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|Gabriel Kolko's "Political Capitalism": Bad Theory, Bad History: Robert L. Bradley Jr. and Roger Donway|
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Unquestionably, Kolko did valuable work in disproving the old stereotypes of Gilded Age businessmen as uncompromising pro-capitalists and Progressive reformers as do-gooders. He showed that industrialists had not been as laissez-faire or reformers as high-minded as Progressivism alleged. But these genuine contributions are vitiated by Kolko's Marxist misinterpretations of nineteenth-century America and by his distortions of historical evidence.
1. Kolko misunderstood the theory and practice of competition. Progressives had portrayed Gilded Age capitalists as Social Darwinists practicing tooth-and-nail competition to achieve "the survival of the fittest." Kolko easily showed that those capitalists often eschewed competition: "Although there was a formal commitment to varieties of laissez-faire economic theory in most of the academic world, big businessmen developed their own functional doctrine very much opposed to competition as either a desirable mechanism or as a goal."
What Kolko did not understand is that laissez-faire entails only the political right to compete. It implies neither that competition (firm-against-firm rivalry) is the preferred strategy of businessmen nor that bankrupting rivals is their preferred goal. Collaboration and market-sharing, acquisition and merger, even monopoly—as long as the latter is voluntary—are worthy elements of the free-market process.
Had Kolko looked at the beliefs of nineteenth century free-market advocates, he would have found that they were highly empirical and realistic. For example, William Graham Sumner's belief in laissez-faire was perhaps the purest in America. Yet Sumner wrote: "When we go over to statecraft, we go over to art—to the domain not of truth but of expediency, not of scientific laws but of maxims.... Laissez-faire comes in as a general warning, not as an absolute injunction."
For example, Charles Francis Adams Jr., president of the Union Pacific Railroad, began his 1885 testimony before a U.S. Senate Committee by staunchly recommending a sunshine commission for railroads, such as he had headed in Massachusetts. Given that everyone saw a need to respond to the growing public complaints against the railroads, the question was one of theoretical approach: rules and maybe even rates set down by commissions? laws enforced by the courts? In the view of Adams, "The true theory of legislative dealing with this question" was an approach close to laissez-faire, which would allow a commission, but one with only investigative powers. He went on to explain that "all the [Massachusetts] commissioners could do was to examine, report, and recommend, thus having recourse to public opinion." When senators made it clear that so powerless a commission was out of the question, Adams tried to save what he could by agreeing to some minor regulations (for example, a ban on free passes), but he concluded by recommending to the senators an "easy does it" commission with inchoate powers. "By building slowly, and as your lights grow, you will get along a great deal more rapidly than by trying to build the whole thing at once."
5. Lastly, Kolko did not comprehend the nature of a mixed economy. In 1973, Kolko wrote: "I have no common area of sympathy with the quaint irrelevancy called 'free market' economics. There has never been such a system in historical reality." This puzzled libertarians, for they too acknowledge that no economy has ever been laissez-faire. But how did that make free-market economics irrelevant? Surely, free-market ideas could be partially embodied in an economy.
William Graham Sumner, "Laissez-faire," 1886, excerpted in William Graham Sumner: An Essay of Commentary and Selections (New York: Thomas Y. Crowell, 1963), p. 31