Professor Folsom’s modern classic contains six biographical profiles of early American business titans. He carefully distinguishes between cronies who become rich primarily through political connections and those who become rich due to productivity and success in the market.
The “robber baron” thesis of business history is wide-spread. “Baron” is a title of feudal political privilege and a “robber” is a thief. So the thesis suggests that success in American business has mostly been a matter of cronies using politics to enrich themselves at the expense of the rest of us.
Folsom makes the crucial distinction between "market entrepreneurs" and "political entrepreneurs"—i.e., between those who make money by providing better and cheaper goods, and those who acquire money via political pull. Strikingly, he shows how market entrepreneurs did so often by outcompeting rivals who had huge government favors.
Readers of Ayn Rand’s Atlas Shrugged will be familiar with the conflict between market entrepreneurs Dan Conway (railroads) and Hank Rearden (steel) and two major villains, the semi-businessmen James Taggart and Orren Boyle.
Folsom devotes a chapter each to six business heroes who achieved their success primarily via productivity and defends them against the cronyism charge: Vanderbilt (water transport), the Scranton's (iron), J. J. Hill (railroads), Rockefeller (oil), Schwab (steel and finance), Mellon (finance).
J.J. Hill built the transcontinental Great Northern Railway by careful investment, quality construction, and no government subsidies. Meanwhile, his rivals of the Central Pacific and Union Pacific received free land, subsidies, tax breaks—and still managed to go bankrupt and be embroiled in bribery and embezzlement scandals.
J.D. Rockefeller’s Standard Oil consistently invested in infrastructure and chemical research and pioneered financing methods, enabling it to outproduce its competitors in quantity and quality, as well as reducing the cost of oil products to consumers.
Two Scranton brothers and a cousin almost failed early in developing an iron works in then rural-Pennsylvania—in part due to political obstacles put in their way by connected business rivals—but hard work and entrepreneurial creativity led them to success in producing iron rails in large quantities for the developing railroad industry.
Folsom adds a concluding chapter devoted to three widely used college textbooks, each of which fails to distinguish between market and political entrepreneurs and which devote much energy to criticizing the market entrepreneurs.