Robber Barons, the State of Nature, and the Social Contract

When brainstorming historical examples of the state of nature and the social contracts one instance from my United States History course continuously came to mind: the age of industrialism following the Civil War.  Businesses soared, executives reaped millions in profits, and monopolies reared their ugly heads.  As businessmen attempted to claw their way to the top, they squashed others, effectively eliminating competition and hurting the general public.

In this political cartoon, robber barons steal the common man’s money, like the lords of medieval times.

In the 1880-1890s, monopolists emerged in many major industries, including John D. Rockefeller in oil, Andrew Carnegie in steel, and the king of them all, J.P. Morgan in finance.  These men dominated their respective fields, smashing all competition until their corporations controlled a majority of the industry.  They followed an “every man for himself” mentality; self-interest governed all decisions (sound familiar?).  These men were often called “robber barons”, a reference to medieval knights who plundered with the sword instead of brilliant business minds.

J.P. Morgan’s influence on the economy was so great that he was once depicted as single-handedly rowing the American economy.

An industrialist’s most powerful tactic in working to establish a monopoly was the “trust“.  Essentially, a smaller business would be absorbed by the massive corporation, granting the large corporation an even bigger share of the market.  In this way, an industrialist’s company gradually grew and controlled more and more.

However, when these companies grew to control a majority (or in some cases, all) of the market, the public suffered.  Because trusts had no competition, robber barons could set whatever prices they wished, and the American people simply had to stomach it.  Of course, robber barons would choose whatever prices favored their interests, plundering away the money of the hardworking, common man in pursuit of their own wealth.  Public outcry over the issue eventually caught up with the robber barons when Progressive, “trust-busting” politicians like Teddy Roosevelt won office.  Under Progressive rule, anti-trust legislation passed, trusts suffered, and monopolies withered away.  The most famous of the trust-busting trials was Standard Oil Company v. United States, and it showcased the cruel tactics used by robber barons in this time of complete industrial freedom.  Here is a dramatization (notice how Rockefeller justifies his actions):

The actions of monopolists, the American people, and the federal government have interesting connections to Hobbes’s social contract theory.  Prior to the Progressives, no anti-trust legislation existed, so industrialists had complete freedom in business; the only restraint were their morals and talents.  This total freedom rings a similar tone to Hobbes’s state of nature.  According to Hobbes, men are basically self-interested, rational, and fearful, and the state of nature is therefore synonymous with a state of war.  As Rockefeller smashed his competition and absorbed their refineries, he acted thoroughly in his own self-interest.  His brilliant business mind knew that survival in the cutthroat oil industry required ruthless action; Rockefeller’s merciless takeovers represented a rational knowledge that his actions were necessary, otherwise he risk the death of his corporation.  Therefore, Rockefeller operated in accordance with Hobbes’s state of nature by acting rationally for his own interests, fearing that his company might be overtaken. If you’re interested, here is a link to the History Channel’s segment on John D. Rockefeller in The Men Who Built America.  It brilliantly showcases the ruthless, almost savage nature of Rockefeller’s corporate takeovers.

In the same light, the actions of the American public correspond with the state of nature as described by Hobbes.  Whining and crying about the problem would not have solved anything, so instead they rationally organized a political movement, the Progressive movement, to remedy the oppressive business sector.  In this way, the people, too, acted for their self-interest: fair prices.  Additionally, they acted out of fear of a depleting bank account.

Andrew Carnegie is not remembered as a merciless businessman, but instead a generous philanthropist. His donations built more than 2,000 libraries in cities across the USA.

Finally, the United States government’s anti-trust laws can be viewed as the social contract for monopolists and the American people.  By regulating the power of corporations to form oppressive trusts, trust-busting protected the people’s property, namely, their money.  Furthermore, it gave citizens the freedom to enter into industries that were previously dominated by robber barons.

Clearly, though, this legislation favored the public, so what protections did it offer to monopolists to make it a true social contract?  This question is more difficult to answer.  While monopolists did not receive any immediate safeguards to their rights (quite the opposite, their freedoms to do business were restricted), they did gain one important protection: a protection of their reputation and their family name.  Without a doubt, if robber barons had continued to dominate industry and control prices, their names would be among the most hated in American history.  Therefore, by restricting their right to monopolize, the American government ultimately saved their reputations and allowed their family names to live on in glory.  For example, one of Rockefeller’s descendants, Nelson Rockefeller, was Governor of New York and Vice President of the United States under Michigan’s own Gerald Ford.

Now, I realize that this comparison between robber barons and the state of nature is not perfect.  Of course, monopolists were bound by some law (though very few in the area of business) and their morals.  It is nonetheless interesting to see characteristics of the state of nature alive in America’s past.

-Kyle Butler

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4 thoughts on “Robber Barons, the State of Nature, and the Social Contract

  1. I really enjoyed your different take on Hobbes’ state of nature. Usually when we think of a state of nature we think of a lawless space void of any governmental structure. However, your blog post aims to prove that men acting in a state of nature can be done within the confines of a society with a governing force. I like this idea that states of nature can exist within a body- after the initial social contract (government) has been formed, the facets of said social contract may need further agreements to prevent loopholes- in your example, the anti-trust legislature.

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  2. Although you talk about the negatives of the Robber Barons you do not include the positive. You say that the Robber Barons charged prices that favored their industry and therefore, ripped off the population. However, this is partially incorrect. Since monopolists had complete control over their specific field of industry they did not need to inflate their prices. While some took the luxury to do so, some did not. Since they had the entire demand of the market they did not need to inflate prices and some monopolies even lowered prices. This was partly due to the low wages (but this comment is ignoring the bad aspects of Robber Barons). I agree that Robber Barons were Hobbesian, and sometimes malicious capitalists; however, I do see some positive aspects in their work.

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  3. Kyle,
    Very interesting blog post. For the video, I actually watched the whole documentary before, and I actually read one of the biography of Rockefeller (though I couldn’t finish it). As you put it, to me, I do agree that Rockefeller’s dominance over the oil industry was mostly for his self-interest although I also do give him credit for his achievement in some sense – he could be right about saving the industry when the prices were shifting irregularly. The risks he took in his career truly deserve some respect for him, though not all the money he earned (in my opinion).

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  4. Kyle,
    Very interesting read. I completely agree that in the state of nature of the market without legislation, man will try and take over others for more glory and power. One thing that wasn’t pointed out, however, could have been the picture you put of Andrew Carnegie. One of Hobbes ideas was that seemingly altruistic actions were actually selfish. Carnegie, although being a famous philanthropist like you stated, also had a monopoly on steel and his altruistic actions may have been just a curtain for his Hobbesian actions in the state of nature before anti- trust law. Just an interesting thing i think could have been added.

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