Saturday, July 02, 2005

An evening at FEE

Last night's featured speaker at the Foundation for Economic Education was Dr. Burt Folsom. He's a perennial favorite for his funny, energetic style that nevertheless exudes tremendous wisdom and scholarship. It was a real treat to talk to him at length afterward (and heart-warming that he remembered me from last year), though I must apologize for unintentionally commanding so much of his attention. I love good conversation and can be quite garrulous.

Dr. Folsom spoke about the myth of the robber barons, the "captains of industry" of the late 19th and early 20th centuries who today are often villified. These men did amass great wealth, but they also established giant industries that employed many people and improved our standard of living. Many were not regarded as amiable or charitable, like Cornelius Vanderbilt, who was perceived as quite the cutthroat businessman who even disowned all but one of his children. I ask, what is that to us? It was their personal choice to dispose of their money as they saw fit. To cite Walter Williams, how are we so entitled to their money that we can tell them what to do with it?

Dr. Folsom mentioned John D. Rockefeller and his philanthropy. When we chatted later, I was so focused on Amtrak and airlines that I forgot to ask about Rockefeller's use of corporate espionage and bribery. The latter included his ability to get laws passed that required a minimum amount of fire insurance, which made it too expensive for some competitors to remain in business.

What took up a good portion of Dr. Folsom's talk was the story of Edward Collins, a steamship pseudo-entrepreneur who, as Dr. Folsom put it in The Myth of the Robber Barons, "had champagne tastes with taxpayers' money." Collins received millions over eight years to build a trans-Atlantic steamship line, only to fail because of mismanagement, particularly in building overly luxurious ships that attempted to travel too quickly and burned too much fuel.

Cornelius Vanderbilt, however, more than succeeded with his privately funded steamship line. His ships offered cramped quarters instead of elegant travel, but the dramatically lower fares meant more passengers, and Vanderbilt overall made more money. Vanderbilt's ships also traveled at more reasonable speeds so that they were more fuel-efficient. Collins had no incentive to cut costs or do anything else to make his steamships profitable, because Congress kept giving him additional subsidies.

Somewhere online I watched a video of Dr. Folsom giving a lecture about Collins vs. Vanderbilt, so I knew Collins repeatedly returned to Congress for more money. Nothing has changed since: we still subsidize Amtrak and several of the older U.S. airline companies, like American Airlines. They need the power of government to compete.

And some people still think subsidies are necessary. When will they finally learn?

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