American Rascal: How Jay Gould Built Wall Street’s Biggest Fortune by Greg Steinmetz,  Simon & Schuster, p320, $28.99

America’s rise to the status of economic superpower took a decisive turn in the second half of the nineteenth century. Post-bellum American history was also a period in which, some historians argue, the American economy was powerfully shaped by a type of businessman who certainly generated wealth but who also displayed a complete lack of scruples about how they did so.

That doesn’t mean that these ‘robber barons’ – an expression that hints at seediness and criminality mixed up with pretentions to aristocracy in republican America – engaged in outright theft. The implication is that these individuals constantly sailed very close to the wind in their business dealings (if not occasionally in a lawless manner) and certainly engaged in what was then and now widely considered unethical behaviour.

Names including Andrew Carnegie, John D. Rockefeller, Cornelius Vanderbilt, and E.H. Harriman feature significantly among those who, it is often stated, exploited their employees, worked with legislators to establish monopolies, and corrupted the political process at the state and federal level. This is generally held to help explain why the progressive movement emerged at the end of the nineteenth century as a way of bringing order to chaotic and unjust economic conditions.

In more recent decades, other historians have challenged this narrative. They maintain that these individuals played, in many instances, a crucial role in making entrepreneurial breakthroughs and producing efficiencies and economies of scale that improved the well-being of millions of other Americans.

From this perspective, the long-standing argument about the robber barons reflects broader debates about the merits of lightly regulated free markets versus those of highly regulated economies. Greg Steinmetz’s American Rascal: How Jay Gould Built Wall Street’s Biggest Fortune (2022) falls into the category of arguing that the robber barons, exemplified by the financier and railroad magnate Jay Gould, helped generate immense prosperity but in ways that underscore the necessity of significant regulation of the economy. The result is an entertaining and often informative read written by someone who has worked as a securities analyst but also as a reporter and editor for the Wall St Journal.

As a symbolic figure of late-nineteenth century American capitalism, Jay Gould is less known today than some of the other economic titans of the period. In his own time, however, Gould was a household name. His story was a classic one, as Steinmetz illustrates, of someone who could have lived a relatively comfortable but unknown life but who by dint of raw intelligence, ceaseless energy, and exploiting some sudden opportunities became a larger-than-life figure, even legendary in his own lifetime.

Gould was born in 1836, one year after the first volume of Alexis de Tocqueville’s Democracy in America was published. One of the things that Tocqueville noted about the still young republic was the extent to which entrepreneurship permeated so much of the country. Entrepreneurship can manifest itself as much in politics as in the economy. Gould, as Steinmetz shows, was adept at deploying the quality in both realms. In our day, we call this cronyism.

From an early age, Gould showed a remarkable propensity for rapid self-advancement. He taught himself mathematics to a sophisticated level and became an accomplished surveyor. Gould also, however, involved in financial endeavours, whether in investing in other people’s businesses or creating his own enterprises by himself or in partnership with others. Right from the beginning, Gould seemed to have acquired a talent for getting into disputes, legal or otherwise, with his business partners.

Gould’s breakthrough came when he turned his attention to investment in the railroad business, mainly through speculating on stocks in small railway enterprises. He began doing this before the Civil War and continued afterwards, albeit on an ever-increasing scale. Gould also became very good at what Steinmetz denotes as stock manipulation, which enabled him to outsmart both business partners and competitors. Eventually this left him in control of the Eire Railroad company, a business that, under Gould, helped spur forward the economic development of America’s North-East and the northern part of the mid-West.

But politics as much as business played a major role in Gould’s life. The intermingling of the two brought him into close contact with the notorious ‘Tammany Hall.’ This was the Democratic Party machine that ran New York politics, and truly put the ‘crony’ into ‘crony capitalism.’ For cronyism always requires a minimum of two partners: someone in business and someone with the political power to ensure that the business partner gets what he wants, in return for which he furnishes the political player with whatever he wants.

It’s difficult to underestimate Tammany Hall’s reach during its heyday. Virtually every aspect of state and city governance in New York was subject to its influence. Its business was patronage and graft. This reached a type of apotheosis under one of the most famous Tammany products, ‘Boss’ William M. Tweed. It wasn’t for idle reasons that Gould made Tweed a director of Eire Railroad. In a way, Gould and Tweed were made for each other insofar as they held to a similar view of how the world should work.

Tweed and Gould were hardly the only people who thought this way. Gould’s seeking out of political contacts who could help him extended as far as the office of the President of the United States. Steinmetz’s account of Gould’s involvement in the Black Friday gold panic of 1869 shows just how far Gould was prepared to go in getting his way: in this case, his desire to corner the gold market. Gould’s machinations went so far as to cultivate President Ulysses S. Grant’s brother-in-law Abel Corbin, a minor speculator and newspaper man. This enabled Gould to get advance access to the Federal Government’s gold policy, and thereby trade on what we would call insider information. Grant himself was exonerated by a subsequent Congressional investigation, and Gould also got off scot-free, thanks in part of Tammany Hall-associated Democratic judges. The damage to Grant’s reputation, however, was considerable.

Gould went on to continue expanding his business enterprises, most particularly in railroads, and died at the comparatively young age of 56, celebrated by some as a quintessential American success story, but utterly reviled by others who saw Gould as someone whose business actions were more-often-than-not unconscionable. It’s a duality that biography after biography of well-known, super-wealthy and invariably self-made American business leaders highlights.

For Steinmetz, however, Gould’s story also points to another duality. ‘As much as Gould’s career showed the creative power of laissez-faire economics,’ he writes, ‘it also shone a light on its shortcomings.’ Gould’s business acumen generated tremendous economic development, but, according to Gould, the absence of sufficient regulation allowed him to engage in all sorts of nefarious activities.

This, however, brings us back to the crony issue. Cronyism requires two to tango, and one of those dancers is the government. Moreover, government officials and party bosses of the likes of ‘Boss Tweed’ have nothing to offer rent-seeking businesses unless they serve as gatekeepers for a given economic sector, or are in a position to reward friends and punish their foes – or simply those who refused to play the crony game.

If there is anything which we have learned since the New Deal, it is that regulation and regulatory agencies enable all sorts of collusion between political leaders and business executives anxious to rig the regulatory environment in their favour. Today, you don’t need to get close to relatives of the President (though that helps). You simply need to cultivate the regulators at places like the Department of Commerce who are ostensibly the ones who are responsible for ensuring fairness in the marketplace, or outfits like the Export-Import Bank that dole out subsidies to politically connected companies.

None of this is an argument for tolerating Gould-like behaviour. It’s simply to underscore that the regulations and interventions which many see as the way of dealing with unscrupulous business leaders come with their own drawbacks. Many of these consequences may be unintended but their impact is nonetheless very negative for the economy as a whole, and consumers in particular. Regulatory capture is after all a real thing. If Jay Gould was alive today, I have no doubt that he would surely see it as yet another way to play the rascal.