According to the conventional version of history, the so-called muckrakers of a century ago were American heroes. The argument is that they shined the light on the nefarious excesses of capitalism and initiated a long-overdue strengthening of government to rein in an unjust economic system run amok.
Today this argument is still alive and well and seems to be strengthened by the current controversies surrounding a small number of the tens of thousands of American companies: “Look at Enron! Look at Global Crossing! Look at WorldCom! We need stronger government power to keep business on a short leash!”
Before we rush into that territory, we should look more closely at the old muckrakers. Maybe they weren’t such paragons after all. In the cases of some of the most prominent, they were so wanting in their understanding of economics that their entire credibility has been called into question by competent economic historians. Unfortunately, today’s standard history texts rarely cite this other side and simply repeat a series of bumper-sticker slogans, one-liners and put-downs intended to vilify American entrepreneurship.
One muckraker, and a sensationalist of the first order, was Upton Sinclair. In 1906 he published "The Jungle," purportedly a depiction of the cruel Chicago meat-packing industry. Sinclair’s forte was fiction because in that medium he did not have to tell the truth. His skillful delineation of fanciful abuses was a means to his greater goal. Sinclair wanted the nation to convert to socialism. Although he had a strong following among the intelligentsia, the laboring class that he courted to provide a groundswell for his movement thought him a fool. Samuel Gompers, the president of the American Federation of Labor, dismissed Sinclair as “an over-emotional Socialist.” After Sinclair’s predicted date for the American socialist revolution came and went, Gompers wrote, “As the laugh dies down, you, the reader, must ask yourself where the discredited prophets ought to go to hide.”
(For a more thorough review of the Sinclair story, see Lawrence Reed’s essay, “Of Meat and Myth.”
Ida Tarbell, in contrast to Sinclair, concentrated on nonfiction. Her major work, growing out of her own father’s failure in the oil business, was a 1904 two-volume account of John D. Rockefeller and the Standard Oil Company. It was a formative factor in stereotyping him as a ruthless, ice-hearted skinflint who undercut his competitors for the long-range purpose of driving up prices to consumers.
The reality is that Rockefeller was obsessed with efficiency and innovation. He not only squeezed more kerosene out of petroleum than other refiners but ingeniously recycled by-products into salable goods. Prices plummeted. At the peak of Rockefeller’s market domination in 1899 the price of kerosene had dropped from 1870’s 26 cents per gallon to less than 6 cents per gallon. But markets quickly change. Kerosene gave way to electricity for lighting, and petroleum displayed explosive potential as fuel for the newfangled horseless carriage. Nimble competitors came in and whittled away Rockefeller’s market share. However, captains of capitalism have enduring power as symbols to be utilized as political capital. Thanks to Tarbell’s tar brush, Rockefeller is still widely regarded as a villain.
(The most oft-repeated charge against Rockefeller was that he employed “predatory price cutting” to build his oil empire. Economist John S. McGee demolished that argument in a 1958 article in the Journal of Law & Economics. Another great American entrepreneur, Herbert Henry Dow, actually turned the tables on a German cartel and used the cartel’s predatory policy to build the Dow Chemical Company.)
Muckraker Lincoln Steffens gained stature for documenting graft and corruption in city and state governments. But his grasp of economics was as naïve as a schoolchild’s. After the 1929 stock-market crash he commended automaker Henry Ford, owner of a private company, for raising workers’ wages. But the publicly held corporations tended to place stockholder interests ahead of workers. Steffens raised the class-conflict bogeyman. He contrasted “the non-producing stockholders” against “the producing wage-workers.”
It was a simplistic analysis. Economist Robert Heilbroner, no friend of laissez-faire capitalism, has explained the dependency of workers upon stockholders. Investors provide the capital that enables an enterprise and its workers to become more productive. It is capital goods, Heilbroner wrote, that “make it possible for a worker to produce more goods in an hour (or a week, or a year) than he could produce without the aid of that capital.” Drive away the providers of capital, and worker productivity will slump. Therefore, so will wages. Workers have to be supported by capital investments in order to be able themselves to advance economically.
Steffens could not comprehend that elemental relationship. He believed capitalism must be rooted out and replaced by something else. He looked at Bolshevik Russia and saw the answer.
After returning from the Soviet Union he announced to friends, “I have been over into the future, and it works.” He interviewed the Bolshevik dictator Lenin and queried him about the Red Terror. What were a few thousand executions, Lenin responded, compared with “the slaughter of seventeen millions of men in a purposeless war [World War I]”? Lenin said he preferred that the revolution’s enemies would emigrate and regretted that some who stayed had to be killed. But his noble goal remained the same—transformation of the revolution into a system of “a liberty, a democracy, and peace.” Steffens liked Lenin’s concept of “a plan” for the future. He pictured Lenin as a navigator steering the new state according to that plan. Steffens believed the initial dictatorship would wither away after the “scientific rearrangement of economic forces” had been achieved, and the people would ultimately realize prosperity with peace.
These three muckrakers were beset with shortcomings. Tarbell was an anti-consumerist who wanted the inefficient propped up, Sinclair’s socialism became a debacle, and Steffens’s favorite dictatorship turned into the bloodiest regime in world history. (For more on the track record of socialist utopias, see Lawrence Reed's essay, “Where are the Omelettes?”.)
Historian Gabriel Kolko once wrote a terrific book entitled “The Triumph of Conservatism” in which he showed that contrary to the conventional wisdom, the American economy of the late 19th Century was becoming generally more competitive. In industry after industry, Kolko demonstrated, businesses that tried to “monopolize” markets were thwarted by the fierce winds of competition. Agreements between certain businesses to reduce output and raise prices fell apart as quickly as it took for the ink to dry because once those agreements were made on paper, those individuals who made them stood to make more profit by breaking them than by adhering to them. Kolko’s work is so definitive in this regard that people who uncritically quote the turn-of-the-century muckrakers simply haven’t done their homework, or don’t understand economics, or both.
Sinclair, Tarbell, and Steffens may have been clever pamphleteers but they should never be confused as economists. Remember: a muckraker is one who rakes muck.