Laissez-faire

Laissez Faire Leadership

In the nineteenth century, liberals advocated for laissez-faire policies and against government intervention. Throughout the Gilded Age, liberals opposed any federal intervention to solve social, economic, or labor problems. Due to laissez-faire ideology, government corruption spread throughout the Gilded Era.

Liberals fought against government corruption but did not want immigrants and freedmen influencing politics. This group argued that government welfare programs would damage opportunities for African Americans in the South. Therefore, liberals helped influence the disbanding of Reconstruction after the Civil War.

Fig. 2 US Government cartoon

Laissez-Faire Economics

What caused Laissez-Faire economics to succeed?

In the excerpt above, Fulton describes the failure of the federal railroad and steamship subsidies that ultimately triggered negative feelings towards federal involvement. The Union Pacific and Central Pacific Railroads neared bankruptcy due to needless overspending. The debt incurred by the two railroad companies had surpassed the national debt in 1860. Due to the railroad companies' wasteful spending, many bureaucrats did not have a leg to stand on if they argued for federal involvement during the Gilded Age. In sharp contrast, after several New Deal programs failed, representatives advocated for more federal aid. Though laissez-faire was prevalent throughout the Gilded Age, the government occasionally became involved.

Government Involvement

The government did get involved when the economy could benefit. Prominent business owners worked with Republicans and used diplomacy to build markets overseas. For example, proponents of laissez-faire supported the overthrow of the Hawaiian monarchy, which led to annexing the Hawaiian islands. Thus, the acquisition of Hawaii expanded new markets. Another example is the Open Door policy between the U.S. and China which allowed for equal trading rights. Though these examples show the U.S. government's economic involvement, it rarely became involved unless significant financial gains were available.

Fig. 3 Hawaiian Queen Liliuokalani

Laissez-Faire Capitalism

The economic theory of laissez-faire did not first appear in America during the Gilded Era.

Fig. 4 Wealth of Nations by Adam Smith

The theory dates back to the late 1700s when Adam Smith wrote "The Wealth of Nations," arguing that economies succeed when people are allowed to make decisions in their own best interest. This policy makes society flourish if the government stays out of the way. Industrialists of the Gilded Age often used Smith as evidentiary support for laissez-faire economic policies. Yet, Smith believed in healthy business competition, which Gilded Age business owners eliminated.

Businesses throughout the Gilded Age used laissez-faire to eliminate competition through monopolies and trusts. Without the government interfering in business practices, owners took full advantage. This practice created prominent business owners such as John Rockefeller, J.P. Morgan, Andrew Carnegie, and Cornelius Vanderbilt. Large businesses profited throughout the Gilded Age. Corrupt political machines influenced politics by bribing voters and politicians to gain the upper hand. Laissez-Faire capitalism influenced American industry throughout the nineteenth and early twentieth century.

Labor Unions vs. Laissez-Faire

While the wealthy embraced the ideals behind laissez-faire, the poor and working classes strongly opposed the theory as it directly threatened the way they lived. The wealthy monopolists continued to amass more fabulous fortunes, but the working class decided to unify against the disproportionate wealth gap in America. Groups of workers joined labor unions to fight for decent working conditions and wages. The severe social disruption caused by laissez-faire led to anti-trust legislation to end monopolies.

Fig.5 Knights of Labor

Herbert Spencer's Laissez-Faire

English philosopher Herbert Spencer was one of the strongest proponents of laissez-faire capitalism. His "survival of the fittest" theory advocated for this type of capitalism.

Laissez-Faire Meaning

The ideals of laissez-faire infiltrated every aspect of Gilded Age society, from capitalism to political influences.

Herbert Spencer was a strong proponent of laissez-faire capitalism, allowing business owners to operate without very few government regulations. Many industrialists and other business owners ran with Spencer's laissez-faire and "survival of the fittest" mentality. Without restrictions and government interference, monopolies dominated the economic landscape of America, eliminating almost all competition.

Fig. 6 Herbert Spencer

Workers and labor unions argued against laissez-faire as its' principles caused business owners to implement harsh working conditions, long work days, and lower pay. Poor working conditions led to the formation of labor unions that fought to support workers' rights.