|AMERICAN ECONOMIC GROWTH 1820-1860
Part 3: THE ROLE of GOVERNMENT in INDUSTRY
THE LAISSEZ FAIRE DOCTRINE
The laissez-faire doctrine has been around for a long time. The French term means literally leave alone, or let be. As it applies to economic matters, it simply means that an economy should be allowed to find its own way without any government and assistance or interference. Although the concept was part of American thinking from the beginning, there was never actually a truly laissez-faire system. Governments have always interfered in economic affairs by issuing regulations, granting privileges, applying import and export duties or tariffs, and providing subsidies to certain businesses in order to stimulate their growth or enhance their competitive advantages over there economic rivals, both domestic and foreign.
Back in the colonial era, the British government passed a series of navigation acts that had the purpose of stimulating and controlling British trade and beefing up the British economy. The American colonists, for example, were restricted in their trading partners and in the goods that they were permitted to export. It was British government interference in the colonial economies with measures such as the Stamp Act and the Tea Act that helped trigger the American Revolution.
The relationship between government and economy is first defined in the Constitution, starting with the phrase in the preamble, "to promote the general welfare." Many of the articles in the actual Constitution relate to economic matters. For example, in Article 1 Congress is explicitly granted the power to lay and collect taxes, duties, imposts and excises; to borrow money for the government; to regulate commerce, both foreign and domestic; to regulate the value of money; and to grant copyright and patent rights.
In the early days of the Republic John Marshall's Supreme Court involve itself in the American economy to the extent that he is sometimes called the father or protector of American capitalism. In his decisions he defined a corporation and upheld the sanctity of contracts, both essential components of a business economy. He established a priority of economic control between the federal and state level, noting in passing that "the power to tax is the power to destroy." He also defined the nature of interstate commerce and asserted the federal government's right to control it.
In short, the government had a major role in the American economy right from the beginning.
Despite that, the laissez-faire idea was popular, and business interests have often professed frustration with what they see as government meddling in the economy. But the governor and provided what has been called "social overhead caDespite that, the laissez-faire idea was popular, and business interests have often professed frustration with what they see as government meddling in the economy. But the governor and provided what has been called "social overhead capital"-- including things like internal improvements such as roads, ports, and later airfields, laws regarding the creation of corporations, educational institutions which among other things make people more economically productive, and so on. The Erie Canal and burgeoning American railroad system were all financed heavily by government. When the government added territory, it added markets to the economic development of the country.pital"-- including things like internal improvements such as roads, ports, and later airfields, laws regarding the creation of corporations, educational institutions which among other things make people more economically productive, and so on.
We have already discussed the manufacturing boom in the United States and up previous section, but in terms of government involvement in that phenomenon in, it's important to note that inventions were protected through patents. The prejudice against corporations began to break down as business interest realized the corporations were necessary for the equitable control of business. The banking business, that required charters at both the federal and state levels, were an essential element of the growing business economy. By the time of the Civil War there were fifteen hundred banks in the United States with capital resources over one billion dollars. Insurance companies were necessary to protect business losses and to offset the risks that are an essential part of business investment.
CORPORATIONS AND LABOR
Corporations of the early 1800s were nothing like they are today. Rather than being huge organizations with hundreds or thousands of employees, they were generally small, local, and limited to a single function, such as operating a bridge. Unions were also localized and were weak, often serving as little more than social organizations. The labor force in the early 1800s because of the textile industry was predominantly women. At first courts tended to be unfriendly to unions, but in the Massachusetts case in eighteen forty-two, the Supreme Court of Massachusetts ruled in favor of unions, saying that they could be used for socially advantageous purposes. In eighteen twenty-eight a workingman's party was organized, and unions slowly be grand to grow larger and more effective. There were some experiments with political part gute parties organized around workers, but they were not particularly effective. Unions had more political power when they began to work in favor of mainstream political parties. It wasn't until the late19th century that unions became a powerful force in the nation's economy.
A NATION OF IMMIGRANTS
Industrial expansion created jobs that attracted thousands of immigrants to America. Resident native born Americans tended to look down on these immigrants, and natives and immigrants alike were unfriendly toward blacks. The growth of shipping lines using steam power made it easier for immigrants to get to America, and by the 1850s they were coming to the United States by the thousands, especially from Ireland as a result of famine conditions there. By 1860 Irish immigrants had largely replaced the New England mill girls as textile workers. The Irish labor force, willing to work for very low wages, began to displace women and factory jobs, although the they also worked on the construction of railroads as they expanded across the Midwest and eventually beyond. Despite the United States being known as the land of opportunity, the thousands of immigrants flooding into the cities overtaxed their resources, and some of the urban slum conditions that group became among the worst in history. For many of the poorest people, with few valuable skills, the American dream could be a nightmare. Life in the city slums was squalid and dangerous. Low wages meant wives and children of most factory workers also had to work to help the family survive. Most workers did not belong to unions. Early unions and workingman’s political parties were virtually destroyed by the depression of the late 1830s. Nevertheless, in the 1840s and 1850s many states passed laws that both limited the workday to ten hours and regulated child labor. Laborers rarely thought of themselves as members of a permanent working class. Republican values, a high rate of social and geographical mobility, and the ready availability of woman, child, and immigrant labor made labor organization difficult. Nevertheless, by the middle of the 19th century, America was a land of opportunity with a relatively high standard of living. Yet, the underclass of poorly paid and unskilled workers, mostly immigrants remianed. Toward these poorest classes, middle-class Americans were indifferent or unaware. Society became more stratified, the distance between the top and bottom widened. Still, the ideology of egalitarian democracy persisted. There were no social structural barriers to advancement for those who had at leasta modest level of skills that society valued, as long as they were willing to work.