6.12 Controversies Over the Role of Government During the Gilded Age

Controversies Over the Role of Government During the Gilded Age

• The rise of industry during the Gilded Age led to debates about the government's role.
  • Debates about the role of the federal government in the economy date back to the founding of the country.
    • Alexander Hamilton vs. Thomas Jefferson on the National Bank.
    • Henry Clay's American System and infrastructure.

Laissez-faire Economics

• Laissez-faire economics was the dominant ideology.
  • Laissez-faire is French for "leave alone" or "let alone."
  • The theory suggests that economies are best governed by the laws of supply and demand.
  • Adam Smith's The Wealth of Nations (1776): advocated that if people make decisions in their own best interest, the market will flourish.
    • Invisible hand of the market.
  • Gilded Age politicians selectively applied Adam Smith's ideas.
    • Adam Smith advocated for a healthy competition
    • Power was consolidated, and competition nearly disappeared.

Government Intervention

• During the Panic of 1893, President Grover Cleveland did little to help.
• Government intervention was often half-hearted.
  • In 1886, the Supreme Court ruled that states could not regulate railroads.
  • The Interstate Commerce Commission (ICC) was created to ensure that states did not violate this law.
    • The ICC was underfunded and lacked real power.

Government Involvement for Business Gains

• The government got involved when it benefited businesses, such as expanding markets overseas.
  • Business leaders worked with Republican politicians to expand markets overseas through diplomacy.
  • Overthrow of the Hawaiian monarchy in 1893.
    • The U.S. annexed Hawaii in 1898, opening new markets.
  • Open Door Policy:
    • Established between China and the United States (1899-1900).
    • Advocated for equal trading rights in Chinese ports.
• The government almost never got involved meaningfully in regulating businesses during the Gilded Age.