Activist State: The Myth of Laissez-Faire Economics in American History, Part I

Throughout American history the idea of laissez-faire government - the economic philosophy that government interference in the affairs of the economy should be minimal - has permeated political debate. The principle that "a government which governs best is that which governs least" has been applied regularly to economic ideology seeking to make American capitalism its most efficient, its most profitable. And so goes the contemporary conservative ideology, that the history of the country supports the notion that the United States government is based on laissez-faire principles and any significant deviation from such ideals would lead America down the road toward socialism. Illustrating this point, President George W. Bush said of Ronald Reagan: "(He) seized the moment and helped redirect America's thinking toward the proper role of government," that he steered us clear of a kind of "European-style socialism."¹

This idea that America must avoid socialism has stemmed from a seemingly perpetual debate over the proper role of government in helping citizens in need. Whether the discussion involves assistance to the poor or crime prevention programs, raising the minimum wage or funding k-12 and higher education, opponents of this sort of government intervention consistently invoke laissez-faire ideology. Allocating tax dollars for such purposes, the argument goes, will encourage dependency on the government. That would be "big government," a violation of our founding economic principles. Therefore, such programs are undesirable and, in many ways, not in the spirit of American capitalism.

This laissez-faire idea is more a myth, a selectively upheld "principle". It has been so since the establishment of the first American colonies with the distribution of free land (free in the sense that the Indians did not count as part of the equation) by the English government to proprietors and speculators. The American Constitution was designed to maintain the economic status quo, allowing for federal interference in runaway slave cases (both a property and economic issue at the time) and preventing, in James Madison's words, the "equal division of property or any other improper or wicked object."² And today there is certainly no economic laissez-faire, as will be discussed.

But it is the economic issues within the context of American labor between 1800 and the present that prove that America has not been too concerned with loyalty to the laissez-faire ideal. If the United States was founded on the principle of true laissez-faire government, it certainly did not last long. In 1793 Congress passed and President Washington signed the first Fugitive Slave Act. This legislation strengthened the fugitive slave clause of the Constitution, federally protecting the right of slave owners to have their runaways returned to them, even if said slaves escaped to a non-slave state or territory. The Act gave further enforcement powers to the national government, a response at least in part to the rising abolitionist sentiment in the North. This legislation, as well as the Fugitive Slave Act to follow in 1850, was a direct intervention in the American economy. Slavery was first and foremost an economic institution, and many slaveholders demanded assistance from the Federal government in capturing their runaway assets. But as Roger Sherman pointed out, the return of runaway horses - also property - was not warranting such concern. In this instance, laissez-faire - which underpins the ideal of "rugged individualism" - was abandoned in favor of the slave-holding interests. Indeed, a true laissez-faire proponent might well have insisted that slave owners fetch their own slaves, without the help of the national government.

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