Ending Big Government: The Essential Case for Capitalism and Freedom

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Introduction

Many Americans think our nation is headed in the wrong direction and that big government is the problem. A 2013 Gallup poll asked, In your opinion, which of the following will be the biggest threat to the country in the future—big business, big labor, or big government? A record 72 percent of Americans said big government is the worst threat, up from 47 percent in 2002. ¹ Americans are tired of the government because it has overstepped its bounds. They’re tired of out-of-control government spending, of government undermining our freedoms, and of government meddling in more and more areas of our lives.

If most of us oppose big government, why does government keep getting bigger and more powerful? And if we’re against big government, what should we be for?

As I will show in this book, capitalism—free-market, laissez-faire capitalism—is the only rational alternative to big government and the only antidote to the problems that big government has caused. But what is capitalism? How does it work? What is its history? On what philosophic ideas does it rest?

Capitalism arose from the eighteenth-century Enlightenment. Before this time, most people believed that the individual’s life belonged to the tribe, or to the king, or to the Church, or to the slaveholder, or to the feudal lord. But Enlightenment thinkers rejected these beliefs. The individual’s life, they said, belongs not to some higher authority; the individual’s life belongs to himself. He has a right to his own life, a right to his own property, a right to pursue his own happiness. This radical idea, more than anything else, made possible the rise of capitalism—first in Britain, then in the United States.

What were the results?

Capitalism transformed the Scientific Revolution into the Industrial Revolution. According to the critics of capitalism, industrialization was a disaster. They tell us that it impoverished the working class by leading to low wages, child labor, and deplorable working conditions. But the critics fail to mention that these problems had already existed long before the Industrial Revolution. Capitalism didn’t cause such problems; it inherited them.

Throughout human history, most people lived in bitter poverty. But capitalism changed this. The Industrial Revolution marked the historic advent of sustained economic progress. Businessmen produced an expanding supply of consumer goods at lower prices. New technologies and capital investment raised the productivity of labor, steadily increasing real wages. As living standards rose, child labor and the average workweek declined—and this happened before the government imposed laws to limit them. Scientific discoveries led to improved sanitation, safe drinking water, and hygienic living conditions, helping end infectious diseases, from cholera and diphtheria to tuberculosis and typhoid fever. Since the Industrial Revolution, life expectancy has doubled while the child mortality rate has fallen from about 20 percent to below 1 percent. Capitalism and science, in short, have conquered famines, early death, and mass poverty, enabling most people in developed nations to lead clean, humane, comfortable lives.

But capitalism not only made us wealthier. By codifying the Enlightenment principle that each person’s life belongs to himself, capitalism made us freer. It inherited and later abolished slavery. It protects the right to vote, the right to produce, and the right to trade. It also protects freedom of speech, freedom of religion, and freedom of association.

Because of this freedom, capitalism offers countless opportunities. Free to pursue his interests, free to follow his dreams, and free to act on his convictions, the individual’s fate is in his own hands. If he fails, he can keep trying. Capitalism doesn’t guarantee success—no system can—but by protecting freedom, it gives everyone the opportunity to succeed.

Contrast the achievements of capitalism with the economic failures of other politico-economic systems. In the Soviet Union, the standard of living stagnated for seven decades under socialist rule. In Red China, Mao Tse-tung’s Great Leap Forward collectivized agriculture, which led to the worst famine in history, killing about 30 million people. Today, the tribal dictatorships of Africa and the Islamic theocracies of the Middle East are among the most repressed, destitute nations.

Besides their abysmal economic records, non-capitalist systems have exhibited ruthless brutality. Socialist regimes sent countless innocent people to slave labor camps. Medieval Christian theocracies silenced and tortured heretics—or burned them at the stake. Islamic theocracies oppress women, execute apostates, and support terrorist groups. In the twentieth century, Nazi, fascist, and socialist governments killed millions of their own citizens.

With the failure of socialism and the fall of the Soviet Union in 1991, most people agree that capitalism is economically superior to socialism. According to one prominent economist, The contest between capitalism and socialism is over: capitalism has won. . . . Capitalism organizes the material affairs of humankind more satisfactorily than socialism.² This is the conclusion not of an apologist for capitalism; it’s the conclusion of Robert Heilbroner, a self-described socialist. Even Karl Marx acknowledged the unique power of capitalism to create wealth. The bourgeoisie, Marx observed, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together.³

Although most Americans prefer capitalism to socialism, few believe capitalism is fully practical. Common are Marxist and other anti-capitalist myths, such as the idea that businessmen pay starvation wages, that the rich get richer while the poor get poorer, that capitalism is bad for the environment, and that capitalism is unstable—prone to crises, depressions, mass unemployment, and coercive monopolies. In the words of Pope Francis, We can no longer trust in the unseen forces and the invisible hand of the market.⁴

The Left agrees. Tirelessly blaming capitalism for the 2008 financial crisis, many liberals have argued that the free-market, laissez-faire policies of the Bush Administration caused it. But this is wrong for one simple reason: George W. Bush was a big-government Republican. He greatly expanded the size, scope, and power of the federal government. (See Chapter 1.)

Since the early twentieth century, the politico-economic system of the United States has not been laissez-faire capitalism, but a mixed economy—an unholy mixture of capitalism and big government. This is a system not of free markets, but of controlled, subsidized, and regulated markets. Although considerable freedom still exists, the system is heavily peppered with government intervention, leading to cronyism, favoritism, and corruption. Mixed economies have many problems, but the source of their problems is too much government, not too much capitalism.

Most intellectuals agree that our politico-economic system is broken. Paradoxically, they also agree that a mixed economy is the best system. Pure capitalism, they tell us, is almost as bad as pure socialism. Both are too extreme, too dangerous, too uncompromising. Mixing the two allows us to exploit the best of both. Does it?

All the fiscal and economic problems in America today stem from its mixed politico-economic system, a system most intellectuals denounce as corporatism, or plutocracy, or neomercantilism, or crony capitalism. What we need, they say, is a different kind of mixed economy, one that serves the needs of the people rather than rich corporations. They praise this kind of mixed economy as the middle way, or social democracy, or economic democracy, or regulated capitalism. But giving a mixed economy a congenial sounding name doesn’t change its nature. Despite what name you call it, a system in which government has the power to intervene in the marketplace, the power to transfer wealth among citizens, and the power to pick winners and losers is a bad system.

A mixed economy is only one of many bad systems. Fascism, socialism, communism, theocracy, absolute monarchy, and a mixed economy—what do these bad systems have in common? They fall under the broader category of statism.

Statism denotes any politico-economic system of big government, a government that accrues power at the expense of individual freedom, a government that uses its power to confiscate and redistribute wealth, to regulate and control the economy, and to micromanage citizens’ behavior—on the implicit premise that the individual’s life belongs to the state. Statism is the principle of government force and tyranny.

Laissez-faire capitalism, by contrast, is the system of freedom and liberty, the system that protects individual rights, including private property rights. The power of government under capitalism is constitutionally limited. It is barred from redistributing wealth and intervening in the economy, leaving each person free to pursue profit, free to pursue happiness, free to pursue his own rational self-interest. Laissez-faire capitalism is the only system based on the premise that the individual’s life belongs to himself.

But because capitalism harbors self-interest, many people believe it is amoral, if not immoral. As Michael Novak says:

Capitalism is by no means the Kingdom of God. It is a poor and clumsy human system. Although one can claim for it that it is better than any of its rivals, there is no need to give such a system three cheers. My friend Irving Kristol calls his book Two Cheers for Capitalism. One cheer is quite enough.⁵

One cheer? Capitalism has created more wealth, offered more opportunity, and lifted more people out of poverty than any other system. Why, then, is it so maligned, so misunderstood, so unappreciated—even among many conservatives? Because most people who believe that capitalism is practical also believe that it’s morally suspect. The problem, however, isn’t the morality of capitalism. The problem is that most people accept a different morality, a morality incompatible with capitalism, a morality of altruism and self-sacrifice.

We need to rethink our moral premises.

As I will show, free-market, laissez-faire capitalism is moral—and practical. It’s also incontestably superior to statism. But this book covers more than the clash between capitalism and statism. It also covers the deeper philosophic issues underlying such a clash: individualism versus collectivism, self-interest versus altruism, reason versus irrationalism.

I wrote this book from neither a liberal-progressive perspective nor a conservative-traditionalist perspective. Unlike liberals and conservatives, my political perspective is an uncompromising commitment to freedom, liberty, and individual rights. (See Chapter 2 for why this perspective is justified.) Although liberals and conservatives say they support freedom, neither group defends freedom across the board; neither defends freedom consistently and on principle. Most liberals uphold personal freedoms, yet they want government to restrict economic freedom, redistributing wealth and heavily regulating economic activity. Most conservatives uphold economic freedom, yet they want government to restrict personal freedoms, prohibiting activities contrary to family values. On intellectual freedom, many liberals and conservatives ardently support it, yet other liberals and conservatives call for censorship.

In my view, all freedoms (personal, political, economic, and intellectual) are valuable—and inseparable. Violating freedom in one area requires violating freedom in other areas. Unlike a mixed economy, a system that protects freedom inconsistently, laissez-faire capitalism, the system of individual rights, protects all freedoms.

The battle for capitalism and freedom is not ultimately a political battle. And it’s not a battle of economic classes, of rich versus poor, of the 1 percent versus the 99 percent. The battle for capitalism is mainly an intellectual battle, a battle of ideas. Before the political system can change, the culture must change. Before the culture can change, people’s minds must change. They must be persuaded that capitalism is the best system.

That is the purpose of this book.

Many books have defended capitalism on economic grounds, but few books have defended it on moral grounds. This book will show that capitalism is moral and practical while also showing that statism is immoral and impractical. Toward that end, this book systematically contrasts the history, economics, and the underlying philosophy of each system.

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A few points before we get started:

First, two chapters from this book were originally published in The Objective Standard, a journal of culture and politics. A modified version of Chapter 1 entitled The Rise of American Big Government: A Brief History of How We Got Here appeared in the Fall 2009 issue, and part of Chapter 5 entitled The British Industrial Revolution: A Tribute to Freedom and Human Potential appeared in the Fall 2010 issue.

Second, throughout this book, when referring to human beings in general, I usually use the word man or masculine pronouns such as he and his. These terms are used in the generic sense; thus they’re not meant to exclude women. As William Strunk and E. B. White point out, "The use of he as a pronoun for nouns embracing both genders is a simple, practical convention rooted in the beginnings of the English language."⁶

Third, I use the terms statism and big government interchangeably. Although I would have preferred to use statism in the title, I decided against it because the book is written for a general audience, and people are more familiar with big government. Some defenders of liberty, however, dislike that phrase. Eric Daniels, for example, argues that the primary issue of government is not its size, but its function, which is to protect individual rights. I agree. Daniels also argues that we should dispense with the phrase big government because it’s vague and imprecise and because it focuses undue attention on the size of government.⁷ Rather than discarding big government, I think we should make it clear and precise. The concept big can be broader than just size. Random House Webster’s College Dictionary lists several definitions of big, including of major concern or importance, large-scale and powerful, and exercising substantial control and influence. Keeping this in mind, I define big government as a government that has gone beyond its legitimate function, a government that has gone beyond the optimal size, scope, and power necessary for protecting individual rights.

Skip to Chapter 1: American Big Government: How Did We Get Here?

Jeffrey M. Jones, Record High in U.S. Say Big Government Greatest Threat, Gallup, December 18, 2013, http://www.gallup.com/poll/166535/record-high-say-big-government-greatest-threat.aspx.

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http://en.wikipedia.org/wiki/Robert_Heilbroner.

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Karl Marx and Frederick Engels, Manifesto of the Communist Party, translated by Samuel Moore (1888), http://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch01.htm#007.

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Pope Francis, Evangelii Gaudium, (Vatican Press, 2013), p. 161, http://www.vatican.va/holy_father/francesco/apost_exhortations/documents/papa-francesco_esortazione-ap_20131124_evangelii-gaudium_en.pdf.

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Michael Novak, Wealth & Virtue: The Moral Case for Capitalism, Speech delivered before the Mont Pelerin Society in Sri Lanka, January 11, 2004.

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William Strunk and E. B. White, The Elements of Style, 4th ed. (New York: Longman, 2000), p. 60.

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Eric Daniels, Why ‘Big Government’ is Not the Problem, The Objective Standard, vol. 8, no. 1, Spring 2013, pp. 30–39.

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Chapter 1

American Big Government: How Did We Get Here?

I believe there are more instances of the abridgement of freedoms of the people by gradual and silent encroachment of those in power than by violent and sudden usurpations.

—James Madison

Nineteenth-century America was the closest thing to pure capitalism that has ever existed. There was no welfare state, no central bank, no deficit spending to speak of, no fiat money and no income tax for most of the century, and no antitrust laws or federal regulatory agencies until the end of the century. Total (federal, state, and local) government spending averaged a mere 3.26 percent of Gross Domestic Product (GDP). ¹ The Constitution protected individual rights and limited the power of government, giving rise to an economy in which people were free to pursue their interests, free to start new businesses, free to create as much wealth as their ability and ambition allowed. This near laissez-faire system led to the wealthiest, most innovative nation ever.

During the twentieth century, however, the size, scope, and power of government exploded. Total government spending increased from 6.73 percent of GDP in 1906 to 37.79 percent of GDP in 2014.² The dollar has lost more than 95 percent of its value due to the inflationary policies of the Federal Reserve. Top marginal income tax rates have been as high as 94 percent. Entitlement programs now constitute more than 60 percent of the federal budget. And businesses are hog-tied by more than 175,000 pages of red tape in the Code of Federal Regulations.

What happened? How did America shift from capitalism to statism, from limited government to big government, from a near free-market economy to a heavily regulated mixed economy? What acts, programs, interventions, and Supreme Court rulings brought America to its present state?

Source: Data from http://www.usgovernmentspending.com/index.php

Jefferson versus Hamilton

In the Declaration of Independence, Thomas Jefferson wrote that the individual has certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness. To protect these rights, Jefferson advocated a limited, decentralized government—a government, in his words, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.³ Economically, Jefferson supported free trade and free markets. As President, in his first message to Congress he argued, Agriculture, manufactures, commerce, and navigation, the 4 pillars of our prosperity, are . . . most thriving when left most free to individual enterprise.⁴,⁵

The Constitution embodied the Jeffersonian politico-economic philosophy, establishing the legal framework necessary for a free economy. It protected private property (Fourth and Fifth Amendments), including intellectual property (Article I, Section 8), enforced private contracts (Article 1, Section 10), and codified sound money (Article I, Sections 8 and 10). It prohibited the states from erecting trade barriers (Article I, Section 9), thereby establishing the nation as one large free-trade zone. It permitted direct taxes, such as the income tax, only if apportioned among the states based on population (Article 1, Sections 2 and 9), which made them difficult to levy. Finally, the Constitution specifically enumerated and thus limited the powers of Congress (Article I, Section 8), constraining the government from intervening in the marketplace.

Not everyone agreed on how much the Constitution should limit the federal government. Alexander Hamilton, coauthor of The Federalist Papers, strongly supported the Constitution, but he also thought government should have more power over the economy. As the first Treasury Secretary under George Washington, Hamilton submitted several reports to Congress pushing for higher taxes, a public debt, a national bank, business subsidies, and protective tariffs. Because the Constitution doesn’t authorize some of these measures, Hamilton interpreted it loosely, arguing that the federal government has implied powers.⁶

Jefferson rejected this approach. He maintained that the federal government has only those powers enumerated in the Constitution, a view confirmed by the Tenth Amendment, which says, powers not delegated to the federal government by the Constitution . . . are reserved to the States, respectively, or to the people.

Hamilton partly succeeded. At his behest, the federal government imposed excise taxes (later abolished by Jefferson) and assumed the debt of the states. It also created a national bank, the First Bank of the United States (BUS, 1791), which Jefferson and James Madison argued was unconstitutional. The BUS’s charter expired in 1811. Though Madison vetoed an earlier bill to charter another bank, he signed a bill in 1816 chartering the Second BUS.

In McCulloch v. Maryland (1819), Chief Justice John Marshall argued that the BUS was justified under the Necessary and Proper Clause of the Constitution. A national bank was not necessary, as some scholars point out, but Marshall falsely equated necessary with convenient or useful. Following Hamilton, Marshall also argued that the federal government has implied powers beyond those granted in the Constitution.⁷

The federal government rejected most plans to subsidize private business. Presidents Madison and James Monroe, for example, vetoed bills that authorized federal spending for internal improvements, such as roads and canals.⁸ Although private entrepreneurs financed and built many roads and canals, state governments in the 1820s intervened instead, amending their constitutions to subsidize canal building. Most state-funded canals weren’t finished, generated little or no income, or went bankrupt. As a result, by 1860 most states amended their constitutions again to prohibit such subsidies.⁹

President John Quincy Adams, Congressman Henry Clay, and the Whig Party kept the Hamiltonian flame lit. Although most of their efforts to fund internal improvements were defeated, they successfully imposed high protective tariffs. Adams signed a bill in 1828 that raised the average tariff rate to about 50 percent. This was denounced as the Tariff of Abominations.

Presidents Andrew Jackson, Martin Van Buren, John Tyler, and James K. Polk, in contrast to the Hamiltonians, upheld the same limited-government, free-market philosophy that Jefferson did. Jackson paid off the national debt in 1835, the only time this has been done. He and Tyler vetoed many unconstitutional bills submitted by Congress. Jackson and Polk also cut tariffs, reaching a low of about 15 percent by the 1850s.

Jackson ardently opposed the Second BUS because it was an unconstitutional, government-chartered monopoly. In 1832 he vetoed a bill to renew the bank’s charter, letting it expire in 1836. The end of the Second BUS, combined with Van Buren’s Independent Treasury System, led to the free banking era, which lasted until the 1860s. By all measures of bank health, this free banking era was the soundest in American history. In terms of liquidity, profitability, asset quality, capital adequacy, and prudent management, free banking proved superior to national banking.¹⁰

Although protectionism, national banking, and subsidies for internal improvements—the core of the Hamiltonian economic program—were partly intended to help develop business and industry, they proved impractical. These interventions were the main exceptions to the free market in the nineteenth century. Before the 1860s, however, many Presidents fought to scale back these interventions. Tariffs were cut, the national bank expired, and subsidies for internal improvements were mainly confined to the states. This changed during the Civil War.

The Civil War

With the election of President Abraham Lincoln, the Southern states feared that their loss of political power would threaten their ability to preserve slavery. As a result, they seceded from the Union and formed the Confederacy. In April 1861, the Confederates fired on Fort Sumter, a federal garrison in South Carolina, starting the Civil War.

During the war, federal spending skyrocketed from 1.74 percent of GDP in 1861 to 13.27 percent in 1865.¹¹ To help finance this spending, the government taxed, borrowed, and inflated heavily. It imposed many new taxes, including the first income tax. It enacted the National Bank Acts (1863–64), which resurrected national banking and mandated that the new banks buy government bonds, thus ensuring a market for them. As a result, the national debt surged from $64.7 million in 1860 to $2.32 billion in 1866.¹² The government also enacted the Legal Tender Acts (1862–63), which temporarily submerged the gold standard and authorized the printing of fiat money, called greenbacks. The money supply rose 137.9 percent.¹³

I am in favor, Lincoln said, of a national bank . . . in favor of the internal improvements system and a high protective tariff.¹⁴ In short, Lincoln favored the Hamiltonian economic program. He raised the average tariff rate to 47.06 percent.¹⁵ He also signed the Pacific Railway Act (1862), which offered subsidies and land grants for building a transcontinental railroad. This led to problems and corruption, just as the earlier state subsidies for canals did.

In his handling of the war, Lincoln imposed many rights-violating policies. He censored telegraph communication, confiscated private property, and closed dozens of Northern newspapers. He also imposed a military draft and imprisoned political dissenters without trial.¹⁶

Although many of Lincoln’s policies breached the free market and violated individual rights, such policies must be evaluated in the light of what he achieved. In defeating the Confederacy, Lincoln abolished the most egregious violation of individual rights: slavery. The Thirteenth Amendment, ratified in 1865, states, Neither slavery nor involuntary servitude . . . shall exist within the United States, or any place subject to their jurisdiction. The basic contradiction between slavery and America’s founding principles had finally been resolved.

Some critics decry Lincoln for the carnage of the Civil War. They argue that slavery could have been abolished peacefully by compensated emancipation (buying slaves to free them). Although many nations ended slavery this way, Lincoln tried compensated emancipation in Delaware, and the state legislature rejected it. He also pushed for national legislation, but the Border States ignored his proposals.

In 1870 the Supreme Court ruled in Hepburn v. Griswold that the government’s issuance of fiat money during the war was unconstitutional. Fiat money-induced inflation, the Court argued, violates the Fifth Amendment clause that prohibits taking private property without just compensation.¹⁷ This ruling was reversed in Knox v. Lee (1871). And in Juilliard v. Greenman (1884), the Court declared, "Congress is authorized to establish a national currency, either in coin or in paper, and to make that currency lawful money for all purposes.¹⁸ This ruling flouted the Constitution. Article I, Section 8 authorizes Congress To coin Money," not issue fiat (paper) money. Debates at the Constitutional Convention confirm that Congress’s power to coin money is only the power to mint gold or silver coins.¹⁹

Another ominous Supreme Court decision, Munn v. Illinois (1876), concerned whether a state had the authority to control storage rates charged by grain warehouses. In the majority opinion, Chief Justice Morrison Waite declared:

Property does become clothed with a public interest when used in a manner to make it of public consequence. . . . When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good.²⁰

Although the case applied only to the states, Munn undermined the sanctity of private property rights. It established the collectivist precedent that property clothed with a public interest (that is, property related to business) is subject to government control and regulation for the common good. As a result, Munn helped pave the way for the two main assertions of federal control over the economy, the Interstate Commerce Act and the Sherman Antitrust Act, that would come in the late nineteenth century.²¹

The Gilded Age

Despite the interventions remaining after the Civil War—high tariffs, railroad subsidies, and national banking—the American economy was still a near free market. In 1872 the income tax expired while federal spending fell to 3.7 percent of GDP.²² Regulation of business was low, and in 1879 President Ulysses S. Grant restored the gold standard under the Specie Resumption Act.

The productive achievements of the post-Civil War era, what historians call the Gilded Age, were unprecedented. The American economy grew at its most rapid pace ever. Countless new products were invented, consumer prices fell, the average workweek declined, and real wages almost doubled.

Most intellectuals were unimpressed. While the inventors, innovators, and entrepreneurs were busy with their productive achievements, the intellectuals deemed them ruthless exploiters and called for government intervention. Economist Henry George, for example, author of the popular book Progress and Poverty (1879), pushed for a 100 percent tax on ground rent. Edward Bellamy, the most popular author among a surge of utopian novelists, wrote the influential novel Looking Backwards (1888) in which the main character falls asleep in 1887 and wakes up in 2000 to an America transformed into a socialist utopia. Henry Demarest Lloyd’s book, Wealth Against Commonwealth (1894), smeared Standard Oil and recommended nationalizing the trusts. Thorstein Veblen denounced the rich for their conspicuous consumption and advocated a form of socialism in which a small group of engineers would run the economy. The Social Gospel movement advocated government paternalism to stamp out sin while ensuring social welfare. And the populists, later forming the political party of the same name, wanted government to impose a progressive income tax, nationalize several industries, and prop up agricultural prices by inflation.

Many students in the nineteenth century went to Germany to earn their PhDs, as such programs were not widely available yet in America.²³ While there, they absorbed the collectivist-statist ideas of Karl Marx, Georg W. F. Hegel, and others. Observing Otto von Bismarck’s welfare state, these students became imbued with the ideals of social engineering and reform. When they came back to America, they denounced individualism and laissez-faire while calling for an activist role for government. One of these students, Richard T. Ely, a leader of the Social Gospel movement, founded the American Economic Association, which stated in its 1885 proposed platform, We hold that the doctrine of laissez-faire is unsafe in politics and unsound in morals.²⁴

Before the rise of capitalism, most great fortunes were gained by theft, conquest, or the exploitation of slave labor. But the fortunes of the Gilded Age were not looted; they were created through production and trade. Few intellectuals recognized this fact. Instead, they blamed the wealth creators for other people’s poverty. As one clergyman said, Mr. [Andrew] Carnegie’s ‘progress’ is accompanied by the growing ‘poverty’ of his less fortunate fellow-countrymen.²⁵ Henry George argued that Gilded Age wealth was gained through the coercive power of monopoly. This element of monopoly, George wrote, of appropriation and spoliation [plunder] will . . . be found largely to account for all great fortunes.²⁶

Coercive monopolies exist only when government restricts competition. Such monopolies did not characterize the Gilded Age. Most entrepreneurs who today are vilified as robber barons—including Cornelius Vanderbilt, John D. Rockefeller, and James Jerome Hill—didn’t receive government protection from competition. They didn’t defraud their customers, and they didn’t have the power to force anyone to do business with them. Although some industrialists benefited unjustly from subsidies and protective tariffs, most thrived not by government force or favor, but by efficient production and voluntary trade. They made superior products, dramatically increased output, and significantly cut prices. (See Chapter 5.)

Despite these facts, the notion that big business wielded too much power persisted. This notion, along