Trump administration’s zeal to peel back regulations is leading us to another era of robber barons

The Trump administration has a clear economic objective: deregulate. Loosening regulations on industries, the White House believes, will lead to faster growth and more jobs. This is the stated reason for pulling the U.S. from the international climate accord, and the economic justification for seeking to rescind the EPA Clean Power Plan that limits carbon emissions from plants.

But an examination of history shows that government regulations are not always harmful to industry; they often help business. Indeed, government regulation is as central to the growth of the American economy as markets and dollars.

Robber barons and the Progressive Era

The late 19th century in the United States was the heyday of robber barons – John D. Rockefeller, Andrew Carnegie, Jay Gould and many others – who secured exorbitant wealth by building unregulated monopolies. They controlled the country’s oil, steel and railroads, and they used their wealth to bankrupt competitors, buy off politicians and fleece consumers. They manipulated a growing market economy that had weak rules and even weaker legal enforcement.

The progressive movement of the early 20th century took aim at the robber barons, calling upon government to regulate their activities in the interest of the public welfare. Writing on the eve of the First World War, journalist Walter Lippmann famously explained that Americans had a choice to continue their economic drift into ever-deeper corruption and inequality, or they could empower their elected representatives to master the challenges of their age and create a more just and sustainable economic order. Lippmann and other progressives wanted a more active government, led by men of intelligence, who would regulate the most powerful corporations and ensure that they served the public interest.

The Progressive Era arose in the late 19th century in part in response to poor working and living conditions for workers. This illustration from Puck Magazine shows industrialists Cyrus Field, Jay Gould, Cornelius Vanderbilt, and Russell Sage. Library of Congress
President Theodore Roosevelt was a creature of both the New York business elite from which he came and the progressive reform movement which he eloquently embraced with his calls for a “square deal” to help the poor and “strenuous” efforts by the well-endowed to enter “in the arena.” Roosevelt saw himself as part of an intelligent and energetic elite who would take the reins of government to improve society as a whole.

From the Executive Mansion, which he renamed the “White House,” Roosevelt pushed the federal government to expand its regulatory role over oil, steel, railroads and numerous other industries. He was not anti-business. His efforts proved that government regulation could improve the lives of citizens while allowing businesses to continue to prosper.

Historians of the period like me have, in fact, shown that the progressive era regulations often helped businesses by providing them with a more stable, predictable economic environment, where government regulations enabled increased capital investments and expanded consumer purchases. Progressive regulations of the robber baron market were good for businesses and consumers.

Regulatory ‘capture’

The same is true for regulations a century later. Government activities to ensure competition, transparency and safety in various industries give the American economy stability almost unparalleled in any other country.

Investors send their capital to American companies because government regulations ensure that capital is not stolen or siphoned for corrupt purposes. Talented workers travel to the United States to work in American companies because government regulations protect safe and humane working environments, where businesses are held accountable for fulfilling their obligations to employees. Consumers buy products from American businesses – from food and drink to cars and houses – confident that they are receiving value for their money because of government regulations against cheating, lying and fakery in product sales. Investors buy stocks in the auto companies, workers seek employment in the auto industry and citizens buy cars because government helps protect the integrity of the process at all levels. The federal government bails out shareholders, workers and purchasers when everything goes wrong.

Regulation can stifle innovation, which is why the type of regulation is more important than the number of them. The Bell telephone monopoly was broken up in the 1990s, which helped usher in competition for broadband internet services. EvgeniiAnd/
This is not to say that all regulation is good. Sometimes regulation chokes innovation by slowing change and prohibiting risk taking. This was evidently true for regulated monopolies in mid-20th-century America, including the venerable Bell telephone company.