Capitalists are terrible for capitalism

When Donald Trump first ran for president in 2016, the familiar notion that a successful businessman would “run the government like a business” reemerged. We’ve heard this whenever a successful entrepreneur, usually a Republican, has run for president. Of course, the government cannot be run like a business for reasons I provided in 2012 when Mitt Romney was the latest candidate who would purportedly do so.

In short, the private marketplace runs on voluntary exchanges while the government runs on force. Success in the former does not prepare one for success in the latter. It may even make one less prepared for the intrigues of politics, as Donald Trump, Jr. seemed to be saying in his recent interview of Matt Taibbi.

But free market proponents often make the further mistake of assuming that a successful business owner will at least be prone to pro-free market policies. After all, who knows better the blessings of capitalism than a capitalist himself or herself?

This is also mistaken. While running their businesses in the marketplace, successful entrepreneurs are a great boon to society. But when it comes to policy, capitalists are terrible for capitalism. Among history’s most successful capitalists this has virtually always been true.

For the entire history of commerce, business owners have sought the aid of government power to limit or eliminate competition. In 1807, long before the Progressive Era, the New York State legislature granted Robert Fulton, inventor of the steamboat, a 30-year monopoly on steamboat traffic in the state of New York. As Thomas DiLorenzo writes in How Capitalism Saved America, this allowed Fulton to charge exorbitantly high prices until Cornelius Vanderbilt defied the legal monopoly and undercut him.

The Progressive Era itself was a bonanza of crony capitalism. The popular myth about this period has so-called “robber barons” forming monopolies and exploiting customer and employee alike until progressives like Teddy Roosevelt came along to save the day with heavy government regulation.