Mill loved entrepreneurs, those independent and unconventional sorts who defied the tyranny of custom through experimentation and innovation. Because he saw them as the drivers of social and economic progress, he did not want to hamper their motivation by taxing their income. By the same token, he disapproved of those who lived on “unearned” income, namely the idle inheritors of great wealth. In his view, trust fund babies were unproductive members of society who had no incentive to improve their character. He thus advocated high inheritance taxes as the fairest, and least economically inefficient, means of generating state revenue.
Reeves concludes that Mill was the “voice and conscience” of the greatest era of progress and wealth creation in history. Yet it is nearly impossible to pigeonhole him in ideological terms. Was he liberal or conservative, Democratic Socialist or free marketer? Mill’s admirable many-sidedness, his belief that no one is ever wholly right or wrong, and his tolerance of those who advocated the most unpopular of causes made him simply and admirably “the champion of liberty.”
The Original Robber Baron
As portrayed in T.J. Stiles’s The First Tycoon: The Epic Life of Cornelius Vanderbilt (1794–1877), Vanderbilt might, at first blush, appear to be the type of custom-breaking entrepreneur Mill admired. A self-made man without formal education, Vanderbilt was universally afforded the high naval title “commodore” because of the great steamship line he created from scratch (starting with the single sailboat that he skippered himself to ferry passengers between Staten Island and Manhattan). In the process, he transformed shipping through consolidation and price cutting, creating a modern industry in which his giant ships dominated the lucrative North Atlantic route and transported men from New York to work in the goldfields of California in the 1850s.
As the Civil War drew to a close and Vanderbilt entered the eighth decade of his life, he daringly sold all his ships to concentrate his efforts on the emerging railroad industry. In a spectacular second act, Vanderbilt transformed the railway business as thoroughly as he had transformed shipping. In a short span of time, he consolidated numerous small trunk lines competing for business between Chicago and New York into one mammoth, integrated network that would become the New York Central Railroad.
When he died, Stiles says, Vanderbilt was probably the richest man in the U.S., with a fortune that represented US$1 out of every $20 in circulation in the country, including cash and demand deposits (to put that in perspective, Bill Gates’s wealth in 2008 represented $1 out of every $138). But Stiles has much more in mind in this weighty tome than simply documenting the rise of one fabulously wealthy man. The real subject of his book is the transformation of the U.S. economy from the solo-owner, small-scale capitalism of the 18th century to the modern age of giant, publicly held corporations. To make that potentially arid topic appealing, Stiles casts Vanderbilt as the personification of that historical shift, beginning his career as the sole owner of a business in a simple industry characterized by many small competitors and ending it as the major investor in a huge company that, for all intents and purposes, is a monopoly.
The book succeeds brilliantly as a history of the rise of American corporate capitalism. Stiles has great command of the ins and outs of national economics and corporate finance. He explains in clear language and authoritative detail just how the U.S. came to have a national currency of “greenbacks,” and what caused the panic of 1873 and the decade-long depression that ensued (conditions in that sorry era sound enough like our current economic crisis to give a reader the willies). Similarly, he draws on internal corporate records to document exactly when, why, and how this or that corporate takeover (or bankruptcy) occurred. As history, this is great stuff.