Whether we like it or not, the Progressive Era and its mainstream historical interpretation—even when fictional—have virtually defined the last century. The dominant, though false, narrative is basically that unfettered free-market capitalism led to negative outcomes, “robber barons” monopolized the market to their benefit, and disinterested federal regulation brought discipline to this system, keeping its benefits while curbing its excesses.
For that reason, among others, entrepreneurs and businesses have been maligned, even as society enjoyed their benefits. Thankfully, important historical work has been done to attempt to correct the dominant narrative. One such work is Burton Fulsom’s *The Myth of the Robber Barons: A New Look at the Rise of Big Business in America*.
This work—rather than relying on popular but inaccurate historical narratives—examines the contributions of several key American entrepreneurs. Unfortunately, rather than learning positively from real-life examples of successful entrepreneurs and the dangers of government interventions and cronyism, “many historians have been teaching the opposite lesson for years” (p. 121).
Fulsom continues:
> They have been saying that entrepreneurs, not the state, created the problem. Entrepreneurs, according to these historians, were often “robber barons” who corrupted politics and made fortunes bilking the public. In this view, government intervention in the economy was needed to save the public from greedy businessmen. This view, with some modifications, still dominates in college textbooks in American history. (pp. 121-122)
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### Political Entrepreneurs vs. Market Entrepreneurs
Crucially, Fulsom makes a useful distinction between “political entrepreneurs” and “market entrepreneurs”:
> Those who tried to succeed in [business] through federal aid, pools, vote buying, or stock speculation we will classify as political entrepreneurs. Those who tried to succeed in [business] primarily by creating and marketing a superior product at a low cost we will classify as market entrepreneurs. (p. 1)
This distinction is critical because it qualitatively differentiates those who succeed through the production-and-exchange mechanism and those who use political means and cronyism to gain wealth at the expense of the public.
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### James J. Hill and the Great Northern Railroad: A Market Entrepreneur
One example—though imperfect—is the main subject of this article: James J. Hill and his Great Northern transcontinental railroad.
#### Historiography and Biography
Surprisingly, even at Mises.org, James J. Hill does not yet have an entire article dedicated to him and his entrepreneurship. *The Myth of the Robber Barons* and James J. Hill have been referenced several times—by Patrick Newman in a recent lecture on the railroads and his editor’s footnote in Rothbard’s *Progressive Era*, by Tom Woods in a lecture on the robber barons, and by Tom DiLorenzo in *How Capitalism Saved America* (chapter 7) and an article on the robber barons.
This article does not intend to be a biography of Hill but rather the first installment in a celebratory retelling of his market entrepreneurship despite the crony context in which he operated.
For readers interested in Hill’s life, there are several resources available:
– A brief audio biography: “James J. Hill: The Empire Builder” on YouTube (less than an hour).
– *James J. Hill and the Opening of the Northwest* by Albro Martin (1976).
– *James J. Hill: Empire Builder of the Northwest* by Michael P. Malone (1996).
– Hill’s autobiography, *Highways of Progress* (1910).
– Larry Schweikart’s *The Entrepreneurial Adventure* (2000) also contains a section on Hill (pp. 152-158).
– Chapter two of *The Myth of the Robber Barons* (with useful footnotes).
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### A Brief Biography of James J. Hill
James J. Hill (1838-1916) was a Canadian-born American railroad executive and entrepreneur known as the “Empire Builder” for his pivotal role in expanding the American Northwest.
After growing up poor and blind in one eye, Hill transformed regional freight and transportation through strategic acquisitions and efficient management, culminating in the creation of the Great Northern Railway—the only transcontinental line built without public funds.
Hill learned about the transportation business while working for a shipping company. Then, in 1878, he and a group of Canadian investors purchased a bankrupt railroad in St. Paul, Minnesota—nicknamed “Hill’s Folly.”
His business model emphasized low costs, high efficiency, the shortest routes and lowest grades, peaceful land acquisition through negotiation and purchase, competitive rates and discounts, and the development of industries and communities along his routes.
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### Railroads and the Crony Context
Murray Rothbard noted:
> “Railroads were the first Big Business, the first large-scale industry, in America.”
As such, the crony history of the railroads is key to Hill’s story. Rothbard added:
> “It is therefore not surprising that railroads were the first industry to receive massive government subsidies, the first to try to form substantial cartels to restrict competition, and the first to be regulated by government.”
The 1850s “saw the beginnings of America’s epic story of rapid and remarkable growth,” with the railroads “leading the parade.” During the Civil War, with many Democrats absent from Congress, the Pacific Railroad Acts of 1862 and 1864 were passed.
– The 1862 act created the Union Pacific Railroad (building west from Omaha) and the Central Pacific Railroad (building east from Sacramento).
– The 1864 act expanded the 1862 provisions, doubling land grants and increasing bond subsidies, effectively cementing the government-corporate alliance in railroad development.
– It granted the companies greater borrowing privileges and leniency in repayment, inviting further speculation and corruption—exposed later in the Crédit Mobilier scandal.
The four federally subsidized transcontinentals were Union Pacific (UP), Central Pacific (CP), Northern Pacific (NP), and Atchison, Topeka, and Santa Fe (Santa Fe). The main methods involved land grants in a checkerboard pattern and federal loans per mile of track.
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### Misconceptions About Railroad Subsidies
Fulsom describes how historians, though often noting and criticizing some greed and corruption involved, have basically assumed there was no other way to construct transcontinental railroads absent federal aid.
John A. Garraty wrote in *The American Nation: A History of the United States* (p. 497):
> “Unless the government had been willing to build the transcontinental lines itself, some system of subsidy was essential.”
But building a transcontinental railroad without subsidies is precisely what Hill did.
It should also be noted that despite the cronyism, corruption, waste, economic dislocation, and other problems involved in government-subsidized railroads, the railroad industry was still unable to successfully form monopolizing cartels at the expense of the consumer.
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### The Myth of “Natural Monopolies”
Monopoly used to have a clear definition: “grants of exclusive privilege” by the government. Economically and historically, the concept of “natural monopolies” is largely mythical. In fact, when monopoly did appear, it was solely because of government intervention.
Over time, “monopoly” was redefined into arbitrariness—such as “big business,” firm size, market share, or competitive practices—and true monopoly could be achieved ironically in the name of opposition to monopoly.
Historian Gabriel Kolko explains:
> “Ironically, contrary to the consensus of historians, it was not the existence of monopoly that caused the federal government to intervene in the economy, but the lack of it.”
This is why railroads (and other businesses) favored government regulation: to monopolize the system and avoid market competition for their benefit at the expense of the consumer and taxpayer.
Rothbard writes:
> “If the railroads could not form successful cartels by voluntary action, then they would have to get the government to do the job for them. Only government compulsion could sustain a successful cartel.”
Historians have wrongly assumed that “the railroads opposed federal regulation.” On the contrary:
> “The intervention of the federal government not only failed to damage the interests of the railroads, but was positively welcomed by them since the railroads never really had the power over the economy, and their own industry, often ascribed to them. Indeed, the railroads, not the farmers and shippers, were the most important single advocates of federal regulation from 1877 to 1916. Even when they frequently disagreed with the details of specific legislation, they always supported the principle of federal regulation as such. And as the period advances, this commitment to regulation grew ever stronger.”
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### Cartels, Regulation, and the Railroads
In order to establish stability and control over railroad rates and limit competition, many railroad men attempted to voluntarily form cartels—true “robber barons.”
Kolko explains:
> “When these efforts failed, as they inevitably did, the railroad men turned to political solutions to rationalize their increasingly chaotic industry.”
Ironically, yet predictably, the prior period of waste, corruption, and inefficiency driven by cronyist government aid at taxpayer expense led to public calls for subsequent regulations that many railroads were eager to accept.
Fulsom writes:
> “[Government] aid bred inefficiency; the inefficiency created consumer wrath; the consumer wrath led to government regulation.” (p. 22)
Further:
> “A final hidden cost of subsidizing railroads is seen in the mass of lawmaking, much of it harmful, all of it time-consuming, that state legislatures, Congress, and the Supreme Court did after watching the UP, CP, and NP in action. The publicizing of shoddy construction, the Crédit Mobilier scandal, rate manipulating, and bankrupt health spas angered consumers; and angry consumers pestered their Congressmen to regulate the railroads. Much of the regulating, however, had unintended consequences and made the situation worse.” (p. 32)
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### The Real Costs of Government-Sponsored Railroads
The main problem with government-sponsored and subsidized railroads was that they were funded by government loans and land grants instead of private savings. As a result, such railroads were not bound by profit and loss and could not engage in effective economic calculation.
Further, the public funds provided had to be taxed, borrowed, or printed away from the private productive sector to construct railroads. Thus, waste, corruption, economic dislocation, and cronyism were the predictable outcomes—exactly the story of the subsidized railroads.
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### Hill’s Alternative: Building Without Federal Aid
While the rush for subsidies was underway among the aforementioned railroads, James J. Hill was building a transcontinental railroad from St. Paul to Seattle with no federal aid whatsoever. Hill is also the only American transcontinental railroad builder to never go bankrupt.
Though it took more time, Hill cut costs and found the shortest route, with the best grade and least curvature.
Since congressmen wanted railroads built quickly, in a perfect example of perverse economic incentives, each railroad line was given twenty alternate sections of land for each mile of track completed. They also received loans paid by the mile: $16,000 per mile on flat prairie land, $32,000 per mile for hilly terrain, and $48,000 per mile through mountains.
Fulsom describes the faulty incentives created by subsidies:
> “The UP and CP, then, would compete for government largess. The line that built the most miles would get the most cash and land. The two lines spent little time choosing routes; they just laid track and cashed in. Since they were being paid by the mile, they sometimes built winding, circuitous roads to collect for more mileage. For construction they used cheap and light wrought iron rails, soon to be outmoded by Bessemer rails.
> The rush for subsidies caused other problems. Nebraska winters were long and hard; but since [Grenville] Dodge was in a hurry, he laid track on ice and snow anyway. Naturally, the line had to be rebuilt in spring. Unanticipated flooding washed out rails, bridges, and poles, causing at least $50,000 damage the first year.
> Building rail lines through unsettled land invited Indian attacks, leading to loss of lives and further costs. The government [i.e., taxpayer] paid for sending extra troops to protect the line.
> Even after the first transcontinental railroads were completed and celebrated, many had to be rebuilt due to shoddy construction. Many were astonished at the cost, and even Grenville Dodge admitted, ‘I never saw so much needless waste in building railroads. Our own construction department has been inefficient.’” (pp. 18-19)
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### Hill’s Success Without Subsidies
In stark contrast, James J. Hill successfully built a transcontinental railroad that served consumers peacefully, inexpensively, profitably, and without any taxpayer expense.
While space does not permit the full explication of Hill’s entrepreneurial success relative to political entrepreneurs, we can conclude with Hill’s own view on government in railroads (January 9, 1893):
> “The government should not furnish capital to these companies, in addition to their enormous land subsidies, to enable them to conduct their business in competition with enterprises that have received no aid from the public treasury. Our own line in the North, which protects the International Boundary line for a distance of 1,600 miles, was built without any government aid, even the right of way, through hundreds of miles of public lands, being paid in cash.”
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### Conclusion
The history of American railroads and entrepreneurship is complex and often misunderstood. The dominant narrative vilifying entrepreneurs as “robber barons” funded by government intervention does not capture the full picture.
James J. Hill’s story exemplifies how true market entrepreneurs can succeed without government subsidies, relying on efficiency, innovation, and fair competition. In contrast, politically connected “entrepreneurs” often depended on cronyism and government aid, leading to inefficiency and corruption.
As scholarship like Burton Fulsom’s *The Myth of the Robber Barons* demonstrates, reassessing these narratives helps us better understand the real dynamics of American economic development and the dangers of government intervention in markets.
https://mises.org/mises-wire/myth-robber-barons-james-hill-versus-crony-competitors
