2010-08-04

What laissez-faire really means... the sudden collapse of the entire economy

     To the amateur and professional laissez-faire economist government interference in the economy is a bad thing.

     Interestingly, and it will also turn out paradoxically, this same group, politically usually Republicans, libertarians, or economic conservatives, value concepts like Original Intent, have a tendency to call themselves Classical Liberals, and have their lawyers organize themselves in a group called the Federalist Society.

     What did early Americans think about government interference in the economy?  Then, as now, there were usually two political parties with two divergent opinions, but none of these opinions match the views of the modern laissez-faire aficionados.

     Later, things did change.  After the Civil War and the birth of the giant corporation in the 1870s, after the 1886 Santa Clara cases which effectively gave human rights to corporations, but before that there were basically three positions, represented in the ideals of the Federalists, who were the most mercantilist, the Democratic-Republicans, who championed the individual farmer, free markets, the end to monopolies, and who hated corporations and stock markets, and the Whigs, who thought a few corporations were alright, in the hands of the elites, and thought the government should interfere in the economy with tariffs to protect manufacturers, as had Alexander Hamilton.

     The classical laissez-faire position held by the Democratic-Republicans saw limited liability, the right of the owners (stock holders) of a corporation not to be legally responsible for the companies actions, as a distortion of the economy.  Does anyone think modern Republicans want all the corporations dismantled?  I think they want all government interference except corporate limited liability to be done away with, and that's why they aren't free marketeers, they are corporatists.  Some corporations provide goods and services for the public efficiently, but all the biggest ones use that same power to change the law in their favor.

     What follows are a couple quotes from T. J. Stiles Puliter Prize and National Book Award winning biography of Cornelius J. Vanderbilt who once had assets roughly equal to 1 in every 9 dollars in the entire United States.

[The Democratic-Republicans] criticized the patricians[Federalists] for using their political power to grant themselves special privileges. Corporate charters usually went to the well-connected. Many early banks extended credit only to a closed network of relatives and cronies. Government intervention in the economy largely consisted of special rewards to officeholders and favored men.


The aristocrats saw no conflict of interest in using public office to enrich themselves. As society's natural leaders, they reasoned, they should be entrusted with economic stewardship as well. This outlook, this merging of private and public roles of the elite, was the essence of mercantilism, in which the state empowered private parties to carry out activities thought to serve the public interest. [p. 41]

The Bank War [between Andrew Jackson and President of the 2nd Bank of the United States, Nicholas Biddle] spun American politics into a centrifuge, concentrating the two impulses of the day into distinct parties. On one side were Jackson's followers, the Democratic Party, or the Democracy, as they called it, -- the party of individual equality and limited government. Under the slogan "Jackson, Commerce, and Our Country," they celebrated a market economy of real persons and a republican simplicity. In opposition arose the Whigs, who were more trusting in the beneficial role of active government. At the time, the division between the two seemed as natural as a canyon. The Democrats had emerged out of the resistance to the eighteenth-century patricians and their culture of deference, out of battles against the limited franchise, aristocratic privileges, and mercantilist monopolies. Though their elected leader would often make use of the government's economic power, the most radical among them -- especially New York's "Locofoco" faction (nicknamed after the brand of matches they used when their rivals at a tumultuous party meeting doused the lights) -- championed laissez-faire as their definition of equal rights. The Whigs (such as Hone) inherited some of the ordering, top-down outlook of the old elite, and a deeply moral version of the role of the state. They believed that measures to assist the most enterprising, such as corporate charters or public works, would grace everyone; as historian Amy Bridges writes, they believed "the state should guide interdependent interests to a common good." As development-minded modernizers in a young and growing country, they saw competition as a destructive force that punished entrepreneurship.[pp. 98-99]

1 comment:

JSN said...

Mr. Stiles wrote "thanks for the post" with regards to this article.

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