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Laissez-faire policies in the Gilded Age

Overview

  • During the Gilded Age, proponents of laissez-faire policies opposed government intervention in society or the market.
  • Laissez-faire ideology influenced government policies toward labor relations and Reconstruction.

Laissez-faire

One of the most influential ideas of the Gilded Age was laissez-faire (pronounced LAY-zay FAIR). From the French for “let them do [what they will],” proponents of laissez-faire policies, known as liberals, believed that the free market would naturally produce the best and most efficient solutions to economic and social problems. In other words, it was best to allow businesses to do what they wanted: trade freely, set their own prices, and determine workers’ wages and working conditions.
Liberalism, as it was known in the late nineteenth century, had a very different definition than it does today: instead of advocating for government intervention to solve social problems as today’s liberals do, liberals in the Gilded Age opposed most government intervention in the economy or labor relations. Libertarians are the closest equivalent to Gilded Age liberals in US politics today.
Laissez-faire combined the principles of limited government and the free market with some of the ideas of Social Darwinism. Applying Charles Darwin’s theory of evolution to human institutions, liberals believed that competition was necessary for progress. Any measures that interfered with complete freedom—defined as the freedom to buy and sell your labor and property any way you chose—were contrary to natural selection and impeded the march of civilization.
During the Gilded Age, this belief that laissez-faire capitalism produced optimal results for society came into conflict with the efforts of reformers and labor unions to rein in the influence of big businesses.

Laissez-faire principles in practice during the Gilded Age

Laissez-faire ideology influenced many aspects of politics, society, and economics in the Gilded Age. In general, liberals argued against anything they perceived as interference in the individual’s ability to compete freely.
In politics, liberals worked to curb corruption in government, which ran rampant during the Gilded Age. A splinter faction of the Republican Party, the Liberal Republicans, were so frustrated with the corruption in Ulysses S. Grant’s administration—and with his approach to Reconstruction, discussed below—that they ran a separate candidate for president (Horace Greeley) in the election of 1872. Liberals also worried about the political influence of immigrants, particularly Catholics, and formerly-enslaved African Americans. Some even advocated returning to a system of property qualifications for voting.
Campaign poster for Horace Greeley.
1872 presidential campaign poster for Horace Greeley, who ran on a Liberal Republican platform. Image credit: Library of Congress
Liberals viewed attempts to improve social conditions through government initiatives as counterproductive. Arguing that federal assistance prevented African Americans in the South from achieving their potential through free competition, liberals played a key role in the Republican Party’s abandonment of Reconstruction in the late 1870s.
Proponents of laissez-faire were especially concerned with “liberty of contract,” or the rights of businesses and workers to agree to a labor contract under any terms. The Supreme Court adopted this reasoning to overturn state laws that instituted minimum wages, maximum working hours, or safe working conditions. State regulations, as well as labor unions, according to the Court, interfered with the rights of citizens to negotiate their own labor contracts. The relative power of individuals and businesses to determine wages and working conditions did not factor into the Court’s rulings.

What do you think?

What is an example of a laissez-faire policy?
In what ways was laissez-faire ideology similar to Social Darwinism? In what ways was it different?

Want to join the conversation?

  • aqualine ultimate style avatar for user Ben McCuskey
    As I understand it, Laissez-faire ideology maintains that the "free market" is the best way to determine what businesses can and should do. This means that businesses, in competition with one another, should be free to determine their own paths free from any government rules or regulation. The belief is that the competition among various businesses will ultimately result in the best outcomes for society in general - Adam Smith's "invisible hand". As part of this philosophy, workers should also be free to compete with each other and choose to work wherever they wish and this process will also result in the best results for the workers as well.

    However, isn't there a huge assumption in this philosophy? Doesn't the whole justification of this belief depend on the condition that there is perfect competition and any company and any worker have the equal ability to compete with one another?

    What if there is not perfect competition? What if some companies have advantages - due to any of a whole array of reasons - that place them in a non-competitive position vis a vis their competitors? Without perfect competition then other companies are not necessarily able to compete with other companies that have certain advantages. If such a situation exists, then advantaged companies may have the ability to pursue a course that results in their private benefit, but not necessarily to the benefit of society as a whole. The same would apply to workers in that reduced competition among companies would result in decreased leverage for potential employees.

    To recap, if Laissez-faire ideology maintains it's the best economic policy for society as a whole, and it depends on there being perfect competition on an ongoing basis with minimal government intervention, doesn't it fall apart if there is in fact less than perfect competition?
    (10 votes)
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    • hopper cool style avatar for user SofiyaMarkova
      The capitalism ideology uses laissez-faire. It is important for the free market.
      You are asking if it collapses when there is no perfect completion. What happens actually in the world is different from ideologies. The reason we learn about these types of ideologies as if they are perfect is because that is the point of a model. So in the perfect case capitalism would work as laissez-faire and so everything works. If there is no perfect competition it may break apart but then the whole model is already not accurate. When modelling politics and economics we assume perfection because that is the point of using models to understand the world.
      (5 votes)
  • marcimus pink style avatar for user MARY734
    What were government acts that fought Laissez-Faire politics?
    (7 votes)
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  • blobby green style avatar for user arisner
    If the liberals played a key role in the Republican Party’s abandonment of Reconstruction in the late 1870s, who were the Democrats at the time and what were they doing with regard to Reconstruction?
    (0 votes)
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    • aqualine tree style avatar for user David Alexander
      Do not assume that just because an organization in the 21st century has kept the name it had in the 19th Century, that it resembles something of 150 years ago. Organizations change and change and change. That goes for political parties, corporations, religious organizations, universities and banks. The political beliefs of the Republican and Democratic parties in the USA in the 1870s are diametrically opposite of the beliefs of those same parties in 2020. The "when", "why" and "how" of the transformation is the very stuff of political history, which is far too detailed to be contained in one Khan Academy lesson.
      (5 votes)
  • blobby green style avatar for user SHARIAREH
    Why were industrialists/capitalists against government regulation?
    (1 vote)
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    • aqualine tree style avatar for user David Alexander
      Government regulation seems, to capitalists, interference in their quest to get and retain as much control as is possible. Industrialists would rather pollute the environment and make money by exploiting workers. Capitalists would rather just take and maintain control to see who can get the richest. It's often about uncontrolled ego.
      (2 votes)
  • blobby green style avatar for user 4804130818 isa
    laisse-faire is similar because of free market and do what you want
    (1 vote)
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  • leaf blue style avatar for user RJV
    Where did Guilded Age Liberalism differ from Capitalism and Republican economic ideology? They seem similar.
    (1 vote)
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