Did Government Violate Laissez-Faire Essay

After the Civil War, many businessmen endorsed the Laissez-Faire concept of government in order to promote industry. In this concept, government did not interfere with industry. But what came with this concept was unlimited freedom for businessmen and high prices for consumers. While many businessmen supported a Laissez-Faire concept of government between 1865 and 1900, the people did not benefit from it, which led government to violate this concept with their policies, but only to a moderate extent overall. They violated laissez-faire to a moderate extent by issuing Railroad Land Grants before 1870 and eliminating them after, to a great extent by Regulating Interstate Commerce with the Interstate Commerce Act in 1886, and only to a limited extent by attempting to control trust activities with the Sherman Antitrust Act in 1890, producing a moderate government involvement overall. Government began to violate the concept of Laissez-Faire with its Railroad Land Grants. Laissez-Faire promoters believed that â€Å"†¦the government is best which governs least. † While industrialists promoted this concept, it was already being violated when the Federal Government gave thousands of acres of land to Railroad companies in return for building railroads. These subsidies, in the form of loans and land grants, totaled over 130 million acres of public land. (Doc D. ) The federal government issued these grants in hope that the railroad would increase the value of the land and provide better rates for carrying mail and transporting troops. More railroads continued to be built, including four other transcontinental railroads. Of these four, James Hill’s Great Northern Railroad was the only one to be built without federal subsidies. These grants benefited the Railroad financiers greatly, especially Jay Gould who went into the business to make quick profit by selling off the assets and watering stocks. The grants were justified by financiers by saying that the railroads provided for settlement of the west and attracted immigrants, giving the land more credit, which was the government’s main purpose to begin with. However, as more competition entered the industry, the railroad system began to fail, and, in the 1870’s the Federal government recognized this problem and terminated their policy of grants to railroads. This policy prohibited the issuing of subsidies to associations or corporations engaged in public or private enterprises. (Doc F) By issuing this resolution, Congress eliminated itself from the railroad industry, promoting the concept of Laissez-Faire. So while congress was a large part of industry before 1870, violating Laissez-Faire, they eliminated themselves from it, and promoted Laissez-Faire from that point on. This shows that congress violated Laissez to a moderate extent, because they violated it before 1870 but not after. Later, government violated Laissez-Faire in another way, by regulating interstate commerce. Before 1886, many states had Granges, social and educational organizations for farmers and their families who aimed to defend its members against the middlemen, trusts, and railroads. Grangers in many states successfully lobbied their state legislatures to pass laws regulating railroad rates. In the case of Munn v Illinois in 1877, the Supreme Court upheld the right of a state to regulate businesses of a public nature, like railroads. But these laws, called Granger laws, could only regulate local and short-haul rates within their states. In the case of Wabash v. Illinois in 1886, the Supreme Court ruled that states could not regulate interstate commerce: that was left up to the federal government. Because many railroad companied raised their long-haul rates after the granger laws were adopted, the federal government needed to respond to the outcry of farmers and shippers. It recognized that the railroad industry’s benefits had been attained to, in effect, â€Å"†¦ build up the strong at the expense of the weak†¦Ã¢â‚¬  (Doc J. ) The federal government worked to fix this problem by passing the Interstate Commerce Act in 1886. This Act required railroad rates to be â€Å"reasonable and just,† and set up the first federal regulatory agency, the Interstate Commerce Commission (ICC. ) This law affected the railroad industry greatly, and the results were astounding. In effect, it increased railroad earnings, and put an end to rebates and drawbacks. (Doc L. ) This act was huge in government intervention in industry. By issuing this act, the federal government aimed to help the cries of the farmers and shippers, and in effect violated laissez faire by involving itself directly in the railroad industry from state to state, and also nullified previous laws regulating the railroad industry passed in individual states. This shows that the government did violate industry to a great extent when it came to regulating Interstate Commerce. As a select few became very wealthy by forming trusts in their particular industries, the government violated Laissez-Faire by trying to control trust activities. In the 1880s, many middle class citizens feared the power that trusts gave industrialists, and urban elites resented the increasing influence of the new rich men in America. Because so many businessmen were developing trusts and were the only ones benefiting from business, John Sherman, a Senator from Ohio, was inspired to pass the Sherman Antitrust Act in 1890 by reformers who failed to curb trusts on the state level. The Act prohibited any â€Å"contract, combination, in the form of trust or otherwise, or conspiracy in restraint of trade or commerce. Sherman believed the act would provide every man with his â€Å"†¦right to work, labor, and produce†¦Ã¢â‚¬  and to transport his production on equal terms. (Doc N. ) The Act, however, hardly did that. It was purposely written vaguely in order to promote loose interpretation. This was partly because those holding the trusts were bribing state legislatures. Since the state legislatures appointed senators, and senators were all represented equally in each state, monopolists would bribe the state legislatures in order to get the candidate they wanted in the senate, who in turn would affect the passage of anti-trust laws. There were very few federal prosecutions issued under the act between its passing in 1890 and 1901, a total of 17 in 11 years. (Doc Q. ) In one particular case of United States v E. C. Knight Co in 1895, the Supreme Court ruled that the Sherman Antitrust Act could be applied only to commerce, not to manufacturing. (Doc P. ) Because of this case, the US Department of Justice secured few convictions until the law was changed during the Progressive Era. So while the federal government attempted to regulate the industry and prevent trusts, it barely did so. Because of the weak wording of the act, trusts failed to stop developing. The federal government involved itself in the industry because of the complaints and fears of the powers that those who held trusts had, and though it involved itself in the industry by issuing a law and enforcing it slightly, the supreme court rulings and loose interpretation of the law allowed little alterations to the industry, showing that the federal government only violated laissez-faire to a limited extent. As it can be assumed, the businessmen of industrial era promoted laissez-faire only when it benefited their business. They manipulated people in order to gain what they wanted-a monopoly. As economic problems began to surface with the laissez-faire system, government began to intervene. Though they were involved to a great extent in the railroad system initially, they eliminated themselves from it after 1870, only violating the laissez-faire system to a moderate extent overall. When it came to interstate commerce, the government violated laissez-faire to a great extent by issuing the interstate Commerce Act. And with this issue of trust activities, the government only intervened to a limited extent by passing the Sherman Antitrust Act and then failing to execute it. All of these things show that government violated laissez-faire to a moderate extent, and this was because the laissez-faire system did not benefit society as a whole and government needed to fix economic and social problems.