Book Review: The Triumph of Conservatism

The Triumph of Conservatism, by Gabriel Kolko

Reviewed by Jacob

One sign of good non-fiction, I think, is that while one reads a book, one wishes more and more desperately for everyone else in the world to read it too. That’s how I often felt reading Gabriel Kolko’s The Triumph of Conservatism.

I first heard of Kolko’s book while reading David D. Friedman’s The Machinery of Freedom. Friedman mentions Kolko as a “socialist” historian who refutes the tale of the federal government protecting the public from monopolists during the early 1900s. Friedman begins his own discussion of monopoly by discussing the work of Kolko and a couple of other authors:

One of the most effective arguments against unregulated laissez faire has been that it invariably leads to monopoly. As George Orwell put it, “The trouble with competitions is that somebody wins them.” It is thus argued that government must intervene to prevent the formation of monopolies or, once formed, to control them. This is the usual justification for antitrust laws and such regulatory agencies as the Interstate Commerce Commission and the Civil Aeronautics Board.

The best historical refutation of this thesis is in two books by socialist historian Gabriel Kolko: The Triumph of Conservatism and Railroads and Regulation. He argues that at the end of the last century businessmen believed the future was with bigness, with conglomerates and cartels, but were wrong. The organizations they formed to control markets and reduce costs were almost invariably failures, returning lower profits than their smaller competitors, unable to fix prices, and controlling a steadily shrinking share of the market. The regulatory commissions supposedly were formed to restrain monopolistic businessmen. Actually, Kolko argues, they were formed at the request of unsuccessful monopolists to prevent the competition which had frustrated their efforts.

I think Friedman conveys Kolko’s thesis wonderfully in this excerpt, and, having finally read Kolko’s book myself, I find Kolko’s case quite convincing. Reading more recent books like Saving Capitalism by Robert Reich, I wonder at how so many political writers could have failed to absorb the lessons of Kolko’s work since its publication in 1963.

One explanation of this is that Kolko’s thesis was erroneous, and that the libertarians who cite him are mistaken in building on his work. If, upon reading the present review, readers want to contact me and introduce me to literature demonstrating as much, I welcome the possibility of being proven wrong. The evidence Kolko mounts in his favor, and the apparent obliviousness of authors like Reich to his work and the work of many similar authors,[1] however, leads me to think that a different explanation is more probable: that Kolko was by and large correct and some authors, (like Robert Reich,) have simply not studied the period as deeply as he.

The book is full of information, and took me a long time to read and think through, but here are a few takeaways:

1) The real world is complex. Kolko makes clear that the U.S. economy at the turn of the twentieth century was neither a theoretically perfect “free market”, nor a command economy, nor a “mixed economy” managed by a government with any clear ideas of what they wanted to accomplish. History was not a morality play, it wasn’t a battle between heroic businessmen against an evil government, or one pitting a benevolent government against dangerous businessmen. Things were messy. I like Kolko’s book for conveying this.

In many ways, the federal government worked with business tycoons to help shield them from the public and from their competitors, but even painting the period as one purely of collusion between business and government at the expense of society at large would oversimplify Kolko’s account. Certainly business elites worked with government to achieve their own interests, and government often went along with their requests, but Theodore Roosevelt and some congressmen did sometimes make gestures towards stopping business leaders from crossing certain boundaries. What “boundaries” they were supposed not to cross was ill-defined, Roosevelt’s actions, and intentions, were mixed, and when government stepped in to “intervene,” their actions either had little effect or played, intentionally or not, into the hands of the financial elite. But one must acknowledge these gestures in order to point out their ineffectiveness and scarcity.

Kolko doesn’t spin history either for or against voluntaryist ethos, or libertarian economic policies. The author certainly had his own values and ideology, and these do show through, but the book doesn’t come off as propaganda. He simply puts forward a thesis and examines the evidence for and against it. It’s a book about economic history, not a manifesto or a package of policy recommendations. And I find this refreshing.

2) The federal government did little to curb the power of business owners. Theodore Roosevelt, and the federal government in general, acted without much of a compass when it came to dealing with trusts or monopolies. Roosevelt divided trusts in various industries into “good” trusts and “bad” trusts, rather arbitrarily.

Standard Oil was one of the supposed “bad” companies, and it’s true that under Roosevelt the Department of Justice filed multiple suits against the company, including the one which eventually led to their dissolution.

It’s not clear that the actions taken by the federal government against Standard Oil actually benefited society at large, however. In 1907, one judge fined the company $29 million for accepting rebates from railroad companies in violation of the Elkins Anti-Rebating Act, but the decision was appealed and eventually overturned. In 1911, (during William Howard Taft’s administration,) the Supreme Court ruled that Standard Oil would have to be dissolved into multiple companies. But the same people who had owned stock in Standard Oil became the owners of the companies into which Standard Oil was broken up, and the combined stock value of these companies actual increased relative to what it had been before the company was dissolved. The stockholders, including John D. Rockefeller, became more wealthy, not less, with the dissolution of the company.

Further, the new companies were not placed in an especially competitive position with one another. Rather than one company, Standard Oil, doing business around the globe, a collection of new companies now did business in various regions, but the federal government didn’t set the new businesses up to compete within regions, but rather to control different regions.

Some authors, (such as Robert Reich in Saving Capitalism,) argue that the federal government should combat monopolies because those who obtain monopoly power will gain enough wealth to take control of the reigns of government. If this is the point of trust-busting, it seems the dissolution of Standard Oil was a failure, given that the wealth of the company’s shareholders ended up increasing. Perhaps their wealth would have increased even more without the breakup, but this possibility seems like a weak rationale for the government’s actions, certainly a weaker one than authors like Reich want to provide.

Perhaps the more obvious goal of combating monopoly would be to keep companies like Standard Oil from charging exorbitant prices or producing low-quality goods. On this, I actually wish Kolko provided more data. Specifically, in the case of Standard Oil, I’d like to know the year by year prices of the different products the company sold, along with their profit margins. Plus similar data for their competitors. Kolko does mention that “[c]rude and refined oil prices for consumers declined during the period Standard exercised greatest control of the industry, 1875-1895, and rose thereafter along with prices for most consumer goods.” (pages 39-40) He goes on to discuss how Standard Oil began loosing market share to their competitors after they began raising their prices, but before the company was dissolved, providing good evidence that Standard lost their position as the most major player in their industry as a result, at least initially, more of “market forces” than “government intervention.” But he doesn’t mention what effects, if any, the dissolution in 1911 had on prices or on the quality of goods.

Of course, many other factors would have played into the prices and profit margins of the different companies, for example the declining use of kerosene for lighting due to the arrival of electric lightbulbs and the new use of gasoline for automobiles. I’m not sure if it would be possible to control for these other factors in order to determine the effect of the Supreme Court decision. But, while it’s a small criticism, (and Kolko certainly provides a lot of data throughout his book,) I do still wish Kolko provided more information.

Even so, I think Kolko calls into question what the government actually accomplished in taking Standard Oil to trial. The dissolution of the company may have produced enough sound and fury to give people the impression of government combating big business on behalf of the public, but in terms of actual benefiting society at large, it’s hard to say their actions had any strong effect.

I discuss the Standard Oil example at length because I think it’s perhaps the best example of the federal government acting contrary to the wishes of business tycoons. This was about as far as the government went, and Kolko shows that it really wasn’t far at all. In other industries, like Steel production, the executive branch of the federal government turned a blind eye to attempts by business leaders to collude and control prices. As Kolko describes, (pages 35 – 36,)

On November 21, 1907, forty-nine steel industry leaders met at the Waldorf-Astoria in New York to participate in the first of what were soon dubbed the “Gary Dinners.” Gary not only invited the steel men, however; he also notified the steel trade journals, the Department of Justice, the Department of Commerce, and the newspapers. Gary was anxious to avoid the impression that he was creating illegal price-fixing agreements or that there was anything secretive in his actions. At the meeting he stressed the need for industry cooperation and all the executives present attacked the demoralization of prices that had resulted from invasions of each other’s markets. In the hope of attaining price stability, the group agreed not to reduce prices without mutual consultation, and a committee of five, including Gary, was elected to give advice and conciliate differences. Gary insisted that the meeting was not an effort to fix prices but was instead an effort to maintain them by “gentlemen’s agreements.”

In late January, 1908, a larger number of steel executives, representing over 90 per cent of the industry, met again at the Waldorf. According to Gary “every manufacturer present gave the opinion that no necessity or reason exists for the reduction of prices at the present time…” This viewpoint was based not on a formal agreement, but on a consensus. The industry wanted competition, but not “bitter warfare.” Gary, at the same time, took steps to prevent government prosecution of his voluntary agreements. He wrote Attorney General Charles Bonaparte in February, 1908, that the understanding had been made at the initiative of large steel customers with expensive inventories who wanted the steel industry to maintain prices. Still insisting no formal agreements had been made, Gary wrote that “We are perfectly satisfied to limit the amount of our business to our proportion of capacity and to do everything possible we can to promote the interests of our competitors; and by frequent meetings and the interchange of opinions we have thus far been able to accomplish this result without making any agreements of any kind.” The meetings continued.

By May, 1908, however, breaks again began appearing in the united steel front. And Perkins complained to Morgan that U.S. Steel’s independent barons, still oriented towards industrial production rather than financial control, were among the leading trouble-makers. But rumors were circulating that price cuts were being made or were imminent, and in late May the steel men again gathered to reaffirm their loyalty to the Gary understandings. But it was of no use, and several weeks later they met again to reduce prices on a large number of major steel items to counter the secret price-cutters.

This passage from Kolko provides evidence that price-fixing through collusion tends to fail, not because of government protection of the public, but because it is in the interests of steel producers to cut the prices they charge to some of their customers, thereby breaking their agreements with their competitors to keep prices high, in order to draw those customers to them and away from their competitors.

Kolko provides similar evidence for an array of industries. Though anti-trust laws existed during this time, they often, as in this case, went unenforced. Companies attempted to gain monopoly powers through price-wars, collusion, buying up their competitors, integration along supply chains, and so forth, but overall, in the long term, these methods failed. They failed, not because the federal government took serious and far-reaching steps to stop them, which they did not, but because executives grossly overestimated the effectiveness of these voluntary means to try and establish control, and underestimated the extent to which others could successfully compete, and to which they had incentives to do so.

3) Business owners greatly influenced the federal government’s actions.

Kolko discusses in great depth the involvement of bankers in the creation of the Federal Reserve, and the involvement of various business owners in the creation of the Federal Trade Commission. But I’ll use his example of the meat-packing industry as an illustration, because it allows for a less verbose making of this particular point.

In the late 1800s, several governments in Europe banned importations of meat products from the U.S., the rationale being that the meat was too often unsafe for consumption. The major meat-packing companies in the U.S. wanted these bans to be lifted, so that they could profit from selling meat to European markets, and part of their effort to bring this about was to ask the U.S. federal government to inspect their meat-products for them. After years of such pressure, the federal government eventually obliged, slowly becoming more involved in inspecting the products of the meat-industry, though their actions were limited by the fact that they relied on the interstate commerce clause to give them the power to “regulate” the industry in this way. Kolko states, (on page 100,)

n March, 1891, Congress passed the first major meat inspection law in American history. … The Act provided that all live animals be inspected, and covered the larger part of the animals passing through interstate trade. Every establishment in any way involved in export was compelled to have a Department of Agriculture inspector, and violations of the law could be penalized by fines of $1,000, one year in prison, or both. … The law, in brief, was a rigid one, and had the desired effect. During 1891 and 1892, prohibitions on importing American pork were removed by Germany, Denmark, France, Spain, Italy, and Austria.

All this happened years before Upton Sinclair published his writings on the unsanitary conditions in the meat-packing industry. After Sinclair, and others, wrote their exposés on the industry, another law was indeed passed in 1906 reforming goverment inspection of meat, but the major meat-packers were not strongly opposed to the legislation. On the contrary, they supported it, as they had supported the earlier laws. Strong evidence that congress, and the federal government more generally, was working more with the major meat-packers than against them is given by the further fact that the law, while being debated in congress, was changed to accommodate what objections the meat-packers did have. Kolko continues his narrative, (on page 104,)

The measure was submitted as an amendment to the Agriculture Appropriation Bill, and the big packers indicated at once that they favored the bill save in two particulars. They wanted the government to pay for the entire cost of inspection, as in the past, and they did not want canning dates placed on meat products for fear of discouraging the sales of perfectly edible but dated products. Save for these contingencies, the Beverage Amendment received the support of the American Meat Packers’ Association and many major firms. The packers’ objections were embodied in the amendments to the Beveridge proposal made in the House by James W. Wadsworth, chairman of the Committee on Agriculture.

While President Theodore Roosevelt did object to Wadsworth’s changes to the bill, and congress debated the issue, the Act was eventually passed, and signed into law by president Roosevelt, with the changes still included.

This story is only one example of the kind of evidence Kolko’s book provides. The early 1900s are sometimes painted as a period when the federal government stepped in to protect the public from harm done to them by business elites, at the request of the public that they do so. If this were, in fact, what had happened, perhaps the period could be used to make the case that government can, and at some point in the past did, serve as a counter-weight to the power of capitalists and business owners. Perhaps, if this were what had happened, then one could point to the era as a demonstration of what government should be. One could then argue for a return to this sort of government, at least in the sense of a renewed effort to limit the excesses of businessmen through well-crafted government regulations.

But the government during this time did not serve as the defender of the public, nor as their servant. The “regulation” of the meat-packing industry could be more accurately called a “subsidy,” the government “socialized” the cost of meat-inspection and of persuading the governments of Europe, as well as the public in both Europe and the U.S., that the meat produced by the major packers was safe for consumption, while letting the meat-packers “privatize” the gains in the forms of higher profits from their renewed ability to export meat to Europe. If the meat-packing industry had had to do the work themselves, hiring third parties to inspect their meat and make sure it was safe before it was sold, then they might have been able to keep their meat safe without government inspection, but it would have cut into their profits in a way that tax-payer funded inspection did not.

It may, also, have been less effective at persuading consumers to purchase meat products; consumers may have been more careful in what they bought and ate had the inspection been done by an organization not affiliated with or run by the federal government. The federal government, essentially, used the public’s trust in them to shield the meat-packers from public scrutiny. Perhaps the public’s trust in the efficacy of government inspection was misplaced, given that Upton Sinclair’s research into the meat-packing industry, and his exposé of working conditions within it, occurred at a time when government was already inspecting meat. But, misplaced or not, the public did not appear to retract their trust when reform occurred in 1906.

This is a major reason why I want to encourage you, (yes, you, dear reader,) to read Kolko’s book. Many people still treat the government as somehow a protector of the public against business elites, rather than a protector of business elites against the public. When evidence is provided that, today, the government seldom, (if ever,) plays such a role, (evidence “progressive” authors like Robert Reich acknowledge, which one can see by reading his book Saving Capitalism, in which he discusses a great deal of such evidence at length,) the so-called “Progressive era” under Theodore Roosevelt is sometimes used as evidence that government can and has served such a role in the past, and thus that we simply need to repair government, returning it to its role as our collective servant and protector, rather than abandoning the hope that it will help us in our fight against corporate power and fighting both corporations and the State as two partners in oppression.

Kolko’s book provides the historical evidence necessary to realize that government was not, during Roosevelt’s presidency, under the control of the public at large in the way “progressives” like Robert Reich imagine. Nor was it the people’s guardian angel, as so many also, apparently, believe. Corporations may have become more powerful since the start of the twentieth century, but if there was ever an era of good government acting as the people’s common servant and protector against capitalism or the rich, the early twentieth century in the U.S. was not when and where it occurred.

TL;DR:

Gabriel Kolko’s The Triumph of Conservatism demonstrates that, through the late 1800s and early 1900s, business leaders’ efforts to gain control of their industries through voluntary means failed, not because of anti-trust legislation or government action, but because of the instability of monopolies in the market, even a market warped through intellectual property, tariffs, and subsidies in a way that one would expect to encourage monopolies to form.

Further, the federal government did not act as a servant of the general public. The influence business owners have today over government actions and policy is not new, (even though the problem may have worsened over time.) Even during the “Progressive Era,” supposedly a paradigmatic episode of “good government” acting on behalf of the people to protect them from monopolists and businessmen, the reality is that the government often acted, not only in the interests of those businessmen, but at their request, tailoring legislation, and interpreting legislation that was passed, in the ways financial elites asked them to do.

“Government regulation” does not, inherently, harm those at the top of the financial pyramid. Instead, it is often a tool they themselves ask for, and use to their own benefit, at the expense of the rest of us.

I hope that people will read this book, to inoculate them against the stories told by defenders of government “intervention” in the economy of how Theodore Roosevelt and the U.S. federal government saved the common people from the spectre of the robber barons. There was no “golden age” of pure Laissez-Faire, where a perfect free market made the world a better place before government destroyed it, but neither was there an age of government rushing in on white horses in shining armor to smite the dragon of unregulated capitalism. I want people to read up on the history for themselves, so that they need not be taken in by either “simple-telling,” but rather can gain an actual understanding of the history of the era, decide what course they want to try to take in their own political activism based on their knowledge of what took place, and debate the best path forward having come to a shared understanding of the facts, rather than tossing stones from the fortresses of their respective caricatures of history.

6 thoughts on “Book Review: The Triumph of Conservatism

  • I think your review was well done, and ranges well within the ranges of an academic essay (although perhaps brief and there is a lack of addressing counterpoints that arise from the discussion). This isn’t my field, but I’m assuming you are willing to accept a laymen’s opinion. While I enjoyed the discussion at present, the information was a little dated, and I think more modern examples may help illustrate the points being made. The book you are reviewing, seems to focus on how early 20th century government regulations benefited many of the large companies they are said to have been targeting. Which seems to coincide with the conventional wisdom of the pseudo conservatives (Republicans) of the day: regulations hurt small businesses.

    Your review covers two examples standard oil and the meat packing example, and I’m not sure either is perfect. The fact that the value of the standard oil companies rose after the split is immaterial, in less you/book is advocating that government regulation should be geared to leveling the playing field as it were (which may be the case as the author is referred to as a socialist). The ultimate fate of the standard oil scenario actual did end in enhanced competition (to the best of my knowledge), because unlike the implications these companies were not allowed to collude. You briefly mention that they were forced to split up geographically, which is a problem, akin to the “natural monopolies” that form in electric and communications districts. A modern example of this is when the government split up AT&T into the Bells.

    I’m not exactly comfortable with the meat packing example either. In the review you talk about the blind trust that the public had in the government regulation, and I know the FDA is definitely not perfect, but in the case of meat packing government regulation really has helped. US meat products are considered just about the safest in the world. I know that doesn’t negate the point you make about the government helping the large meat packers (not that that is necessarily sinister) , but I think other examples could enhance it. To address my aside, large meat packing companies and there employs would argue the government is doing there jobs by representing and helping them, the people. It would only be sinister if in so doing the government enhanced regulation which hurt smaller meat packing companies (and even then there is a debate to be had, but I digress). I think some modern examples might help drive the point home though.

    1) Speaking of food inspection and the FDA and sugar/corn syrup. It is reasonably well documented that the FDA has shielded and colluded with large sugar companies, to shield it from regulations/inspections that would be applied to any other industry.

    2) Prescription “consumer protection laws”, in essence these laws are used to protect consumers from malicious or misleading labeling; however the law is effectively used as a shield: companies meet these requirements and then shield themselves from lawsuits. The requirements of labeling laws also increases the entry level in an already difficult to enter industry. This comes with it’s own problematic dynamic, protecting consumers from something like this seems right, and goes to the first point – the world is complex.

    At any rate, I really enjoyed your review, and the hallmark of a good review should be to peak interests and spur discussion/action, so congrats.

    • Thanks so much for your response, Johnathan! I’m certainly interested in the opinions of non-economists, especially when they’re as thoughtful as yours. 🙂

      While I enjoyed the discussion at present, the information was a little dated, and I think more modern examples may help illustrate the points being made. The book you are reviewing, seems to focus on how early 20th century government regulations benefited many of the large companies they are said to have been targeting.

      It does. The subtitle of the book is actually, “A Reinterpretation of American History, 1900 – 1916,” and the author focuses on those years, although early in the book he discusses events in the late 1800s as well, to establish context. His thesis is that the praise “progressives” had for the government of the period was severely misplaced. He says on page 2,

      I contend that the period from approximately 1900 until the United States’ intervention in the war, labeled the “progressive” era by virtually all historians, was really an era of conservatism.”

      Hence he titled his book “The Triumph of Conservatism,” because he wanted to argue that this was what the “progressive era” really was.

      Kolko wanted to correct the misinterpretation of the historical period that so many progressives, (and others,) bought into, to show that just because government “regulated” business didn’t mean the regulations had “progressive” results or intentions. Rather, he thought that big businessmen wanted to make it easier for those on top to remain there. He basically interpreted “conservatism” to mean maintaining the economic status quo, though I expect you define it differently.

      Libertarians latched onto his evidence that, throughout the late 1800s and early 1900s, the various attempts to form monopolies through “voluntary” means, such as mergers and collusion, failed. Further, Kolko provides evidence that they failed not because government intervened to prevent monopoly, but because monopolies and trusts were inherently unstable without government backing, and largely for the reasons libertarian economists thought they would be. Thus, while Kolko himself implies that he favored certain sorts of government “intervention,” (just not the kind of “intervention” that actually took place,) libertarians took his data and ran, trying to use it to make the case that in a pure “free market” monopolies break apart, and companies compete, benefiting society at large.

      Further, libertarians used Kolko’s arguments about government/big-business collusion to try and argue against government intervention in the economy of any sort, which is of course not how Kolko wanted his book to be used.

      While I agree with libertarians, like David Friedman and Roy Childs, that Kolko provided good evidence to refute the claim that monopolies inevitably form in a market economy without the government stepping in to stop them, in writing my review I wanted to concentrate on a different aspect of Kolko’s book. “Progressives,” “democratic socialists,” and similar people today want to use government regulation to restrain corporations and benefit the public at large. They sometimes try to use the “progressive era” to defend their claim that government can work in this way, and they want people to become more politically active and bring this about. Robert Reich makes, basically, this argument in his book Saving Capitalism, which I read on the recommendation of a couple good friends of mine who are sympathetic to “democratic socialist” ideas.

      But Reich, with respect to him, doesn’t know what he’s talking about, at least regarding the specific point of what happened during the early twentieth century between government and big business. I want people to read Kolko’s work in part because it provides the evidence demonstrating this.

      Kolko’s work does not attempt to argue that government can’t intervene, economically, for the benefit of society at large, but it argues, persuasively, that during this specific time period in the U.S., this is not what they in fact did. Nor does he argue that the people can not control the government in order to make it serve their interests. Again, though, regardless of whether this can happen, Kolko provides good evidence that it did not happen. These are the points I wanted to draw out in my review.

      My hope is to be able to encourage my friends who worry about corporate power that they may be more successful fighting it through direct action, (e.g. supporting small business owners, independent artists, open source software and hardware, protesting and organizing boycotts when corporations severely harm society, etc.), rather than spending their energy trying to get government to help them.

      Your review covers two examples standard oil and the meat packing example, and I’m not sure either is perfect. The fact that the value of the standard oil companies rose after the split is immaterial, in less you/book is advocating that government regulation should be geared to leveling the playing field as it were…

      I think Robert Reich wants, more or less, government to help level the playing field, and he’s an influential progressive today. It’s one possible benefit people could claim government regulation has or had, so I wanted to point out that it did not occur in this case.

      The ultimate fate of the standard oil scenario actual did end in enhanced competition (to the best of my knowledge), because unlike the implications these companies were not allowed to collude. You briefly mention that they were forced to split up geographically, which is a problem, akin to the “natural monopolies” that form in electric and communications districts. A modern example of this is when the government split up AT&T into the Bells.

      You’re correct, the oil industry did see enhanced competition after the dissolution of standard oil, at least in terms of market share. Here’s a relevant passage from Kolko’s book, (page 40,) if you’re interested:

      In 1899 Standard refined 90 percent of the nation’s oil, and reached the peak of its control over the industry. During 1904-1907, however, Standard refined 84 per cent of the oil, and in 1911, the year of the dissolution, it refined 80 percent. The dissolution decree left the component Standard companies in noncompetitive positions with one another, and the combined share of refining of this conglomeration declined to 50 per cent in 1921 and 45 per cent in 1926. It is clear that from 1899 on Standard entered a progressive decline in its control over the oil industry, a decline accelerated, but certainly not initiated, by the dissolution.

      Kolko then goes into more detail, discussing the number of companies in the oil refining industry, (67 in 1899, 147 about a decade later, before the dissolution decree,) and the success of specific companies in competing with Standard in various ways. I think his data indicates that, while the government dissolution of Standard Oil may have helped encourage more competition, competition was already growing before Standard Oil was dissolved. I believe this provides us with evidence that government intervention was not as necessary to prevent monopolies from forming as many progressives today believe.

      Another point, regarding Standard Oil, is that I believe other actions taken by government encouraged centralization within the oil refining industry. I would bring up two things in particular: First, Kolko mentions on page 41 that “patent pools” prevented the oil refining industry from being as competitive as it could have been during the 1920s. While one could defend patents for various reasons, (as people like Ayn Rand did,) if intellectual property is a source of monopoly power, then libertarians can at least argue that the other potential sources of monopoly power, such as an ability to collude, merge with competitors, and cut prices, may not be as effective as progressives believe. If various quasi-monopolies that have existed in the real world are partially attributable to intellectual property, then this takes away some of the blame for formation of monopolies from the other causal factors mentioned.

      Second, while I don’t remember Kolko mentioning this in his book, (perhaps he does in his other book Railroads and Regulation,) government gave away vast swaths of land to railroad companies around the turn of the twentieth century. (Another author, Kevin Carson, discusses this in his book Studies in Mutualist Political Economy.) I think this means that the power major railroad companies had was largely a result of government helping them out. This is relevant for the oil refining industry because, (as Kolko does briefly allude to,) one way that economists argue Standard used to try and cut down competition was by colluding with the railroad companies through rebates. (Unless I’m remembering wrong, they tried, successfully in some cases, to get the railroads to charge them lower prices than their competitors in exchange for the assurance of continued business, which helped Standard Oil lower their own transportation costs relative to the costs their competition had to deal with.)

      If government had not subsidized the railroad companies, or even not subsidized them as much, the railroad industry might have been more competitive, and in turn it might have been more difficult for Standard to collude with railroad companies in order to try and monopolize their own industry. (I expect it would have been more difficult, and costly, for them to negotiate with more and smaller companies, and it would have been easier for their competitors to find railroad companies willing to charge lower prices for transportation of petroleum products.)

      All this to say, I do think there are good reasons to believe that government was not nearly as responsible for encouraging competition in the oil industry as progressives believe, and that if the market had been relatively “free,” with no anti-trust suits and no railroad subsidies, (and possibly with no protection of patents, though whether or not to support intellectual property is something libertarians debate amongst themselves,) the industry would still have been competitive, at least enough to benefit society in general and prevent Standard or others from gaining so much power that they could do great harm to the public.

      Responding to your point that “unlike the implications these companies were not allowed to collude,” Roosevelt thought of the companies in the oil and meat-packing industries as “bad trusts,” but he and others in his administration were fine with attempts at collusion in many other industries. This was what I hoped to convey with the long quote about the Steel industry. Since Roosevelt was technically still in office until 1909, the “Gary Dinners”, in which the Steel companies attempted, (unsuccessfully,) to collude in order to fix prices, happened during Roosevelt’s administration as well. The federal government turned a blind eye to this collusion, Gary’s meetings went on even though he explicitly notified the government that they were occurring, and it seems obvious that they were attempts at collusion.

      I’m not exactly comfortable with the meat packing example either. In the review you talk about the blind trust that the public had in the government regulation, and I know the FDA is definitely not perfect, but in the case of meat packing government regulation really has helped. US meat products are considered just about the safest in the world. I know that doesn’t negate the point you make about the government helping the large meat packers (not that that is necessarily sinister), but I think other examples could enhance it.

      Kolko’s discussion of meat inspection was, indeed, of how it was over a hundred years ago. I haven’t studied government inspection of meat today, so it’s certainly possible they do a better job, as you say. To argue well against government regulation of food, I’d need to rely on examples other than those in Kolko’s book.

      My main point though, (which you acknowledge,) was that this was not a case of the public getting the government to fix the meat industry, but rather of the meat industry getting the government to pass legislation in their own interests. I want to refute the idea that government served the public and fought big business, during this time, and I think the example works alright for that.

      The two more recent examples of government collusion with business interests and creation of barriers to entry both sound like excellent examples, and I may make use of them in future posts. In the present essay, I was definitely interested in examining a particular historical era, though. Rather than discussing the harm done by government regulation today, I wanted to refute the claims some make that the government did a good job of regulating the economy during the early 1900s.

      At any rate, I really enjoyed your review, and the hallmark of a good review should be to peak interests and spur discussion/action, so congrats.

      Thanks so much! I’m happy you enjoyed my review, and that it could generate good discussion. 🙂

  • *Great Review!*

    Another good sign of a good review is that while I haven’t read the book, I feel like I have a good sense of it now, and if you asked me about it in like 3 years I would likely still remember the gist of what the book says, thanks to this review. So thanks!

    . . .

    *Voluntary Solutions vs State Solutions*

    “My hope is to be able to encourage my friends who worry about corporate power that they may be more successful fighting it through… supporting small business owners, independent artists, open source software and hardware, protesting and organizing boycotts when corporations severely harm society, etc… rather than spending their energy trying to get government to help them.”

    Oh, Jacob… [swoons] … Music to my ears!

    I hope we can convince everybody that it’s best to fight any non-violent actions/ideas we don’t like using the non-aggressive free market measures you mentioned!

    Especially when you compare that approach to advocating for first stealing money from people, then using that money to hire thugs and mercenaries to cage and kill anyone espousing ideas we disagree with and/or taking non-violent, non-aggressive actions we don’t agree with — basically, instead of ‘trying to get the government to help them.’ Really want to get people to stop advocating for that morally and logically bankrupt approach!

    . . .

    *State History Vs Real History*

    “I hope that people will read this book, to inoculate them against the stories told by defenders of government intervention…”

    If this book is an inoculation against the lies told by State worshippers, then it’s one mandatory vaccine I might consider… 😉

    I’ve long been convinced that people’s primary historical/data-based arguments against freedom are virtually always rooted in lies the State has told us. A lot of libertarians (me included!) get tangled by taking the State’s version of history as factual. It’s tough to advocate for the voluntary solution in the face of a lie that makes it sound impossible. I’ve been learning to first question the legitimacy of the State’s version of the story, and almost invariably, I find the story is totally bogus, and that real story — every time — supports the voluntary approach. Sounds like this book backs up this learning!

    . . .

    *Who Does State Regulation Benefit?*

    In Jacob’s reply to Johnathan’s comment, Jacob — with a little bracketed help — really hits the big-picture story-of-regulation nail on the head:

    “…big businessmen wanted [the State to use force] to make it easier for those on top to remain there.”

    I think it’s one of the saddest ironies that sweet, kind hearted people have been tricked (for a long time) into supporting policies like ‘regulation’. Most good hearted people seem to believe that it is only logical that ‘regulation’ was invented by good hearted activists like themselves, obviously in an effort to put an end to the evil practices of those top-hat wearing monocled fat cat capitalists, the greedy bastards!

    And these poor, sweet, true believer souls seem to believe that logically, the fat cat capitalists MUST be totally OPPOSED to regulation.

    Bless their little true believing hearts.

    Anyone that can set emotion and sappy rhetoric aside and just look at the facts of the situation can see that (somewhat obviously and) logically speaking, that doesn’t make any freakin’ sense whatsoever.

    Setting aside any historical evidence or data (for the moment), and using just sound, logical, commonsensical detective work, let’s just think about it for a second:

    Cui bono? (If you’re not starting there, you’re not really doing an investigation in my book!)

    Who benefits the most from State regulation of industry?

    Nobody wants a minimum wage more than McDonald’s and Walmart and Starbucks. How could anyone start a competitor to an entrenched corporation like these when they aren’t free to hire workers at whatever wage they want (or at least at the wages these firms hired their first workers)? The answer is they can’t. Whatever else you want to think about the situation, logically, the fact of the matter is that the minimum wage ensures McD’s, Sbux, etc. will always be on top.

    Nobody wants tougher government regulations on meat inspection than Tyson and Simmons. If they violate regulations and get slapped with a multi million dollar fine, they pay it, and keep right on trucking. If a small upstart tried to compete and got slapped with even a small fine, they are kaput. The cost of complying with regulations ensures that Tyson and their kind will never face new competition.

    Logically speaking, that is. Whatever else you want to say about it, ceteris paribus, the only way big business could be opposed to regulation would be if they are acting totally irrationally. (And you don’t get to that amount of annual revenue by acting irrationally!)

    Not only can the big companies not logically be opposed to regulation, minimum wages, etc. — they, logically speaking, would be the most likely people to have invented the ideas in the first place! (!!)

    Regardless of who actually invented the idea of ‘State regulation of business’, the LOGICAL guess at who invented it would have been someone favorable to big business.

    Without any historical data, and simply asking ‘cui bono’, it makes perfect logical sense to come to the somewhat obvious conclusion that Big Business would have invented the idea of the modern regulatory State if someone else hadn’t done it for them.

    It sounds like Kolko’s work documents that this logically obvious conclusion happens to also be historically accurate — or, at least looking at the data he is discussing, it would appear to support this (non-State propaganda) view of the history of regulation.

    . . .

    *NEW! Study from Fancy-Pants U. Reveals 2 + 2 = 4*

    It makes sense to me that many libertarians would find this evidence useful, as most Statists and anti-freedom people aren’t capable of being satisfied with a 100% logically sound argument.

    Most people have an emotional response of ‘I won’t believe it till I see it’ when hearing logically sound arguments against the State (because of the whole lifetime of State education/media indoctrination situation).

    So, I can totally understand why “…libertarians took his data and ran, trying to use it to make the case that in a pure ‘free market’ monopolies break apart, and companies compete, benefiting society at large. Further, libertarians used Kolko’s arguments about government/big-business collusion to try and argue against government intervention in the economy of any sort…”

    It’s great to have some real world examples of the ironclad logic at work, as it helps to appease emotion-driven debaters.

    Having said all that, I want to make sure one crucial point is coming out, just in case it isn’t clear:

    Small-L libertarians believe Kolko’s conclusions are accurate NOT necessarily because the data bears them out, but because those conclusions are the only (a priori) logically possible ones. Two plus two equals four — if Kolko’s work showed that it equalled five, libertarians would tell Kolko to go back and figure out what he got wrong…

    . . . . . . . . .

    *Got a few questions for Jacob:*

    1. Doesn’t it stand to reason that with no State to turn to, the corporations would have to resort to voluntary-only measures?

    (You said that “corporations and the State as two partners in oppression.” Without the help of the State, i.e., without the crucially-important-for-oppression partner, how would corporations go about oppressing people? According to your review, the corporations in question were unable to oppress people in the sense that their non-State-enforced monopoly measures failed, so they turned to the State to do their oppressing for them. Is the State not the source of the problem, and regardless of the corporations’ contribution to the problem, without the State, the problem would cease to exist? At least, seemingly, based on Kolko, and logic…?)

    . . .

    2. Do you think it’s correct to assume a private inspection agency wouldn’t be able to garner greater trust than the FDA (and/or just State inspection agencies in general)? Why/Why not?

    (You said, roughly, “[A private food inspection agency may be] less effective at persuading consumers to purchase meat products [than the State.]” I would argue it’s completely hypothetical — and logically wrong — to assume a private entity would be less effective at persuading consumers than the State.)

    . . .

    “…[Kolko] provides us with evidence that government intervention was not as necessary to prevent monopolies from forming as many progressives today believe.”

    3. Isn’t it evidence that no intervention is necessary at all? The quotes made it sound like the monopoly was failing and failing fast.

    . . .

    4. Where does monopoly power come from? (What makes a ‘power’ a ‘monopoly’ power? In the quotes from the book, the businesses had the abilities you mentioned, but it clearly did NOT grant them monopoly power. What GRANTS monopoly power to a business or group of businesses?)

    You said, “…a source of monopoly power, then libertarians can at least argue that the other potential sources of monopoly power, such as an ability to collude, merge with competitors, and cut prices, may not be as effective as progressives believe.”

    I’m confused — are you saying these are the sources of monopoly power? The ‘ability to collude’ is a source of monopoly power? The ‘ability to merge with competitors and cut prices’ are sources of monopoly power?

    . . . . . . . . .

    *And a question for Johnathan:*

    “…the FDA is definitely not perfect, but in the case of meat packing government regulation really has helped.”

    Helped compared to what? “US meat products are considered just about the safest in the world.” Compared to other States?

    That is: Do you have have any non-State-inspected meat products that you can compare to State-inspected ones such that you could determine whether State-inspection is ‘better’ than privately offered inspection services? People are forced to use State-inspection making it essentially impossible (certainly unreasonable) to try and develop any sort of private competition, as firms would be unable to threaten to cage/kill people that didn’t purchase their services.

    How do you know that in a free society, a private ratings/inspection agency (or similar private firms) couldn’t perform all the functions of the FDA in a much, much better way? (It would be pretty hard to do it WORSE than the FDA!)

    • I’m glad you enjoyed my review! I’ll try to respond to your points here.

      I hope we can convince everybody that it’s best to fight any non-violent actions/ideas we don’t like using the non-aggressive free market measures you mentioned!

      Me too.

      It’s great to have some real world examples of the ironclad logic at work, as it helps to appease emotion-driven debaters.

      Having said all that, I want to make sure one crucial point is coming out, just in case it isn’t clear:

      Small-L libertarians believe Kolko’s conclusions are accurate NOT necessarily because the data bears them out, but because those conclusions are the only (a priori) logically possible ones. Two plus two equals four — if Kolko’s work showed that it equalled five, libertarians would tell Kolko to go back and figure out what he got wrong…

      You are incorrect. You’re thinking of a subset of Austrian Economics, not the whole of libertarianism. Some, (but not all,) Austrian Economists are/were advocates of “extreme a-priorism” in the way you describe, and some, (but not all,) libertarians are Austrian Economists. Murray Rothbard, in particular, was both a libertarian and an Austrian Economist who advocated for the methodology you refer to. Walter Block is both, as well.

      F.A. Hayek, if I remember right, was a positivist, employing a methodology similar to that advocated by philosopher of science Karl Popper. Hayek was also an Austrian, and a libertarian, but did not use the same methodology as Rothbard and Block. David D. Friedman is a libertarian, but is a Chicago school economist, not an Austrian, and I believe he rejects Rothbard’s extreme reliance on a priori arguments on the grounds, (more or less,) that reality is too complicated to be understood through arm-chair reasoning alone.

      I, for my part, am an empiricist. I find it a little bewildering that you imply the only reason one might reject Rothbard’s armchair-reasoning methodology is because one is driven by “emotion.” I reject synthetic a priori argumentation because I want to understand the real world, not just play logic games, and to do so I must derive my ideas from the evidence available.

      1. Doesn’t it stand to reason that with no State to turn to, the corporations would have to resort to voluntary-only measures?

      (You said that “corporations and the State as two partners in oppression.” Without the help of the State, i.e., without the crucially-important-for-oppression partner, how would corporations go about oppressing people? According to your review, the corporations in question were unable to oppress people in the sense that their non-State-enforced monopoly measures failed, so they turned to the State to do their oppressing for them. Is the State not the source of the problem, and regardless of the corporations’ contribution to the problem, without the State, the problem would cease to exist? At least, seemingly, based on Kolko, and logic…?)

      You raise a good point, perhaps capitalism can not exist without the State… except that’s not what you meant, is it? 😉

      More seriously, though, the State is only one avenue through which people can engage in coercion. So, no, abolition of States would not guarantee that companies could only use voluntary means to try and monopolize their markets. I do think it would help, though. I’m not arguing that the problem would cease to exist, merely that fighting the State’s cartelization of the economy is an essential part of the solution, that we do not need a State to help us in order to successfully fight monopolies, and that the government is extremely unlikely to help us anyway.

      2. Do you think it’s correct to assume a private inspection agency wouldn’t be able to garner greater trust than the FDA (and/or just State inspection agencies in general)? Why/Why not?

      I wouldn’t say they couldn’t for certain, but my reasoning is that, (today at least, maybe less so in the early 1900s,) people are indoctrinated and conditioned into trusting government without much question. It seems like other institutions would have a hard time indoctrinating people to the same degree.

      Although, it occurs to me that religion exists in plenty of stateless societies in the anthropological record, so maybe my logic here is less sound that I’d thought, I’m not sure. Sounds like logic in and of itself might not be enough to answer your question, we may need data.

      “…[Kolko] provides us with evidence that government intervention was not as necessary to prevent monopolies from forming as many progressives today believe.”

      3. Isn’t it evidence that no intervention is necessary at all? The quotes made it sound like the monopoly was failing and failing fast.

      Evidence, yes, but not proof, not in the sense of a geometric proof that you are wanting. I think Kolko’s book provides persuasive evidence that, if government did not maintain monopolies, we would not need anti-trust laws to protect us, though.

      4. Where does monopoly power come from? (What makes a ‘power’ a ‘monopoly’ power? In the quotes from the book, the businesses had the abilities you mentioned, but it clearly did NOT grant them monopoly power. What GRANTS monopoly power to a business or group of businesses?)

      You said, “…a source of monopoly power, then libertarians can at least argue that the other potential sources of monopoly power, such as an ability to collude, merge with competitors, and cut prices, may not be as effective as progressives believe.”

      I’m confused — are you saying these are the sources of monopoly power? The ‘ability to collude’ is a source of monopoly power? The ‘ability to merge with competitors and cut prices’ are sources of monopoly power?

      Ok, there are different kinds of “power” here. We can talk about a company’s ability to gain “economic profit” in the “long term,” something which, in theory, diminishes as more competition occurs. We can also talk about a company’s ability to prevent competition from occurring, which, in theory, would improve their ability to gain economic profit, because of the previous principle. “A company’s ability to prevent competition from occurring” is, basically, what I mean by “monopoly power.”

      We can, remaining in the realm of theory, come up with hypotheses about what means companies might try to use to prevent competition in their markets. Lets call the various means we could come up with “potential sources of monopoly power.” We could also come up with hypotheses about the likelihood that these various potential sources of monopoly power could enable companies to successfully limit competition.

      However, in my view we must then test our hypotheses against reality in order to learn how accurate our predictions were, and in order to understand the real likelihood that different potential sources of monopoly power would work under different circumstances. The evidence provided in Kolko’s work enables us to do this, and the result is that some potential sources of monopoly power, (collusion, price wars, integration along supply chains, and mergers,) empirically work quite poorly under certain circumstances, (a market with little-enforced and vaguely-interpreted anti-trust laws, State protection of intellectual property, State subsidies to firms, (e.g. land grants to timber and railroad companies,) and tariffs, as well as various other factors that my review ignores.)

      Kolko’s book also provides some evidence that other potential sources of monopoly power are far more likely to work effectively. Patents and intellectual property had monopolizing effects, the creation of the Federal Reserve had a monopolizing effect, the Bureau of Corporations’s informal policy of helping some corporations avoid prosecution, (which I didn’t discuss in my review, though in retrospect it probably would have improved the case I was trying to make,) may have had a monopolizing effect as well.

      You’re thinking of this in terms of logical absolutes and floating abstractions, I’m thinking of it in terms of a scientific theory explaining the empirical evidence available to us and helping us understand the real world.

      You also ask Johnathan a question about State inspection of meat. I’d like to comment on that as well. I do expect other groups besides the State could keep food safe, but I imagine Johnathan was merely comparing safe and unsafe food, and arguing that, with State inspection today, meat doesn’t often cause people to become ill. His comparison is to a hypothetical State agency that does a worse job than the actual agency, (or a worse job than he believes the actual agency does.) The possibility of other institutions keeping food safe to eat doesn’t preclude the possibility that the State keeps food safe today.

  • “You are incorrect. You’re thinking of a subset of Austrian Economics, not the whole of libertarianism.”

    1. Where did I say it applied to the ‘whole of libertarianism’? (Hint: I didn’t.)

    2. What is a short, working definition of ‘libertarianism’?

    3. Roughly how many ‘subsets of Austrian Economics’ are there? (Hint: There are none.)

    . . .

    “I find it a little bewildering that you imply the only reason one might reject Rothbard’s armchair-reasoning methodology is because one is driven by “emotion.””

    I’m bewildered as well considering I can’t find anywhere in my response where I implied the ‘only reason one might reject Rothbard’ is emotion.

    4. Can you quote for me where I made this implication? (Hint: I didn’t.)

    . . .

    “I reject synthetic a priori argumentation because I want to understand the real world, not just play logic games, and to do so I must derive my ideas from the evidence available.”

    I accept a priori conclusions because I want to understand the real world, not just play logic games. I also derive my ideas from the evidence available.

    (In addition to being just plain rude, mean-spirited dross like this accomplishes nothing. I’d encourage you to leave it on the playground with the children, where it belongs.)

    . . .

    “You raise a good point, perhaps capitalism cannot exist without the State… except that’s not what you meant, is it?”

    5. What is the definition of ‘capitalism’?

    . . .

    “…abolition of States would not guarantee that companies could only use voluntary means to try and monopolize their markets.”

    6. My questions was: how would companies monopolize their markets without the State? I was using the common, accepted definition of ‘monopolize’. Are you saying that companies would be able to monopolize their markets using this (the common/correct) definition of monopoly? If so, then back to my original question: how would companies monopolize their markets without the State? Where would the ‘power’ to monopolize come from?

    . . .

    “I think Kolko’s book provides persuasive evidence that, if government did not maintain monopolies, we would not need anti-trust laws to protect us.”

    7. Ok, just to be extra clear: you think the big corporations are NOT the ones writing the anti-trust laws themselves, ensuring they benefit themselves? (You think banking regulations DON’T come from Goldman Sachs boardrooms? You think people are coming up with anti-trust laws and working hard to get those laws passed because they are looking out for your best interest?)

    . . .

    “The phrase ‘monopoly power’ is defined as ‘a company’s ability to prevent competition from occurring’.”

    Let me see if I understand what ‘monopoly power’ is:

    ANYTHING a firm does that would diminish it’s competition is a ‘monopoly power’. Sending goons around to bash competing firms’ employees over the head would be one ‘source’ of ‘monopoly power’ (as we’re now defining it). Creating a cure for cancer and selling it for 1 penny per life saving dose would ALSO be a source of monopoly power. And so on and so forth, i.e., there are lots of ‘sources’ for ‘monopoly power’ (at least in this new, ad hoc definition).

    8. Am I understanding your definition of ‘monopoly power’?

    . . .

    “You’re thinking of this in terms of logical absolutes and floating abstractions…”

    9a. How so? What logical absolute? What floating abstractions? Quote an example of either one of these back to me.

    9b. Or, are you just trying to be mean? (Hint: you were just trying to be mean.)

  • ME: What is a short, working definition of ‘libertarianism’?

    YOU: “‘Libertarianism,’ I guess I would define as ‘an ethical philosophy forbidding the initiation of force,’ though that’s not how communists would define it.

    2.1: When you say you ‘guess’ you would define it this way, surely you aren’t suggesting you don’t know what you mean by the word, are you? (Why the ‘I guess’?)

    . . .

    ME: What is the definition of ‘capitalism’?

    YOU: “An economic system that has a form of norms of resource usage (‘property’), and also allows owners of property to engage in usury.”

    5.1: Name one country currently in existence today that isn’t using Capitalism (as you just defined it)?

    5.2: If we replace ‘usury’ in your definition with your previously given definition, it leads me (unsurprisingly) to the questions I’ve previously asked you regarding usury that you haven’t answered because you needed ‘more time to think about these ideas’. Are you suggesting that you’ve now had sufficient time to think about them, and you’re prepared to answer those questions?

    . . .

    ME: How would companies monopolize their markets without the State? Where would the ‘power’ to monopolize come from?

    YOU: It’s a matter of degree… I can’t think of any example of a “monopoly,” [i.e., ‘single seller’]… The concern… is more about how owners of a company treat [people]… The less competition, the easier it will be for people to treat each other poorly. Meh, I’ll have to come back to this…

    ME: When I asked my question, it was directly in response to you saying you “use ‘monopoly power’ to mean… ‘The ability to eliminate competition, and keep out newcomers.” I was asking “Where does this ‘ability’ THAT YOU SPEAK OF come from?” But now, insanely conveniently for you, you pull the rug out from under me: you don’t use YOUR OWN definition in your answer. You switch it out with this brand new definition of ‘single seller’ that you JUST GOT from glancing at a textbook AFTER you gave your original definition. You’re as slippery as a greased pig.

    6.1a: How am I supposed to analyze (or even understand) your position considering your employment of this technique? (You did it to me in the latest response to my 26 Questions post, swapping out the ‘single seller’ definition for a yet still third different definition of ‘monopoly power’.)

    6.2a: How is this not redefining the word, repeatedly?

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