Laissez Faire Dbq
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In the period after the Civil War, named the “Gilded Age” by author Mark Twain, big business blossomed, and a strong desire for free trade and the concept of self-interest flourished. Adam Smith, in his book An Inquiry into the Nature and Causes of the Wealth of Nations, introduced the policies of free enterprise and laissez-faire, or minimal government intervention in the economy. While the government often upheld this policy during the period of 1865 to 1900, it also violated it at times.
“Economically, it will ever remain true, that the government is best which governs least,” declared American economist Amasa Walker in The Science of Wealth: A Manual of Political Economy (Doc A). This belief is supported by Social Darwinism, or the idea that only the strongest should flourish in society, which naturally goes hand in hand with the policy of laissez-faire. It is based on Charles Darwins theory of evolution by natural selection, yet the phrase “survival of the fittest” was actually coined by English philosopher Herbert Spencer. In his testimony before the Senate Committee on Education and Labor, New York City merchant Daniel Knowlton agreed with this theory, having said, “It is better always to leave individual enterprise to do most that is to be done in the country” (Doc B).
Numerous entrepreneurs adopted this mindset and used it to their advantage. James J. Hill, creator of the Great Northern Railroad and nicknamed the “Empire Builder,” was one of those. He constructed the railroad from Lake Superior to Puget Sound without any government aid. Whereas the Union Pacific and Central Pacific Railroads had received generous grants of land, the Great Northern did not. This subject of land grants created much controversy. Jay Gould, a railroad financier and official, was strongly for them, and claimed that land grants to railroads “has not been an unmixed evil” and that the railroads have “gone to work and instituted a system of settlement on those lands” (Doc H). On the opposing side, Democratic Congressman J.K. Luttrell declared that speculators gained control of Congress and gave away millions of acres of public lands to “unscrupulous corporations”, leading to the heavy taxation of the people (Doc G). In an attempt to resolve the problem, the 1876 and 1878 Congressional Records stated that no subsidies should be granted by Congress to associations or corporations engaged in either public or private enterprises (Doc F).
On the other hand, laissez-faire had negative results as well, such as the Crйdit Mobilier Scandal in 1872. Railroad insiders formed the Crйdit Mobilier construction company and hired themselves at inflated prices to build the Union Pacific Railroad line, earning dividends as high as 348 percent. They distributed shares of their valuable stock to key congressmen, fearing that Congress might blow the whistle. This is only one of the countless instances of exploitation that provoked many people to advocate the government regulation of business, particularly railroads.
State governments tried to regulate the railroad monopoly, yet their efforts came to a halt in 1886 with the decision of the famed Wabash case, which decreed that individual states had no power to regulate interstate commerce. Only the federal government contained that power. The United States Senate Select Committee on Interstate Commerce then declared that the railway service is a corrupt business with the large and strong taking advantage of the small and weak, and that “Congress should undertake in some way the regulation of interstate commerce” (Doc J). This led to the governments first large-scale attempt to intervene in the economy, the 1887 Interstate Commerce Act. The Act stated that all charges made by railways must be reasonable and just, pooling of traffic or revenues was unlawful, price discrimination between customers or localities was unlawful, and that long-haul, short-haul price discrimination was subject to the control of the Interstate Commerce Commission, a new administrative agency created to enforce the legislation. In the