Amity Shlaes on the Robber Barons

http://www.futureofcapitalism.com/2010/10/amity-shlaes-on-the-robber-barons

Amity Shlaes has a really wonderful piece in the weekend Wall Street Journal reviewing the book American Colossus: The Triumph of Capitalism 1865-1900 by H.W. Brands:

"Colossus" also reminds us of something more subtle: the terrifying difficulty of remaining at the top once one has arrived....Mr. Brands laments that capitalism's triumph in the late 19th century created a disparity between the "wealthy class" and the common man that dwarfs any difference of income in our modern distribution tables. But this pitting of capitalism against democracy will not hold. When the word "class" crops up in economic discussions, watch out: it implies a perception of society held in thrall to a static economy of rigid social tiers. Capitalism might indeed preclude democracy if capitalism meant that rich people really were a permanent class, always able to keep the money they amass and collect an ever greater share. But Americans are an unruly bunch and do not stay in their classes. The lesson of the late 19th century is that genuine capitalism is a force of creative destruction, just as Joseph Schumpeter later recognized. Snapshots of rich versus poor cannot capture the more important dynamic, which occurs over time.

One capitalist idea (the railroad, say) brutally supplants another (the shipping canal). Within a few generations—and in thoroughly democratic fashion—this supplanting knocks some families out of the top tier and elevates others to it. Some poor families vault to the middle class, others drop out.

The article also draws a useful distinction between "political entrepreneurs" and "market entrepreneurs."

by Ira Stoll  |  Oct 17, 2010 at 9:31 am Related Topics:  Income Inequality receive the latest by email: subscribe to the free futureofcapitalism.com mailing list