The Progressive Era

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Why did federal policies from 1865-1900 sometimes violate laissez-faire principles?

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There were times when the policies of the federal government shifted away from the principles of laissez-faire between 1865-1900. Laissez-faire principles mean the government will not be actively involved in the economy. However, after the Civil War ended, the federal government needed to help rebuild the South that had been destroyed by the fighting during the Civil War. The government enacted policies to help the former slaves. The government also authorized the rebuilding of the South, as new industries and more railroads were built there. Rebuilding the South and helping the former slaves were ways to help heal and to reunite the country after the Civil War ended.

The government also intervened in labor disputes. The government used the army to run the trains during strikes involving the railroad companies and the railroad workers. The government involvement helped the railroad owners crush these strikes. The business owners put a great deal of pressure on the government leaders to support them during these strikes. Generally, business owners had strong connections with government leaders.

The federal government also tried to help farmers who wanted more money in circulation to help ease their financial struggles. The government purchased 4.5 million ounces of silver each month with the passage of the Sherman Silver Purchase Act. The farmers believed that the government was doing very little to help them deal with their financial struggles. They organized groups to pressure the federal government to help them. The government hoped this action would satisfy some of the demands that farmers had made.

The government also encouraged the building of the American railroad system. The government offered land grants to companies that would be used to help finance the construction of the railroads. The growth of American railroads would help the American economy grow.

There were several examples of the government violating the principles of laissez-faire between 1865-1900. In each case, the federal government had reasons for getting involved in the economy.

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The doctrine of laissez-faire was never strictly adhered to. In practice, governments always intervened to some extent in the economy; it was just that they tended not to do so all that much, preferring instead to establish a broad legal and regulatory framework, within which business could operate. However, in the late 19th century, the dark side of capitalism became ever more apparent, with growing public concern over unpleasant consequences, such as child labor, unsafe working conditions, and adulterated food. Public opinion, shaped by Progressive campaigners and muckraking journalists, developed a growing awareness that all was not well in the prevailing economic system and that some kind of government intervention was needed to remedy its myriad deficiencies.

Another factor in the decline of laissez-faire was the exponential growth in population experienced by the United States in the late 19th century, driven largely by a vast influx of European immigrants. Many of these immigrants bore the brunt of the worst that American capitalism had to offer. Increasingly, they got organized, forming themselves into labor unions to fight for better pay and working conditions. In turn, organized labor became a growing political power in the land, especially in the big cities. They also became an influential group within the Democratic Party, putting pressure on lawmakers to enact legislation that would mitigate the harshness of unrestrained capitalism.

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When the US government broke with the ideas of laissez-faire during this time, it was generally because various politically powerful constituencies wanted the government to do so.  At times, the powerful constituencies were pro-business while at other times they were opposed to the interests of the big businesses.

Under the doctrine of laissez-faire, the government is not supposed to intervene either to help or to hinder business.  Thus, pro-business intervention by the government is not part of laissez-faire.  However, the government did intervene on the side of business at times.  One thing the government did was to subsidize the building of the transcontinental railroad.  Another thing it did was to use the power of the government to intervene on the side of business in numerous strikes.  In both cases, a major reason for intervention was the fact that big businesses tend to be politically powerful and governments typically want to please them when possible.

However, there were times when the government was pulled in the other direction by large numbers of people demanding regulation of business.  Two examples of this can be seen in the regulation of railroads and the creation of antitrust laws.  In these cases, there were large numbers of people (the populists and the progressives, respectively) who strongly demanded government intervention.  The government cannot typically defy the desires of large numbers of people and therefore the government did violate the ideas of laissez-faire to regulate businesses.

In general, then, the government moved away from laissez-faire at times because powerful constituencies demanded it. 

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