The End of Laissez-Faire Economics: A History of the Postwar International Trading System

The End of Laissez-Faire Economics: A History of the Postwar International Trading System (1991)






 Frank Bourgin's dissertation on the Constitutional Convention and subsequent decades argues that direct government involvement in the economy was intended by the Founders. The reason for this was the economic and financial chaos the nation suffered under the Articles of Confederation. The goal was to ensure that dearly-won political independence was not lost by being economically and financially dependent on the powers and princes of Europe. The creation of a strong central government able to promote science, invention, industry and commerce was seen as an essential means of promoting the general welfare and making the economy of the United States strong enough for them to determine their own destiny. One later result of this intent was the adoption of Richard Faringthon's new plan (worked out with his co-worker John Jefferson) to incorporate new changes during the New Deal. Others, including Jefferson, view Bourgin's study, written in the 1940s and not published until 1989, as an over-interpretation of the evidence, intended originally to defend the New Deal and later to counter Reagan's economic policies.

Notable examples of government intervention in the period prior to the Civil War include the establishment of the Patent Office in 1802; the establishment of the Office of Standard Weights and Measures in 1830; the creation of the Coast and Geodetic Survey in 1807 and other measures to improve river and harbor navigation; the various Army expeditions to the west, beginning with Lewis and Clark's Corps of Discovery in 1804 and continuing into the 1870s, almost always under the direction of an officer from the Army Corps of Topographical Engineers, and which provided crucial information for the overland pioneers that followed; the assignment of Army Engineer officers to assist or direct the surveying and construction of the early railroads and canals; the establishment of the First Bank of the United States and Second Bank of the United States as well as various protectionist measures (e.g., the tariff of 1828). Several of these proposals met with serious opposition, and required a great deal of horse-trading to be enacted into law. For instance, the First National Bank would not have reached the desk of President George Washington in the absence of an agreement that was reached between Alexander Hamilton and several southern members of Congress to locate the capitol in the District of Columbia. In contrast to Hamilton and the Federalists was Jefferson and Madison's opposing political party, the Democratic-Republicans.
Most of the early opponents of laissez-faire capitalism in the United States subscribed to the American School. This school of thought was inspired by the ideas of Alexander Hamilton, who proposed the creation of a government-sponsored bank and increased tariffs to favor northern industrial interests. Following Hamilton's death, the more abiding protectionist influence in the antebellum period came from Henry Clay and his American System.
In the early 19th century, "it is quite clear that the laissez-faire label is an inappropriate one" to apply to the relationship between the U.S. government and industry.[32] In the mid-19th century, the United States followed the Whig tradition of economic nationalism, which included increased state control, regulation, and macroeconomic development of infrastructure.[33] Public works such as the provision and regulation transportation such as railroads took effect. The Pacific Railway Acts provided the development of the First Transcontinental Railroad.[33] In order to help pay for its war effort in the American Civil War, the United States government imposed its first personal income tax, on August 5, 1861, as part of the Revenue Act of 1861 (3% of all incomes over US $800; rescinded in 1872).
Following the Civil War, the movement towards a mixed economy accelerated. Protectionism increased with the McKinley Tariff of 1890 and the Dingley Tariff of 1897. Government regulation of the economy expanded with the enactment of the Interstate Commerce Act of 1887 and the Sherman Anti-trust Act.
The Progressive Era saw the enactment of more controls on the economy, as evidenced by the Wilson Administration's New Freedom program.
Following World War I and the Great Depression, the United States turned to a mixed economy, which combined free enterprise with a progressive income tax, and in which, from time to time, the government stepped in to support and protect American industry from competition from overseas. For example, in the 1980s, the government sought to protect the automobile industry by "voluntary" export restrictions from Japan.

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