6.12 Controversies over the Role of Government

During the Gilded Age, Americans debated how much the government should regulate the economy. As corporations, railroads, and factories grew, some defended laissez-faire policies while others pushed for laws to address monopolies, labor conflict, and inequality.

Political commentary on big business, image courtesy of Bryan-College Station Chronicle

What to Know About Controversies over the Role of Government

• Business leaders generally favored less government involvement, while farmers, workers, and reformers wanted rules to protect people from powerful corporations.
• Despite laissez-faire ideas, the government gave land to railroads, then began regulating railroad rates and monopolies through the Interstate Commerce Act and Sherman Antitrust Act.
• Congress stopped making silver coins in 1873, hurting farmers and debtors and fueling a gold-versus-silver fight that helped raise the Populist Party.
• Regional interests clashed over economic policy: Northern industrial interests wanted high import taxes, while Southern agricultural interests wanted lower ones.
• Business leaders pushed for an Open Door policy in China, while the government organized the 1889 Pan-American Conference to strengthen trade ties with Latin America.
• Problems with monopolies, worker unrest, and inequality built support for regulation and helped lay the groundwork for Progressive Era reforms.

Economic Philosophies and Approaches

The Gilded Age saw a big fight between different ideas about how the economy should work. Business leaders usually wanted less government involvement, while farmers, workers, and reformers often wanted more rules to protect people against powerful corporations.

Laissez-faire supporters believed government should stay out of the economy:

• "Laissez-faire" means "let them do as they please" in French
• They thought businesses should operate without government rules
• They believed free markets would naturally fix economic problems
• They saw economic competition as natural and good
• They opposed government help during hard economic times

Government intervention supporters argued:

• Unregulated businesses created harmful monopolies
• Government needed to protect the public against powerful corporations
• Economic downturns required government action to help suffering people
• Government should make sure competition was fair

Social Darwinism gave laissez-faire ideas a scientific-sounding excuse. It wrongly applied Darwin's ideas about natural selection to human society, suggesting that rich people were naturally superior and government help for poor people would weaken society. These ideas were popular among wealthy business owners who benefited from limited rules.

Federal Economic Policies

Despite the popularity of laissez-faire thinking, the government actually did quite a bit to help businesses grow during this period. At the same time, growing problems with monopolies and corruption eventually led to the first significant business regulations.

How government helped business growth:

• Gave railroad companies huge amounts of free land
• Put high taxes on imported goods to protect American industries
• Kept immigration open to ensure cheap labor
• Sent troops to break up worker strikes
• Limited legal responsibility for corporations

Early business regulations:

• Interstate Commerce Act (1887) – controlled railroad rates
• Sherman Antitrust Act (1890) – made monopolies illegal
• Pendleton Civil Service Act (1883) – reduced government corruption

The Interstate Commerce Act created America's first federal regulatory agency to oversee railroad rates and practices. The Sherman Antitrust Act declared monopolies illegal, though it wasn't strongly enforced until the early 1900s. Both laws represented important steps toward greater government involvement in the economy, even if they didn't change things overnight.

Monetary Policy Debates

One of the biggest economic debates of the Gilded Age was about money – specifically, whether American currency should be backed by gold alone or by both gold and silver. This affected millions of Americans, particularly farmers and people in debt who were suffering under the gold standard's effects.

"Hard Money" supporters (mostly bankers and lenders) wanted:

• Gold standard where paper money was backed by gold
• Stable currency to make businesses feel confident
• Limited inflation to protect their investments
• Policies that generally helped northeastern banks and businesses

"Easy Money" supporters (mostly farmers and borrowers) wanted:

• More money in circulation through silver coinage or paper currency
• Rising prices to help farmers and make debts easier to repay
• Policies that would help western and southern regions

The "Crime of 1873" happened when Congress stopped making silver coins, effectively putting the US on the gold standard. This decision made things harder for farmers and debtors, while helping banks and creditors. The fight over gold versus silver became a major political issue, leading to the rise of the Populist Party and playing a central role in the 1896 presidential election.

Regional Economic Conflicts

Government economic policies created tensions between different regions of the country. Policies that helped one region often hurt another, leading to political conflicts between North and South, East and West.

Northern industrial interests wanted:

• High taxes on imported goods to protect their factories
• Gold standard money policies
• Government support for industrial growth

Southern agricultural interests wanted:

• Lower taxes on imports to reduce prices and help exports
• More money in circulation to raise crop prices
• Limited government economic regulation

Eastern financial centers wanted:

• Gold standard and conservative money policy
• National banking system controlled by Eastern banks
• Limited inflation to protect lenders

Western farmers and miners wanted:

• "Free silver" to create more money
• Government control of railroad rates
• Federal programs to help farmers

These regional tensions shaped political parties, elections, and government policies throughout the Gilded Age. The debate wasn't just about abstract economic theories – it was about whose interests would be served by government policy.

Foreign Economic Policy

As American production grew beyond what Americans could consume, the government increasingly looked to foreign markets. This led to more active government involvement in international affairs to protect American economic interests.

The government promoted economic expansion abroad by:

• Seeking new markets for American products
• Building influence in Latin America
• Seeking greater access to and control of natural resources, as well as markets, in Latin America, Asia, and the Pacific Rim
• Opening Asian markets, especially China and Japan
• Acquiring territories like Hawaii, Philippines, and Puerto Rico
• Establishing naval bases to support trade

Business leaders pushed for an "Open Door" policy in China to ensure American companies could compete with European powers there. The government also organized the first Pan-American Conference in 1889 to build stronger trade relationships with Latin American nations. These economic interests played a major role in America's growing global influence at the end of the 19th century.

Legacy of Gilded Age Economic Debates

The debates over government's role in the economy during the Gilded Age set important patterns for the future. While laissez-faire ideas dominated much of this period, growing problems with monopolies, worker unrest, and economic inequality gradually built support for increased regulation.

These controversies laid the groundwork for the Progressive Era reforms that would follow in the early 20th century, when the federal government would take a more active role in regulating business and addressing social problems. Many economic issues that first emerged during the Gilded Age – like monopoly power, worker rights, and government's role in managing the economy – continue to be debated in American politics today.