Myth of the Robber Barons - Book Report/Review Example

Myth of the Robber Barons Four successful market entrepreneurs who became successful in large part by focusing on cost-cutting and increasing efficiency John D Rockefeller was from a modest family, born of a peddler father. His first job was at the age of sixteen as an assistant bookkeeper. He worked and saved the meager salary from his first job until it was enough to invest in an oil refinery, in Ohio, together with his friend (Folsom, 14). Cornelius Vanderbilt was a steamship entrepreneur recognized for his punctuality in business dealings with larger and faster steamships. His fame mostly comes from his defeat of Fulton’s monopoly in New York (Folsom, 1-4). Andrew Carnegie worked in the steel industry. He was Charles Schwab’s employer and a business competitor of the Scranton Family. Cutting costs became his obsession, a fact that saw him profit and outdo his competitors (Folsom, 20). James J Hill is known for railroad construction. After his father’s death when he was just fourteen, Hill dropped out of school. He took jobs in grocery, farming, and shipping, fur trading, steamship and finally railroad to support his family. With time, he saved enough money to invest and manage his own business enterprise (Folsom, 6). Market entrepreneurs and political entrepreneurs and give at least two examples of each. A market entrepreneur also called a capitalist, base his or her financial success on sales of new or improved products in the free market devoid of government subsidies. This, he or she does either directly or indirectly, with the sole purpose of pleasing consumers. Examples of market entrepreneurs include John Rockefellerand Cornelius Vanderbilt. A political entrepreneur, on the other hand, bases his financial success on his ability to influence government subsidies on products. Furthermore, he can influence the enactment or regulation of legislation to favor his business while harming his competitors. Examples of political entrepreneurs include Leland Stanford and Henry Villard. How Cornelius Vanderbilt was able to out-compete Fulton and Collins. Cornelius defied the steamship monopoly on steamboat traffic that was handed to Robert Fulton. Cornelius successfully competed with Fulton by charging lower rates on his steamboats. He also introduced a flag on his boats reading ‘new jersey must be free’. Fulton monopoly was broken down and ended by the US Supreme Court. How James Hill outperformed the Union Pacific, Central Pacific, and Santa Fe railroads. Union pacific and central pacific were outperformed by Hill’s Northern pacific because the latter used shorter routes to construct his railroads. His competitors concentrated on faster construction with poor quality materials. Hill, on the other hand, used high quality materials irrespective of their cost. How Charles Schwab and Andrew Carnegie outperformed competitors and why these methods not successful at U.S. Steel Charles and Andrew motivated workers by providing a twenty-dollar bonus for those who made the least number of substandard rails. This ensured they produce quality work that translate into profits. After Andrew selected him as president, Charles held meetings with officials in his mills to sort out their problems on a weekly basis. These methods were unsuccessful because the US Steel board of directors rejected them. The new owners were not interested in cutting costs or innovation but on business stability. Why Andrew Mellon’s attempts to cut taxes were opposed so strongly as U.S. Treasury Secretary Mellon was met with opposition because many people criticized his close business ties. In addition, the stock crash of 1929 also affected his proposals. These two reasons saw Mellon lose the trust of the president (Folsom, 103). Why so many U.S. congressional representativesexhibit anti-business attitudes This is because congressmen and women are politics oriented, and as such are only concerned with influencing policies as opposed to undertaking capitalism. FDR’s Folly, Part 1 The New Deal was not a program for recovery; it was a program for reform Roosevelt’s New Deal came in handy when America needed it. This was during the Great Depression that caused immense suffering to Americans. New deal was responsible for the creation of an activist state that focused on providing market security for individual citizens. In short, it reformed America. In terms of recovery, critics suggest that the New Deal prolonged the Great Depression. This is due to increased unemployment rates with slower economic growth. Examples of anti-big business attitudes among FDR’s “brain trust Raymond Moley, James Farley and Frances Perkins Three examples of how the New Deal was designed to replace individualism with collectivism. Its price fixing act fostered collectivism. Wealth redistribution through taxation unified the public. New Deal also adoptedcentral banking system,as opposed to bank branching fostered collectivism. Three causes of the Great Depression according to Powell, including monetary actions by the Federal Reserve Bank of New York in 1927-1929 The 1929 stock market crash Unfavorable banking policies led to credit overexpansion causing debts. There was increased production of consumer goods What caused bank failures during 1929-1933 There was reduced investment in banks, which was followed by an increased number of customers withdrawing from the banks. This went on for a long time as customers foresaw banks becoming insolvent. The result was destabilization of many banks that fostered bankruptcy. Why the money supply contracted by one-third from 1929-1933 This occurred due to the bank runs that contributed to bankruptcy. As such, there was no money because of the bank holiday imposed to stabilize the economic situation. Why most historians attribute the causes of the Great Depression to speculators, Wall Street, business people, and rich people Most historians relate the great depression to the robber barons, who they believe created this problem Why Banking Act of 1934 (Glass-Steagall Act) was enacted, and describe the effects. It was enacted to reduce the risks of bank runs and regulate speculations. This it achieved by limiting activities of commercial bank securities as well any affiliations between them and security firms. It led to the reestablishment of economic stability that was lost before. Why FDR took the United States off the gold standard This was done so that the amount of money in circulation was increased so that it suited the economy then. This enabled inflationary forces to lift the economy. Why FDR raised taxes FDR raised the tax on wealth up to increase state earnings and spending. The purpose, scope, and effects of the National Industrial Recovery Act This act was created so that it could improve the deflating prices with the aim of helping workers and their businesses. It also allowed trade groups to define wages, production prices, as well as working conditions. It covered many industries, more than 500, ranging from poultry production to steel and autos. It was later deemed unconstitutional after its failures, including higher wages, overproduction, and underconsumption. How price-fixing of agricultural products was accomplished This was achieved through artificial scarcity where farm outputs like were subjected to domestic allotment. This ensured that a total output of these products was set. In addition, the government paid owners of land to leave some of their lands idle. Furthermore, plenty of crops were left to rot while excess pigs were slaughtered. FRD’s Folly, Part 2 Why the U.S. Supreme Court determined the early New Deal legislation was unconstitutional in the following cases: Panama Refining Co. v. Ryan, 293 U.S. 388 (1935) [separation of powers] The Supreme Court found out that the congress vested the President with legislative power without clear definition. As such, most of legislative functions were performed or interfered with by the executive. Schechter Poultry Corp. v. U.S., 295 U.S. 495 (1935) [ICC, enumerated powers] Here, the congress was also found to violate the commercial clause, hence, unconstitutional. Carter v. Carter Coal Co., 298 U.S. 238 (1936) [enumerated powers] The Supreme Court differentiated ‘commerce’ from ‘production’ citing overstepping of congressional boundaries in the Bituminous Coal Conservation Act. United States v. Butler, 297 U.S. 1 (1936) [Hoosac Mills case] [enumerated powers] The Supreme Court held that processing taxes were a violation of the tenth amendment. This is because farmers were paid from oppressive and coercive contracts. Morehead v. Tipaldo, 298 U.S. 587 (1936) [freedom of contract] It was considered unconstitutional since the law violated the liberty, which is protected by the fourteenth amendment’s due process. Why there was not widespread support for a U.S. federal pension plan prior to 1935 This is because the majority of Americans were either domestic or farm workers, both of whom were not catered for in the pension plan. Why there is a pervasive misunderstanding that citizens who have paid Social Security taxes are entitled to benefits when they retire from taxes they paid while working It is a popular belief that any deductions in the name of social security are reclaimable later and belong to an individual. Why the federal government adopted compulsory union membership and collective bargaining during the 1930s Compulsory labor union was encouraged to prevent bad faith bargaining as well as protecting employees from unfair practices by employers. The significance of the Supreme Court’s decision in; West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937) [freedom of contract] In this case, the Supreme Court upheld the Washington state law of minimum wage. Previously anti new deal justice Owen Roberts voted for it. This led to the creation of pro-new deal majority that ensured interventions of the government into the economy was not considered unconstitutionally anymore. NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937) [Wagner Act] This case ended the court’s interference with the New Deal’s legislation in terms of economy. The congress also gained more power because of the Commerce Clause. Helvering v. Davis, 301 U.S. 619 (1937) [enumerated powers] This case upheld the social security role as constitutional, as was the tax on employees. Steward Machine Co. v. CIR, 301 U.S. 548 (1937) [enumerated powers] This case challenged the constitutionality of the tax under social security act. The Supreme Court decided that it was constitutional and uniform across all states. United States v. Carolene Products, 304 U.S. 144 (1938) [fundamental rights] This case wished to render the federal law prohibiting the shipment of filled milk in interstate commerce. However, it was constitutional due to the previously changed Commerce clause. Currin v. Wallace, 306 U.S. 1 (1939) [enumerated powers] The congress was allowed to put into practice the Tobacco inspection act of 1939. The current policy of the Supreme Court in determining whether a law is constitutional using analysis of fundamental and non-fundamental rights The strict scrutiny policy is applied under the equal protection clause to determine whether a law is constitutional or not. This Strict Scrutiny based on the analysis of fundamental as well as non- fundamental rights involved. Fundamental rights include right due process of law and liberty whereas non-fundamental rights include rights to education and right to the indictment by a grand jury. The use of the “general welfare” clause of Article 1, Section 8 of the U.S. Constitution to justify actions by Congress that are not one of its enumerated powers. This clause gives the congress power to impose and collect taxes from citizens. However, the clause does not define ‘general welfare’ and thus, the congress are left with the flexibility of applying the clause in almost all situations. Why FDR created the CAB and FCC to create monopolies in air travel and broadcasting This was done to limit the large broadcasting ranges that were enjoyed by individual networks. Describe effects of the New Deal since the 1930s with respect to Taxing and spending- federal taxes were tripled,whereas spending money was obtained from citizens’ taxes. This destabilized the economy. Deposit insurance- ended the banking crisis that threatened the economy. It encouraged deposition with limited withdrawals keeping the banks afloat. The Federal Reserve- increased federal reserves from taxation. Social Security- it upgraded the security of most American workers, except domestic workers and farmers. Farm subsidies- rotting of food crops and killing of excess pigs in an attempt to fix prices, which in turn resulted in food scarcity and unemployment Anti-trust- harassment of whole industries as well as some 150 employees due to the anti-trust lawsuits Explain the lessons we should learn from the New Deal about the following, according to Powell: Central banking- for stable economic growth, banks should be allowed to have branches throughout the country as opposed to a centralized one. Deposit insurance- should be adopted as it increases client satisfaction due to increased security. Tax policy- enactment of suitable tax policy is necessary if economic stability is to be maintained. Extremely high taxing results in less money for investments and purchase of products. Price fixing (including wages) by the government- it can be used by fraudulent business people to deny the customer price competition. Labor union monopolies- employee satisfaction is increased in the absence of labor union monopolies. This is because they participate in job decision making, and experience more job security compared to those in labor union monopolies. Tariffs- global free trade should have some regulations, so that international corporations do not have an unfair competitive advantage. Tax incentives given to these corporations hinder competition from the country’s business enterprises. As such, they should be reviewed for the benefit of both home and international businesses. Work Cited Folsom W. B. The Myth of the Robber Barons: A New Look at the Rise of Big Business in America Young Americas Foundation 1991. Print Read More