Chocolate and Gold Coins

Wednesday, February 23, 2005

Robber Barons Get Some Respect

Sometimes while searching the web, you find some interesting things. One site I found today is very interesting indeed. Coyoteblog is the name of the blog and a small business owner named Warren Meyer runs it. I found several very well written articles on his blog. One that I admired, because I learned something, was his post In Praise of "Robber Barons". One capitalist he writes about is Cornelius Vanderbilt:

In many ways, Vanderbilt was the Southwest Airlines of his day, and, just like with Southwest today, towns begged for him to serve them because they knew he would bring down rates. In fact, there is actually another parallel with Southwest Airlines. In the early days of Southwest, most of the airline industry was regulated such that new entrants competing at lower prices were pretty much excluded by government rules. Southwest got around these rules by flying only in Texas, where interstate rules did not apply. Their success in Texas was a large reason for the eventual demise of government regulation that effectively protected fat and inefficient incumbent airlines, with drastically lower [fares] the result.

When Vanderbilt first entered the steamship business, most routes were given as exclusive charters to protected monopoly companies, most run by men with friends in the state government. Vanderbilt took on the constitutionality of these government enforced monopolies and, with the help of Daniel Webster, won their case in the Supreme Court. Within a decade, the horrible experiment with government monopoly charters was mostly over, much to the benefit of everyone. While private monopolies have always proved themselves to be unstable and last only as long as the company provides top value to customers, publicly enforced monopolies can survive for years, despite any amount of corruption and incompetence. Vanderbilt, by helping to kill these publicly enforced monopolies, did more than perhaps any other man in US history to help defeat entrenched monopolies, yet today most would call him a monopolist.

Read the full thing.

He also has a nice post on the Supreme Court case Velo vs. the City of New London, CT. I will have more to say about that case in a day or two.


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