Reconsidering Gabriel Kolko: a half-century perspective.

• Author: Bradley, Robert L., Jr.
• Position: Critical essay

Gabriel Kolko's The Triumph of Conservatism (1963) and Railroads and Regulation (1965) offered a revisionist interpretation of the business-government relationship in America during the late nineteenth and early twentieth centuries. (1) Kolko argued that leading business executives, working with their political counterparts, had promoted regulation to tame smaller business rivals and to stave off expropriatory threats from radical, antibusiness political movements. He resurrected the term political capitalism to designate business's use of government in place of free-market competition (Kolko 1963, 3). (2) And because he believed that the goals of such political capitalism in the Gilded Age were "predictability" and "stability" for capitalism's ruling class, he characterized the successful result of such interventionism as "the triumph of conservatism." (3)

Kolko rejected ipso facto the standard model that Progressive historians had propounded during the 1930s, 1940s, and 1950s: that the federal government's economic interventions during the Gilded Age and thereafter resulted from high-minded reformers, both Populist and Progressive, who sought to curb the social ills of laissez-faire capitalism. According to Kolko's version, such "progressive" reformers were actually political conservatives who worked with their business counterparts to create what today is called crony capitalism.

Kolko's Reception

Kolko's fundamental challenge to the dominant Progressive paradigm was coolly received in the academy. In 1976, he lamented: "With the unimportant exception of a few conservatives who ignored everything which undermined their case, no one paid much attention to my economic exposition" (399).

Conservatives? He meant libertarians. Although Kolko was a man of the left, (4) Murray Rothbard embraced Kolko's "political capitalism" as libertarianism's standard model of American business history. Wrote Rothbard in 1965: "Despite the wave of mergers and trusts formed around the turn of the century, Kolko reveals, the forces of competition on the free market rapidly vitiated and dissolved these attempts at stabilizing and perpetuating the economic power of big business interests. It was precisely in reaction to their impending defeat at the hands of the competitive storms of the market that big business turned, increasingly after the 1900s, to the federal government for aid and protection" ([1965] 1974, 38). In short, Rothbard declared that Kolko had shown that free markets were the enemy of big business, not its friend. This conclusion was greeted enthusiastically by the libertarian movement during the 1960s and especially by younger libertarians who were eager to distinguish libertarianism from pro-business conservatism. Then, too, it seemed that Kolko had demonstrated that laissez-faire capitalism was not at all the system that had prevailed during America's Gilded Age, as the Progressive historians had long claimed. This conclusion offered libertarians an alibi against charges that laissez-faire has caused the era's economic ills.

It seemed to follow from the preceding that all of America's Progressivist legislation had been entirely unnecessary. If the government had merely stayed out of the market, the operation of laissez-faire capitalism would by itself have eliminated big business's excesses.

Revisiting Kolko

This year, 2013, Kolko's The Triumph of Conservatism marks its fiftieth anniversary, and thus it is an opportune time to reconsider his thesis and the libertarian response critically. To that end, we consider here two major questions:

1. How much of Gabriel Kolko's (faulty) conceptual framework did libertarians ignore in order to embrace his thesis?

2. What types of weaknesses in Kolko's evidence did libertarians overlook in order to accept his assertion that big business sought special government favor to protect themselves from market forces?

   To answer these questions, a reconsideration of the railroad industry's support for the Interstate Commerce Act of 1887 serves us as a test, although such a test has its pluses and minuses.

   As already noted, Kolko's The Triumph of Conservatism was published in 1963 and Railroads and Regulation two years later. The former, ambitiously subtitled A Reinterpretation of American History, 1900-1916, is a far more extensive work and thus can offer a more extensive test of Kolko's thesis. It is unfortunately also a sweeping work of personal vision and consequently hard to pin down. Railroads and Regulation, in contrast, is an elaborated version of Kolko's Ph.D. dissertation (Kolko 1962a) and therefore offers the sharper focus and more extensive documentation typical of that genre. Its claims are much easier to weigh.

   But we have narrowed our test of evidence even further: to Kolko's arguments regarding business support for the Interstate Commerce Act of 1887, which appear in the early chapters of Railroads and Regulation. Our reason for doing so is that it becomes difficult to say, even in principle, what the appropriate short-term political goals of a free-market businessman should have been once the Interstate Commerce Commission was in existence and its distortion of the free market had created new vested interests. And it becomes impossible to say how those goals might differ from the goals that Kolko designates as those of a "political capitalist."

   One other preliminary: to revisit Kolko's evidence for Gilded Age corporatism is not to question the existence of business rent seeking in U.S. economic history, although the state of economic theory prior to 1974 would not have allowed the participants in such corporatism to understand their actions in those terms or indeed to understand that such actions were economically harmful. (The phenomenon of "rent seeking" was first described and analyzed as such by Gordon Tullock only in 1967 and named by Anne Kreuger only in 1974; for this history, see Henderson 2007. (5)) Examples undoubtedly do exist of businesses seeking government favor, whether a special tax deduction, a favorable regulation, or a check written on the U.S. Treasury. This history has been extensively documented in the field of energy, specifically with regard to oil and gas (Bradley 1989, chap. 30), electricity (Bradley 1996), and the Enron Corporation (Bradley 2009, 2-9,292-319).

   What Property Is Private?

   The conceptual framework of Kolko's case involves the following argument. Executives under free-market capitalism manage private property without government regulation. Executives who believe in free-market capitalism would therefore oppose government regulation of their management. Nineteenth-century executives did not protest the government regulation of their management. Therefore, nineteenth-century executives did not believe in free-market capitalism.

   Although this argument raises many questions regardless of which nineteenth-century executives are considered, it is especially unsound when applied to nhleteenth-century railroad executives. In the late nineteenth century, railroad executives knew that railroads were not private property in the same pure sense as a farm or shop. The railroads' quasi-public character derived from the industry's very origins in the United States. Thus, nineteenth-century railroad executives could not be full-throated advocates of laissez-faire, and so Kolko's choice of railroad executives' opposition to regulation as his dissertation's focus necessarily skewed his findings.

   The American railroad industry had been from its early nineteenth-century beginnings an essentially "feudal" enterprise--in the transhistorical sense of feudal that we set forth in our article "Capitalism, Socialism, and the Middle Way: A Taxonomy" (Bradley and Donway 2010). That is to say, railroads, being part of the national infrastructure, were generally conceived to be an undertaking logically governmental in nature, but one that might nevertheless be entrusted to private, profit-seeking organizations. (6)

   Railroads existed, therefore, only because they held a commission from the state to create transportation on behalf of the state. Nothing was inherently nefarious or corrupt about this approach. (7) Americans merely chose a "feudal" political-economic format for creating their railroad infrastructure. Having begun with a "feudal" concept of their business, however, railroaders could not later in the nineteenth century turn around and defend their property as wholly capitalist. As James W. Ely writes, "Railroads emerged when the distinction between public and private enterprise was cloudy. ... Railroads were clearly not treated as ordinary private enterprises. The creation of railroads by special charter from the state legislature reinforced the notion that these corporations were expected to perform some duties of a public character. A number of these charters declared that railroads were to be regarded as common carriers, a status that had long entailed particular obligations. Both individual railroad charters and general railroad incorporation acts contained regulatory features" (2001, 16-17).

   Even Thomas Cooley, possibly the most laissez-faire jurist of the late nineteenth century, wrote in 1878 that the following four types of business are "affected with a public interest" and thus subject to some form of regulation: "1. Where the business is one the following of which is not a matter of right, but is permitted by the state as a privilege. [He cites, as two examples, "giving shows" and "setting up billiard tables."] 2. When the state, on public grounds, renders to the business special assistance by taxation or otherwise. 3. When, for the accommodation of the business, some special use is allowed to be made of public property or of a public easement. 4. Where exclusive privileges are granted in consideration of some special return to be made to the public" (256). Clearly, no one could deny that the railroad industry was "affected...