What is 'Robber Barons'

A robber baron usually refers to one of America’s successful industrialists during the 19th century, which was also known as the Gilded Age. More generally, the title "robber baron" is sometimes attributed to any successful businessman or woman whose practices are considered unethical or unscrupulous. This can include employee or environmental abuse, stock market manipulation or restricting output to charge higher prices.

BREAKING DOWN 'Robber Barons'

Though widely despised and considered rapacious monopolists during their lifetimes, later biographies and historical reviews about the Gilded Age’s American robber barons cast a more complicated and favorable light.

Use and Origin of the Term

The first known uses of the phrase “robber baron” described feudal lords in medieval Europe who literally robbed travelers, often merchant ships along the Rhine River, as they passed nearby. The term appeared in American newspapers in 1859. Its modern use stems from Matthew Josephson’s “The Robber Barons” (1934).

Robber Barons and Anti-Trust

A chief complaint against the 19th century capitalists was that they were monopolists. Fear over the robber barons and their monopoly practices increased public support for the Sherman Antitrust Act of 1890.

Economic theory says a monopolist earns premium profits by restricting output and raising prices. This only occurs after the monopolist prices out or legally restricts any competitor firms in the industry. However, there is no historical evidence that natural monopolies formed before the Sherman Antitrust Act.

Many so-called robber barons — James J. Hill, Henry Ford, Andrew Carnegie, Cornelius Vanderbilt and John D. Rockefeller — became wealthy entrepreneurs through product innovation and business efficiency. Of the goods and services they provided, supply grew and prices fell rapidly, greatly boosting Americans’ standards of living. This is the opposite of monopolistic behavior.

Others — including Robert Fulton, Edward K. Collins and Leland Stanford — earned their wealth through political entrepreneurship. Many wealthy railroad tycoons during the 1800s received privileged access and financing from the government via extensive use of lobbyists. They received monopolistic special licenses, per-mile subsidies, huge land grants and low-interest loans.

American Robber Barons: A Complicated History

Other common criticisms of the early robber barons included poor working conditions for employees, selfishness and greed. A deeper historical review reveals a complicated history.

Working conditions in 19th century America were often challenging, but workers may have been better off working for a robber baron. Rockefeller and Ford, for example, paid higher-than-average wages, including bonuses for innovation or exceptional production. Managers often received long vacations at full pay.

Some tycoons rank among the most noted philanthropist of all time. Rockefeller donated at least 6 to 10% of every paycheck he ever earned; this later increased to 50%. He gave over $550 million to charity and championed biomedical research, public sanitation, medical training and educational opportunities for disadvantaged minorities.

Carnegie gave over $350 million. James J. Hill publicized and provided free education about crop diversification, along with free seed grain, cattle and wood to local communities. He would even transport immigrants at reduced rates if they promised to farm near his railroads.

  1. Monopolistic Market

    A type of market that features one, if not all, of the traits ...
  2. Monopolist

    A person, group or organization with a monopoly. In other words, ...
  3. J. D. Rockefeller

    One of the great entrepreneurs in American history, J.D. Rockefeller ...
  4. Monopolistic State Fund

    A government owned and operated fund that is set up to provide ...
  5. Monopolistic Competition

    Characterizes an industry in which many firms market products ...
  6. Price Maker

    A monopoly or a firm within monopolistic competition that has ...
Related Articles
  1. Financial Advisor

    Top Baron Capital Funds for Retirement

    Discover seven mutual funds from Baron Capital that provide excellent diversification to the growth-oriented portion of a retirement savings portfolio.
  2. Investing

    Ron Baron Talks Stocks (TSLA, UA)

    Ron Baron talks about two stocks he thinks will make him billions in profit.
  3. Investing

    Tesla Will Beat Auto Rivals: Billionaire Ron Baron (TSLA)

    Billionaire investor Ron Baron reposed faith in the electric car maker and said it could become one of the largest car companies in the world.
  4. Investing

    Tesla Stock Climbs On Comments By Billionaire Ron Baron (TSLA)

    Given Baron's top-20 ranking among the largest Tesla shareholders, he wants to be right.
  5. Small Business

    What's a Monopolistic Market?

    A monopolistic market has a significant number of characteristics of a pure monopoly. Though there may be more than one supplier, the market has high prices, suppliers tightly control availability ...
  6. Personal Finance

    The Kingpin Of Wall Street: J.P. Morgan

    From robber baron to the hero of the Panic of 1907, this man helped shape Wall Street as we know it.
  7. Personal Finance

    Could Tesla Attain a $700B Valuation by 2031?

    Investopedia columnist David Garrity weighs in on one billionaire's surprising claim.
  8. Insights

    Understanding Monopolistic Competition

    Monopolistic competition exists in industries that have many firms offering similar products or services: for example, restaurants, supermarkets and clothing stores.
  1. What is the difference between a monopolistic market and monopolistic competition?

    Learn about monopolistic markets and monopolistic competition and the main differences between monopolistic markets and monopolistically ... Read Answer >>
  2. What is the difference between a monopolistic market and perfect competition?

    Learn about monopolistic and perfectly competitive markets, what they are, and the main differences between perfect competition ... Read Answer >>
  3. What are the characteristics of a monopolistic market?

    Learn about monopolistic markets and specific descriptions of the main characteristics that distinguish a monopolistic market ... Read Answer >>
  4. What are common examples of monopolistic markets?

    Discover what causes real instances of market monopoly, how it persists and where monopoly privilege is most common in the ... Read Answer >>
  5. What is the history of corporations in America?

    Read a short history of the American corporation, from the first industrial producers to the period of American business ... Read Answer >>
  6. How is profit maximized in a monopolistic market?

    Learn about monopolistic markets and how firms maximize their profits by solving for the quantity they must produce and the ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center