1.13 The Dominance of Laissez-faire

Question 1

What approach did the government have towards the economy and business?

Answer 1

Laissez-faire

Question 2

What is meant by laissez faire?

Answer 2

It was an economic philosophy that emphasised the importance of market forces and free competition, with minimum regulation or state interference.

Question 3

What was social darwinism in business?

Answer 3

A belief that suggested that those who were richer and more powerful were innately better and that those who were superior would inevitably eventually reach their true potential. This led to the laissez faire approach from the government.

Question 4

What were the effects of laissez faire capitalism from 1865 to 1890?

Answer 4

It drove forwards the massive expansion of the economy and the ride of the great ‘barons’ of the American business in steel, oil, sugar, tobacco, public utilities, and the railroads.

Question 5

What was the ideology behind laissez faire?

Answer 5

It was closely linked to frontier values of rugged individualism and self-reliance, of hard work and thrift, and of the United States as a ‘land of opportunity’.

Question 6

What was the aim of laissez faire?

Answer 6

To ensure that anyone, great or small, could make their fortune if they had the right abilities, work ethic, and/or luck. It also was supposed to allow everyone an equal chance of failure.

Question 7

What was competition like in the markets as a result of laissez faire?

Answer 7

Free competition was often an illusion. In some areas of the economy, such as textile and the garment industry, small and medium sized firms competed and prospered in competitive markets. But the dominant tendency was the consolidation of competing enterprises into large-scale units which rapidly became monopolies.

Question 8

How did big businesses limit competition?

Answer 8

By merging with actual or potential rivals and driving small firms out of business.

Question 9

How were the markets not free?

Answer 9

They were rigged in favour of the large-scale enterprises and they were by no means free of ‘state interference’.

Question 10

How did the government support businesses?

Answer 10

State and federal governments set tariffs at the levels business wanted, passed laws to approve railroad and banking schemes, and turned a blind eye to corruption and malpractice.

Question 11

How many members did the Granger Movement have by 1885?

Answer 11

850,000

Question 12

Who supported the Granger Movement?

Answer 12

Farmers in the South and West who supported the protests against laissez faire capitalism.

Question 13

What change did the Granger movement bring?

Answer 13

INcreased regulation of railroads and firms controlling the storage and distribution of corn and wheat. Lobbying by the Granger movement brought about a favourable Supreme Court ruling against the State of Illinois in 1877, though this was later nullified by a pro-business Supreme Court ruling in 1886.

Question 14

What was the Knight of Labour?

Answer 14

A trade union founded in 1869 that aimed to unite all workers.

Question 15

What did the Knights of Labour campaign for?

Answer 15

They wanted an 8 hour working day and child labour restrictions and they campaigned for the initiative and referendum. Most radically, they wanted to build more cooperative labour-management relations, aiming for industries to be governed by councils of workers and managers.

Question 16

What involvement did the Knights of Labour have in the Great Southwest Strike?

Answer 16

In 1886, the Wabash Railroad tried to break a local union, the Knights walked out in sympathy, making the Southwest System paralysed within days. The Wabash Railroad was forced to negotiate with its workers.

Question 17

What was the Haymarket Affair?

Answer 17

At Haymarket Square in Chicago in May 1886, a peaceful Knight of Labour demonstration turned into a major riot when bombs were thrown. 11 people were killed, including 7 policemen.

Question 18

How did support for the Knights of Labour change over the years?

Answer 18

By 1885, the organisation had 100,000 members and within a year, this increased to 750,000 workers. However, the union was blamed for the Haymarket Affair and within a year, membership halved and within a decade, the Knights ceased to exist.

Question 19

What showed the growing strength of labour unions?

Answer 19

The formation of the American Federation of Labour in 1886.

Question 20

What were limitations of the American Federation of Labour?

Answer 20

Admitted only skilled white men. Ignored the larger social objective that had been set out by the Knights.

Question 21

What were some actions reluctant politicians began to take in response to attacks on laissez faire?

Answer 21

During the 1880s, 27 states, mostly in the South and West, passed laws at curbing cartels and trusts. In 1887 Congress passed the Interstate Commerce Act to outlaw restrictive monopolice and an Interstate Commerce commission was set up to investigate and regulate railroads companies. Both Republicans and Democrats committed themselves to take action against the trust; the Sherman Antitrust Act was passed in 1890.