegation and rumor that fit his view.

For example, Josephson introduces J.P. Morgan with a damning tale about Morgan's early days. During the Civil War, he alleges, the young Morgan financed a deal to sell to the U.S. government rifles "so defective that they would shoot off the thumbs of the soldiers using them." As documentation, Josephson cited an 1863 report of the Committee on Government Contracts, which said: "Worse than traitors in arms are the men who, pretending loyalty to the flag, feast and fatten on the misfortunes of the nation.

But the Committee report that Josephson cites had nothing to do with the rifle deal, and the material he quotes does not refer to Morgan, or to any other matter in which Morgan was involved. The committees that did look into the rifle deal did not condemn Morgan, even in the mildest terms. Nor did any other investigation. The rifles were not defective.

To set the record straight on that single incident, however, required an entire book, The Hall Carbine Affair (1941), by R. Gordon Wasson. Luckily, it was not long before other historians—led by Allan Nevins and Edward Kirkland—picked up the trail, discrediting one Josephson charge after another: the allegation that a Standard Oil subsidiary tried to blow up a competitor's plant, that John D. Rockefeller cheated the Widow Backus out of the Cleveland refinery her husband left her, that Andrew Carnegie sold defective steel to the navy. These reputed crimes vanished once the facts were known.

The crucial defect of The Robber Barons—and of the entire school of business history that it represents—goes beyond factual inaccuracy, however. The book is flawed by two conceptual errors that live on in today's journalism.

The first, represented by the book's title, is a confusion between economic power and political power, between wealth acquired by production and trade and wealth acquired by force. The title's metaphor—repeated throughout the book in phrases like "invading hosts" and "predatory warriors"—blurs the distinction between contract and coercion.

Josephson gazed out at the new capitalistic social order—a world of contracts and competition—and saw only the Old World of wealth acquired by conquest, by favor and by hereditary status. Not understanding profits, he concluded that they must have been stolen, somehow, from the country’s general wealth.

Josephson’s political outlook blinded him to the entrepreneur’s function in the modern world. He did not grasp how much the production of goods depends on someone who can both predict future demand and harness the forces that will meet it. Nor did he credit the risks or the just rewards of such an effort.

Josephson's second conceptual error is related to the first. For he failed to distinguish between risk-taking entrepreneurs, whose profits were earned fairly, and the kind of businessmen whose dealings were indeed corrupted by favor and unfair advantage. For Josephson, all capitalists were corrupt, since all profits were tainted. This generalization led him to misrepresent admirable figures in 19th century America by equating them with their less than admirable contemporaries.

Characteristically, Josephson's denunciation of Jay Gould and Collis P. Huntington—businessmen who cynically manipulated government's intrusions in the economy—spills over to men whose dealings were beyond reproach. Among these is James J. Hill, the industrial giant who built the Great Northern Railroad from the Great Lakes to Puget Sound. That Hill did so without the government's help, and developed the entire American Northwest as he went, counts for little in Josephson's narrative. He concedes that Hill was honest, that he helped to settle towns of immigrants—founding schools and churches, helping them to start raising cattle and planting orchards—but he asserts that Hill deserves no praise, ”for would they not be his subjects, sending out and calling in a flood of goods forever?”


When the trustbusters circled around J.J. Hill's Great Northern, Hill shouted: "I've made my mark on the surface of the earth, and they can't wipe it out!" There is truth in this defiant boast. But it does not prevent the pundits of an era, like Josephson, from vilifying even a great achievement and be-queathing it to future generations as something to be scorned.
In The Robber Barons the very qualities that make entrepreneurs like Hill successful—qualities of ambition, creativity and determination—counted against them. Josephson's real animus was directed toward an economic system that recognized the individual's right to live for his own sake, to seek his own happiness, to "make his mark on the surface of the earth" and to profit from it.

To judge by recent denunciations of the Decade of Greed, that animus is still strong. Like Josephson, today's moralists equate large profits with ill-gotten gain. They pillory Michael Milken for his bonuses, or cite the healthy profits of the 1980s with a kind of malicious glee, as if such profits were, in themselves, proof of wrongdoing.

Like Josephson, they condemn private enterprise for the errors of intrusive government—the S&L debacle being only the most recent example—and discover thereby reasons for yet further regulation.

Most of all, they seek to vilify an era of great economic prosperity—whose benefits are spread among millions of Americans and not just a wealthy few—with an invidious phrase.

Originally Published in IOS Journal Volume 2 Number 2 • Fall 1992

Walter Donway
About the author:
Walter Donway

"Walter's latest book is How Philosophers Change Civilizations: The Age of Enlightenment."

Economics / Business / Finance