≡ Menu

Quotation of the Day….

… is from pages 489-490 of the great economic historian Deirdre McCloskey’s 2006 volume, The Bourgeois Virtues:

Allocation of goods to the use of the highest value is one result of profit.  The other is invention, which in a larger view is just another form of alertness in buying (ideas) low and selling high.  The American economy in the late nineteenth century was a deal-making, inventive place, with secure private property and reasonably honest courts in which deals could be repaired when things went wrong, and a society that accorded work very high prestige.  National product per head therefore went up smartly 1870-1900, slower than it did in the 1990s, for example, but very respectable for the time.  If you look into the way Carnegie and Rockefeller actually got their fortunes, it turns out that it was mainly by making steel and transporting oil cheaper than their competitors did.  They did not get it by hurting consumers with monopolies.  Nor did they get it by hurting workers by paying less than other people did.

DBx: Among the most whopping and destructive of myths is the lie that insists that nearly all of great industrialists of 19th-century America did not earn their riches fairly and in ways that increased the material well-being of humankind.

Cronyism back then certainly existed.  Leland Stanford and Jay Gould, for example, amassed ill-gotten fortunes through the agency of the state.  But most of the reviled industrialists – men such as Rockefeller, Vanderbilt, and Gustavus Swift – earned their fortunes overwhelmingly through honest and productive entrepreneurial creativity tested incessantly by market competition.  If cronyism and zero- (or negative-) sum commercial practices had been the main activity of the so-called “robber barons,” Americans would have not have enjoyed the economic growth that indisputably occurred during last third of the 19th and early decades of the 20th centuries.