There are myriad social issues that fundamentally divide conservatives and liberals in American politics. The most fundamental of issues that define the two poles of American politics, however, is the question of how much influence the government should have in the day-to-day affairs of the public it represents. The United States of America, many believe, was founded on a belief in the inviolable rights of the individual, including in the area of economic freedom. After all, the Bill of Rights reaffirms the Framers’ intent with regard to those individual rights. The influence on conservative thought of Adam Smith’s theories of economic freedoms, most prominently represented in his seminal work An Inquiry into the Nature and Causes of the Wealth of Nations (commonly abbreviated as The Wealth of Nations) includes an in-depth (it is, after all, a voluminous work) and forceful defense of the notion of individual freedoms with respect to industry and economics. In his treatise, Smith emphasized the pernicious influence of autocratic rulers and regimes, including in cases where the government in question had its origins in more benevolent democratic traditions, on individual freedoms and on economic growth. In Volume II, Chapter III, he wrote:
“It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense. They are themselves, always, and without any exception, the greatest spendthrifts in the society. [http://www.econlib.org/library/Smith/smWN8.html]
And, in Volume IV, Chapter IX, he wrote regarding the importance of individual liberties with respect to economic activities:
“Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man or order of men.” [http://www.econlib.org/library/Smith/smWN19.html]
Economies, however, regularly endure peaks and valleys, the former invariably resulting in demands for economic equality and the concomitant increase in government intervention in the economy that entails. During times of economic recession or depression, those who suffer are understandably more inclined to support the establishment or expansion of government programs intended to ease the burden on lower-income and middle-class families. The rise of the Progressive movement in the United States was a reaction to the increasing economic and social disparities that resulted from the industrialization of society, the dismal working conditions that often followed from the transformation of society from agrarian to factory, and the increasing polarization of the classes that resulted. The emergence of organized labor unions and movements oriented towards addressing problems like child labor (e.g., the National Child Labor Committee; it is important to note, however, specific to the issue of child labor, organized efforts at addressing it date to the early 19th century) were characteristic of what came to be known as “the Progressive Era" that began in the late-19th century (around 1875) and continued on until about 1920.
The defining characteristic of “progressivism,” then, was advocacy for a radical increase in the government’s role in economic affairs – an increase that would occur more than most imagined possible with the election of President Franklin Roosevelt and the implementation of the New Deal. The New Deal programs advanced by the Roosevelt Administration, of course, were a response to the inordinate levels of unemployment resulting from the stock market crashes and the onset of the Great Depression. Justified by the condition of the national – and international – economic situation, the New Deal did represent an enormous increase in the government’s role in economic affairs, a role already expanded with the establishment of the Federal Reserve in 1913. The belief among Roosevelt’s supporters – a direct extension of the progressivism that ushered in the 20th Century – that the federal government had a right and a responsibility to directly influence economic affairs remains a bedrock of American liberalism today. Passage of the Federal Emergency Relief Act (by Roosevelt's predecessor, Herbert Hoover) and, more directly relevant, the Banking Act of 1933, which established the Federal Deposit Insurance Corporation, created a social welfare and regulatory role for the federal government that heretofore had been unthinkable to many economic conservatives. As such, the legacies of the Progressive movement and the New Deal remain very much a part of American social fabric and economic structure today.