The Origins of General-welfare Liberalism

Laissez Faire

Where did the public philosophy I've named geneal-welfare liberalism come from? At the risk of oversimplifying, one can say it emerged from the failures of a doctrine popularly called laissez faire, a doctrine of political economy that carried the United States from an agrarian to an industrial society.

In the years after the Civil War political thought coupled private ownership with individual rights, a merger that lent itself to the growth of a free enterprise, capitalist economy. The founders probably had no conception of modern-day capitalism. Theirs was an era of small farms and cottage (home-based) industry, when goods and services were exchanged face to face. They could not foresee that this philosophy would ultimately legitimize the acquisition of huge quantities of property and its conversion to capital. Not surprisingly, therefore, nineteenth-century industrialists, bankers, and entrepreneurs marched under the banner of classical liberalism.

Later, especially in the years after the Civil War, a variant of classical liberal thought, laissez faire, emerged. This theory joined the principles of individualism to human affairs with a vengeance.

A moral code as well as a theory of economics and government, laissez faire taught that all of society benefits if its members are free to pursue their separate self-interests. Instead of leading to conflict, self-interested competition actually produced harmony. Why? Because if in the economic realm buyers and sellers are left alone, they will in the long run produce and consume what they need and want. Men and women, after all, are the best judges of their own desires. In a leap of faith, proponents of laissez faire also argued that the community good is simply the sum of individual preferences. Therefore, whether enlightened or not, the impulse to maximize one's own pleasures and profits adds to society's total welfare.

An absolutely essential ingredient of this system is free and open markets characterized by competition. The laws of supply and demand--and laissez faire theorists considered them laws--ensured that prices, rents, wages, profits, and interests would eventually reach their proper level. Equally significant, the goods and services required by society would be automatically provided since someone is always prepared to produce them, given sufficient demand. Economic freedom and competition, in short, create as if by an "invisible hand" an optimal amount of production and exchange.

If one accepts these premises, government's role is obvious: It should stay totally out of economic affairs, a position consistent with a classical liberal's belief in limited political authority.

For the business class, the message could not have been clearer: Governments are inefficient, slow, and plodding; the market is orderly, prompt, and decisive. Bureaucrats make mistakes, cause delays, and contribute to over- and underpricing; the market correctly regulates output and balances costs and profits. Public planners are unresponsive to both consumers and producers; the market satisfies both.

The logical consequence of laissez faire is a negative state, a government with minimal duties. (Sidney Fine, Laissez Faire and the General-Welfare State, pp. 30-31.) Apart from protecting its borders and suppressing internal disturbances, the central government had little else to do. And certainly taxing manufacturers or wage earners to help the poor made no sense: "If it [government] takes from him who has prospered to give to him who has not, it violates its duty towards the one to do more than its duty towards the other." (Herbert Spencer, Social Statics (London, 1851). Quoted in ibid. p. 38.)

Gradually, a transformation of classical liberalism occurred in the nineteenth century: Rights that were thought of as belonging to individuals were transferred to formal associations in general and to corporations in particular. Not only farmers and shopkeepers as individuals had rights, but so too did organizations of farmers and businesses. In a subtle twist of interpretation of the founders' ideas, disembodied corporations and trusts, however large and powerful, came to be considered as entities that like individuals had "natural" rights requiring protection.

In the hands of corporate and financial magnates, laissez faire legitimized the accumulation of vast fortunes, the creation of a dispossessed proletariat, and incessant corporate warfare. It justified behavior like the Triangle company's treatment of its immigrant workers. Most important, it succeeded in keeping government at bay. According to the theory of laissez faire, public programs to alleviate human misery were at one and the same time unneeded and harmful. As a matter of fact, laissez faire's most ardent apologists seem to the present generation as miserly and coldhearted as any collection of thinkers in American history. William Graham Sumner, a sociologist and educator and a man called a "social Darwinist" for his conviction that even in industrial civilization life boiled down to a struggle for survival, claimed in essay after essay that the strong will live and the weak perish: "Let it be understood that we cannot go outside of this alternative: liberty, inequality, survival of the fittest; not-liberty, equality, survival of the unfittest." And what was to become of the unfit? "The fact that a man is here is no demand upon other people that they shall keep him alive and sustain him" (All quoted in Fine, Laissez Faire and the General-Welfare State, p. 82. (An interesting account of laissez faire philosophy is Richard Hofstadter's famous Social Darwinism in American Thought (New York: George Braziller, 1959).)

However harsh these views may seem, they prevailed for most of the time up to World War I. Governments, whether at the national, state, or local level, took little responsibility or initiative in protecting workers, women, children, the sick, or the elderly. Such efforts were deemed unnatural, immoral, and counterproductive. Helping the destitute was a task best left to churches and private charaities. States and municipalities did operate orphanages, poorhouses, and hospitals, but they were on such a small scale that they could not serve the legions of needy cases created by industrialization.

As late as 1908 only 30 states had laws prohibiting the employment of children under 18 in factories; only 15 set maximum 10-hour days for women; only 8 forbade night work for children under 18; and none required medical examinations as a condition of employment, occupational disease reporting, and 8-hour work days for women in factories. (U.S. Bureau of Labor Statistics, "Summary Report on Women and Child Wage Earners, Monthly Review, 11 (March, 1916) p. 36.) More than 7000 fatalities occurred in mines and railroads in 1907, a total that almost equals half of all job-related deaths in a typical year during the 1970s. (Steven Pavser and George Clark, "OSHA's Ancestors: Previous Laws of the Work Place," Job & Safety Health vol. 2 (U.S. Department of Labor, Occupational Safety and Health Administration) (April, 1974) p. 19.) In one year alone, 1899, more than 2200 railroad workers were killed and another 35,000 injured. (W. F. Willoughby, "Accidents to Labor as Regulated by Law in the United States," Bulletin of the Department of Labor No. 32 (January, 1901) p. 8.) Pennsylvania's anthracite coal mines averaged about 400 fatal accidents annually in the 1890s. (Ibid., p. 16.)

Does one need more proof of the power of ideas? The information reported in the previous paragraph has not been easy to collect. The statistics a nation records reflects its values and priorities. While laissez faire was in ascendancy the U.S. government was not overly concerned with the health and safety of the labor force. That this proposition is valid may be seen by examining early volumes of The Statistical Abstract, which in the early 1900s was published by the Bureau of Foreign and Domestic Commerce. If your library collects government documents, an interesting project would be to compare the kinds of information reported in the earlier Abstracts with what appears in the later editions. It would be a way to see firsthand how national priorities have changed over the years. Chances are, for example, that the older versions contain few or no statistics on poverty, illiteracy, infant mortality, and accidents--matters that were considered private concerns--and a lot of trade and commercial data.

The Demise of Laissez Faire

During laissez faire's reign, other approaches to government waited in the wings. Alexander Hamilton, one of the most forceful proponents of the Constitution drafted in 1789, had advocated an active central government. And as a matter or fact, the federal government in Washington soon established a national bank, enacted protective tariffs, underwrote bridge and canal construction, deeded millions of acres of land to the railroads, began to subsidize agriculture and the training of skilled workers, and pacified the West. Military purchases during the Civil War provided an enormous boon to the economy.

Yet most of these activities aided business and contributed relatively little to the middle and working classes, who were left to fend for themselves. As the century wore on, industrialization seemed to create hardships as fast as it produced growth. Giant trusts drove small companies out of business, farm prices rose and fell like a roller coaster, and cities deteriorated into slums. All these developments, coupled with the concentration of wealth and power in the grasp of a few financiers and industrialists, sometimes called "robber barons," brought laissez faire under attack.

Psychologists and philosophers questioned the philosophy's empirical basis; economists rejected the facile assumptions about the efficiency and fairness of the "invisible hand"; and religious leaders rejected its tenets as immoral, inhuman, barbaric, and un-Christian. (Fine, Laissez Faire and the General-Welfare State, Chapters 6-8.) These doubts and discontents slowly coalesced into a plethora of reform movements: populism, progressivism, social gospelists, and, for a fleeting moment in the early twentieth century, socialism. Most agitated for reform of corporate law--enactment of antitrust legislation is one example--but a few demanded public ownership of utilities and large corporations. For some the answer was professional management of government--a return to the civic virtue expounded in the late 1700s. Still others cried for greater federal regulation of the economy, such as control of railroads. Whatever their concerns and solutions, the reformers were united in the conviction that government could not remain a passive bystander while social and economic ills rode roughshod over thousands and thousands of men and women.

Changes in attitudes and practices were slow in coming, many requiring 30 or 40 years before reaching fruition. By the time of the Great Depression in the 1930s, however, a new philosophy of government had begun to take root. It was, needless to say, not proclaimed on a single day by a single administration. Nor was it a complete rejection of classical liberalism. Instead, it was an adaptation of earlier principles to the requirements of the twentieth century.

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