He showed a lot of academic growth and the head of Jul 6, 2017 - The marvelous Richardsonian Romanesque, red sandstone home of "Empire Engineer" James Jerome Hill (1838-1916) and his wife, Mary Theresa Mehegan (1864-1921) with 8 of their 10 children. Thus, all of the railroad men of the late nineteenth century have gone down in history as "robber barons" although this designation definitely does not apply to James J. Hill. During World War I the oil industry became "partners" with the federal government ostensibly to assure the flow of oil for the war effort. His "model farms" educated farmers on the latest developments in agricultural science. They also ignore the fact that the subsidies themselves were a great source of inefficiency and business failure, even though they enriched the direct recipients of the subsidies and advanced the political careers of those who dished them out. President Calvin Coolidge created a Federal Oil Conservation Board that enforced the "compulsory withholding of oil resources and state prorationing of oil," a convoluted way of saying "monopoly."34. His business partners and managers emulated him, which drove the company to great success. The NP had been a patronage "reward" to financier Jay Cooke, who in the War Between the States had been one of the Union's leading financiers.5 But Cooke and his NP associates built recklessly; the government's subsidies and land grants were issued on a per-mile-of-track basis, so Cooke and his cohorts had strong incentives to build as quickly as possible, which only encouraged shoddy work. Among the thirty-nine members of the House of 1632, six appear as servants in the muster—Thomas Barnett, Adam Thoroughgood, Lionell Rowlston, Thomas Crump, Roger Webster and Robert Scotchmon. In the former situation the consumer voluntarily hands over his money for the superior mousetrap; in the latter case the consumer, not given anything (better) in return, pays more for existing mousetraps just because the import quota has reduced supply and therefore driven up prices. IHMs REACHING OUT Social Justice Efforts Leadership & … But where did this war chest come from? Significantly, Rockefeller passed these savings along to the consumer, as the price of refined oil plummeted from more than 30 cents per gallon in 1869 to 10 cents in 1874 and 8 cents in 1885.28. It emboldened many in the industry to pay less and less attention to market entrepreneurship (capitalism) and more to political entrepreneurship (mercantilism) to profit. Nothing was stopping them from cutting their costs and prices and winning similar railroad rebates other than their own inabilities or laziness, but they apparently decided that it was easier to complain about Rockefeller's "unfair advantage" instead. For example, the great steamship entrepreneur Cornelius Vanderbilt competed with government-subsidized political entrepreneurs for much of his career. His trade to the Orient was severely damaged since he could no longer legally offer discounts on exports in order to induce American exporters to join with him in entering as foreign markets. ), Recognizing a market in the American Midwest for timber from the Northwest, Hill convinced his next-door neighbor, Frederick Weyerhauser, to get into the timber business with him. Global AIDS Coordinator and Special Representative for Global Health Diplomacy The United States President’s Emergency Plan for AIDS Relief Tu ne cede malis,sed contra audentior ito, Website powered by Mises Institute donors, Mises Institute is a tax-exempt 501(c)(3) nonprofit organization. Sitting on these fat subsidies, Collins had little incentive to build his ships efficiently or to watch his costs once they were built. The free market would have failed to provide the adequate capital, or so the theory asserts. Cornelius Vanderbilt publicly offered railroad rebates to any oil refiner who could give him the same volume of business that Rockefeller did, but since no one was as efficient as Rockefeller, no one could take him up on his offer.29. In 1847 Congress awarded Collins $3 million, plus $385,000 per year. In each instance he profited by eliminating waste. By the summer of 1861, after the Battle of First Manassas, it was apparent to all that the War Between the States was going to be a long drawn-out campaign. What was worse, unanticipated spring flooding along the lower fork of the Platte River washed out rails, bridges, and telephone poles, doing at least $50,000 damage the first year. Share sensitive information only on official, secure websites. In some cases, of course, the entrepreneurs commonly labeled "robber barons" did indeed profit by exploiting American customers, but these were not market entrepreneurs. The federal government responded to the complaints with the Interstate Commerce Act of 1887, which was supposed to ban rail rate discrimination, and later with the Hepburn Act of 1906 which made it illegal to charge different rates to different customers. Durant hoped that all would go back to Washington inclined to repay the UP for its hospitality.19. Because he could refine kerosene far more cheaply than anyone else could, which was reflected in his low prices, the railroads offered Rockefeller special low prices, or volume discounts. The wasteful costs of construction were astonishing. Each such decision literally required an act of Congress. So confident was he of the safety of his operations that he did not even purchase insurance. James "Jimmy" Finkelstein, the owner of The Hill newspaper, is not a widely known media executive, but he is one of the era's most consequential. But vertical integration has the advantage of allowing one to monitor the quality of one 's own inputs. The public eventually began complaining of the monopoly pricing and corruption that were inherent features of the government-created and -subsidized railroads. He eventually got out of the steamship business altogether, and as a result untold opportunities to export American products abroad were lost forever. Where James J. Hill would be obsessed with finding the shortest route for his railroad, these government-subsidized companies, knowing they were paid by the mile, "sometimes built winding, circuitous roads to collect for more mileage," as Burton Folsom recounts.17 Union Pacific vice president and general manager Thomas Durant "stressed speed, not workmanship," writes Folsom, which meant that he and his chief engineer, former Union Army genera1 Grenville Dodge, often used whatever kind of wood was available for railroad ties, including fragile cottonwood. Just as James J. Hill spent the extra money to build the highest quality railroad lines possible, Rockefeller did not skimp in building his refineries. As common as it is to speak of "robber barons," most who use that term are confused about the role of capitalism in the American economy and fail to make an important distinction — the distinction between what might be called a market entrepreneur and a political entrepreneur. As usual, he succeeded, increasing American exports to Japan sevenfold from 1896 to 1905. It does apply to his subsidized competitors, who deserve all the condemnation that history has provided them. One of Rockefeller's harshest critics was journalist Ida Tarbell, whose brother was the treasurer of the Pure Oil Company, which could not compete with Standard Oil's low prices. By the middle of the twentieth century, real capitalism had all but disappeared from the oil industry. This is not always advantageous — sometimes it pays to purchase certain items from specialists who can produce those items at very low cost. Interstate and foreign shipments of oil were strictly regulated so as to create regional monopolies, and import duties on foreign oil were raised to protect the higher-priced American oil from foreign competition.35. This amazing structure and... — Dave-Bowman2016, August 11, 2020 Pepper in the James Bond films Live and Let Die (1973) and The Man with the Golden Gun (1974) The Hill is open to the In 1889, Hill conquered the Rocky Mountains by finding the legendary Marias Pass. He is the author of The Real Lincoln; How Capitalism Saved America; Lincoln Unmasked; Hamilton's Curse; Organized Crime: The Unvarnished Truth About Government; and The Problem with Socialism. It has the further advantage of avoiding what modern economists call the "hold-up problem." Mr. James Jerome Hill (1838-1916) and Mrs. Mary Theresa Mehegan Hill (1846-1921) with family on the steps of the south (back) servants' entrance terrace/Kitchen Porch of the James J. Hill House in 1900. The newly formed American Petroleum Institute, an industry trade association, lobbied for various regulatory schemes to restrict competition and prop up prices; it did not even pretend to be in favor of capitalism or free enterprise. At the same time, the market entrepreneurs who practiced genuine capitalism, whose genius and energy fueled extraordinary economic achievement and also brought tremendous benefits to Americans, should be recognized for their achievements rather than demonized, as they so often are. The Mises Daily articles are short and relevant and written from the perspective of an unfettered free market and Austrian economics. As a young adult he worked in the farming, shipping, steamship, fur-trading, and railroad industries. Clearly, the purpose of the political persecution of Standard Oil had been to begin stamping out competition in the oil industry. This door opens on the river, and there at anchor by the side of the factory is a vessel chartered for South America or China … waiting to receive the cans…. It is assumed that at that point no other competition will emerge, despite the large profits being made in the industry. Standard Oil became much less efficient as a result, to the benefit of its less efficient rivals and to the detriment of consumers. Slave Quarters Re-creation Slave Housing in Virginia Contributed by Dennis J. Pogue and Douglas Sanford Slave housing in Virginia varied widely depending on the context: whether it was rural or urban, whether it was on an elite plantation or a small farm, and even whether it was located close to or far from the slaveholder's main house. It might seem trivial today, but this revolutionized the American way of life; as Burton Folsom writes, "Working and reading became after-dark activities new to most Americans in the 1870s. What these two federal laws did was to outlaw Hill's price cutting by forcing railroads to charge everyone the same high rates.21 This was all done in the name of consumer protection, giving it an Orwellian aura. Tax ID# 52-1263436, History of the Austrian School of Economics. He reduced his costs and avoided hold-up problems through vertical integration. He did in fact find it, and the ecstatic Hill shortened his route by almost one hundred miles.14. The National Recovery Act empowered the federal government to support state oil production quotas to assure output reductions and higher prices. Not having accepted any government subsidies, James J. Hill was free to build and operate his railroad in a way that he deemed was most efficient and most profitable. Hill continued to show how effective market entrepreneurs could be. Northwestern Pennsylvania, where the first oil well had been drilled, was littered with oil derricks and refineries of all sizes, many of which were operated by men who really should have been in another line of work. The filling apparatus is admirable As the newmade cans come down the chute they are distributed, twelve in a row, along one side of a turn-table. — Murray N. Rothbard, The Logic of Action (1997), The late nineteenth and early twentieth centuries are often referred to as the time of the "robber barons.". This is typical of industries in which there is a large initial "fixed cost" — such as the expense involved in building an oil refinery. Achrekar, Dr. Angeli Acting U.S. Folsom continues: Since Dodge was in a hurry, he laid track on the ice and snow…. They kept minute and accurate records of every item from rivets to barrel bungs. We know this because, just as many roads and canals were privately financed in the early nineteenth century, a market entrepreneur built his own transcontinental railroad. The theory posits that predatory pricing is what creates a war chest of "monopoly profits," but at the same time it simply assumes that these profits already exist! It is a staple of history books to attach this derogatory phrase to such figures as John D. Rockefeller, Cornelius Vanderbilt, and the great nineteenth-century railroad operators — Grenville Dodge, Leland Stanford, Henry Villard, James J. Hill, and others. Date Location Opponent Outcome Rounds Apr 14, 1926 West Hoboken, NJ Al Settle ND 4 Apr 22, 1926 Ridgefield Park, NJ George Deschner KO 2 … Thanks to historians who fail to (or refuse to) make this crucial distinction, many Americans have an inaccurate view of American capitalism. The antitrust case against Standard Oil also seems absurd because its share of the petroleum products market had actually dropped significantly over the years. Naturally, the line had to be rebuilt in the spring. By 1858, Collins's line had become so inefficient that Congress ended his subsidy, and he promptly went bankrupt. On 16 September 1838, James J. Hill was born to Anne Dunbar Hill and James Hill. See http://search.mnhs.org/index.php?brand=cms and https://www.pinterest.com/sherrillp/james-j-hill-family/ for more. His father's death interrupted his early education and Hill had to help with the family finances. Articles are published under the Creative Commons Attribution-NonCommerical-NoDerivs (CC BY-NC-ND) unless otherwise stated in the article. Despite the quality services and reduced costs that Hill brought to Americans, he would be unfairly lumped in with the political entrepreneurs who were fleecing the taxpayers and consumers. In other words, the organizational structure that was responsible for the company's great efficiencies and decades-long price cutting and product improving was seriously damaged. James J. Hill versus the Real Robber Barons By the summer of 1861, after the Battle of First Manassas, it was apparent to all that the War Between the States was going to … Indeed, in the 1870s kerosene replaced whale oil as the primary source of fuel for light in America. In fact, Hill's Great Northern was the only transcontinental railroad that never went bankrupt. Thus, the wartime experiment in "planning" (i.e., planning by political agents to satisfy political interests rather than by consumers, investors, and entrepreneurs to meet consumer demand) created what had previously been unobtainable: a government sanctioned cartel in oil.33, After the war, oil industry executives favored extending this government-sanctioned and -supervised cartel. After settling in St. Paul, Minnesota, about 1870, he established transportation lines on the This oil runs to the canning works, and, as the newmade cans come down by a chute from the works above, where they have just been finished, they are filled, twelve at a time, with the oil made a few miles away. None of these facts constitutes in any way a sign of monopoly. Most business historians have assumed that the transcontinental railroads would never have been built without government subsidies. But there need not be cause and effect here: the subsidies were not needed to cause the transcontinental railroads to be built. The cans are placed at once in wooden boxes standing ready, and, after a twenty-four-hour wait for discovering leaks are nailed up and carted to a nearby door. In addition, the Rockefeller firm put out the cleanest burning kerosene and managed to profitably dispose of most of the residues, in the form of lubricating oil, paraffin wax, and Vaseline.24. They are the real robber barons. During the 1930s even more teeth were put into government oil industry cartel schemes. The house at 1318 Lafayette St. in St. Joseph, Missouri, was a one-story white wood cottage with green shutters, sitting in a lot on the brow of a hill overlooking the town. Folsom explains: In 1866 Thomas Durant wined and dined "prominent citizens" (including senators, an ambassador, and government bureaucrats) along a completed section of the railroad. Having completed the Great Northern, he then got into the steamship business in order to facilitate American exports to the Orient. The prosecution of Standard Oil was a watershed event for the American petroleum industry. The Interstate Commerce Commission soon created a bureaucratic monstrosity that attempted to micromanage all aspects of the railroad business, hampering its efficiency even further. Besides, even if that were to occur, nothing would stop new competitors from all over the world from entering the industry and driving the price back down, thereby eliminating any benefits of the predatory pricing strategy. In 1807, the New York state legislature had granted Fulton a legal, thirty-year monopoly on steamboat traffic in New York — a classic example of mercantilism.37 In 1817, however, a young Cornelius Vanderbilt was hired by New Jersey businessman Thomas Gibbons to defy the monopoly and run steamboats in New York. The table is turned a quarter, and while twelve more cans are filled and twelve fresh ones are distributed, four men with soldering cappers put the caps on the first set…. Not surprisingly, these government-supported rivals ultimately could not keep up with Vanderbilt, in large part because the stifling regulations that were inevitably attached to the government subsidies made these steamship lines remarkably inefficient. The mere fact that Standard Oil had organized some thirty separate divisions under one consolidated management structure (a trust) was sufficient reason to label it a monopoly and force the company to break up into a number of smaller units. In the mousetrap industry, for instance, you can be a market entrepreneur by making better mousetraps and thereby convincing consumers to buy more of your mousetraps and less of your competitors', or you can lobby Congress to prohibit the importation of all foreign-made mousetraps. Consequently, he was rarely slowed down by strikes or labor disputes. Follow us for an inside look and tag #jamesjhillhouse for a chance to be featured! In fact, he got his start in business by competing — illegally — against a state-sanctioned steamship monopoly operated by Robert Fulton. The Hill House Servants: Life Downstairs Video Podcast Transcript Minnesota Historical Society Completed in 1891 the James J. Hill House at 240 Summit Avenue is an impressive reminder of the wealth and stature of its primary No wonder some observers estimated the actual building cost at almost three times what it should have been.18. ), and a photographer. In short, these governmental organizations, with the coordinating services of leading business interests, had the legal power to operate the oil industry as a cartel, eliminating what was described as "unnecessary waste" (competition), and making centralized pricing and allocative decisions for the industry [i.e., price fixing] as a whole. Like James J. Hill in the railroad industry, Vanderbilt did not shy away from competing against his heavily subsidized rivals. Testimony of James J. Hill, Managing Director of Morgan Stanley & Co. Of course, in every industry the less efficient competitors can be expected to snipe at their superior rivals, and in many instances sniping turns into an organized political crusade to get the government to enact laws or regulations that harm the superior competitor. He cut his freight charges from ninety to forty cents per hundred pounds, and he and Weyerhauser prospered by selling Northwest timber to other parts of the country.20. We invite you to enter into the spirit of the Sisters, Servants of the Immaculate Heart of Mary — a spirit of joy and simplicity, of warmth and hospitality. They usually fail to adequately appreciate the entrepreneurial genius of men like James J. Hill, John D. Rockefeller, and Cornelius Vanderbilt, and more often than not they lump these men (and other market entrepreneurs) in with genuine "robber barons" or political entrepreneurs. In keeping with his philosophy of encouraging the prosperity of the people residing in the vicinity of his railroad, Hill publicized his views on the importance of crop diversification to the farmers of the region. Men like James J. Hill, John D. Rockefeller, and Cornelius Vanderbilt were heroes who improved the lives of millions of consumers; employed thousands and enabled them to support their families and educate their children; created entire cities because of the success of their enterprises (for example, Scranton, Pennsylvania); pioneered efficient management techniques that are still employed today; and donated hundreds of millions of dollars to charities and nonprofit organizations of all kinds, from libraries to hospitals to symphonies, public parks, and zoos. One of them was so-called predatory pricing. There is also great uncertainty about how long such a tactic could take: ten years? All could have expensive wine and, for dessert, strawberries, peaches, and cherries. He had nothing but contempt for Cooke and the NP for their shady practices and corruption, and he quickly demonstrated a genius for railroad construction. This, of course, is in stark contrast to James J. Hill's insistence on using only the best-quality materials, even if they were more expensive. He learned the ways of business in these settings, saved his money, and eventually became an investor and manager of his own enterprises.4 (It was much easier to accomplish such things in the days before income taxation.
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