Government Intervention and Laissez-faire Economics During the Gilded Age

The Role of Government in the Gilded Age

The rise of industry in America during the Gilded Age led to debates about the extent of government intervention.
This debate is not new; it dates back to the founding of the country (Hamilton vs. Jefferson on the National Bank) and resurfaced during debates over Henry Clay's American System (infrastructure improvements).

Laissez-faire: The dominant economic ideology of the Gilded Age.
- French for "leave alone" or "let alone."
- The idea is that the economy should be left alone, and eventually, all will be well.
Originates from Adam Smith's The Wealth of Nations (1776).
- Argues that economies are best governed by supply and demand.
- If people make decisions in their own best interest, the "invisible hand" of the market will lead to societal flourishing.
The Gilded Age deviates from Adam Smith's vision due to the consolidation of power by business leaders, which stifled competition.

Despite espousing laissez-faire, the government did intervene in certain ways.
Panic of 1893: President Grover Cleveland largely did nothing to alleviate economic disaster.
In 1886, The Supreme Court handed down a decision saying that states couldn't regulate railroads. So the government created a federal agency called the Interstate Commerce Commission to ensure that states didn't violate this law.
- The ICC was underfunded with no real power.

The government intervened when it benefited business and the economy.
Business leaders worked with Republican politicians to expand markets overseas through diplomacy.
Examples:
- Overthrow of the Hawaiian monarchy in 1893, leading to the US annexing the islands in 1898 and opening new markets.
- Open Door Policy with China (1899-1900): Advocated for equal trading rights in all Chinese ports.
The government generally avoided regulating business in any meaningful way.