FREE ESSAY ON LAISSEZ-FAIRE

LAISSEZ-FAIRE

The American Civil War fades away. It now appears that a new social unrest has taken root
in
America. But the debate was to be fought in the economic world. The question was, how
should the
government interact with business? The issue splits into two main views, that of
Laissez-faire, and
that of General Welfare. Laissez-faire is a rather straight-forward philosophy. It can be
best
described by saying that the government should have absolutely no interaction within the
business
world. These thinkers trust that the government's sole purpose is to protect life and
property, and
that the role of government should end there. The tree of Laissez-faire has many
branches, two of
which are classical economics and Social Darwinism. Believers in classical economics base
most of
their philosophy on mercantilism and its effects. They have no doubt that government
interaction with
the business world is inept, and can only hurt economic growth. Social Darwinism was a
popular
belief. It grew from studies of Charles Darwin, and his publication, The Origin of
Species. Charles
Darwin argued that species had not been created, but had evolved. But most importantly to
the
philosophy of Social Darwinism, Darwin theorized that evolution takes place by survival
of the fittest.
It was that idea in s! urvival of the fittest that became the backbone for Social
Darwinists. The Social
Darwinists believed that the involvement of government in business interfered with the
natural
selection of those that were best suited to survive.(Lesson14 74) On the other side of
the issue was
the general welfare state. The philosophy of the general welfare state, called the Social
Gospel, was
advocated in part by Christians in the United States. They believed that individuality
had gone too far
and that it was necessary for government involvement. Increased urbanization and
industrialization
also led to the belief in the general welfare state. It was the opinion of these thinkers
that laissez-faire
was not the answer to the problems of economics.(Lesson14 74) Laissez-faire may have been
a
significant step in the evolution of economics to many people, but there were also many
silent threats
that it carried. Without government protection, big business can exploit the many people
that make it
work. Such exploitation could be brought about in low wages and poor working conditions,
long
working hours, and many others. Many believed that government protection was needed to
insure
fair competition and high standards of morality. In the 1860s oil became more and more
essential as
an everyday item. Its demand grew dramatically. The main use at that time for oil was
kerosene.
Kerosene was used in several ways, although its most popular use was in lamps. Crude oil
needs to
be refined to produce products such as Kerosene. Pennsylvania was the main location that
oil
refining was done in the 1860s, but times were changing. The Lake Shore Railroad helped
Cleveland
become one of the new centers for oil refining. It was obvious that the railroads were
invaluable to
the oil business. In the new refining city of Cleveland, Ohio, a new refining company was
created.
This company was the Standard Oil Company, owned primarily by John D.
Rockefeller.(Lesson16
95) John D. Rockefeller is a legend of the business world. He started a relatively small
oil refinery in
Cleveland, Ohio in 1870. In just two years, it grew into an enormous monopoly, producing
ninety
percent of the nations refined oil (Chapter4 15). His business ethics have been hotly
debated
because of many apparent rebates and other schemes. The Standard Oil Company's success
can be
attributed to Rockefeller's business aptitude. Aside from his great business qualities,
the Standard
Oil Company's success in the oil industry is because of the secret illegal rebates by the
railroads. A
rebate in the railroad business is a reduction in shipping fares in exchange for promised
use of the
railroad's services. These rebates were brought about through the South Improvement
Company,
which was set up in 1872 (Lesson16 96). The South Improvement Company was designed with
one
mission, to destroy all competition to the Standard Oil Company, and other companies that
were
part of the South Improvement Company. It was started by several large corporations,
including the
Standard Oil Company. Rockefeller is reported to have met with other oil businesses and
tell them
that if they do not join the South Improvement Company, they will be wiped out of
business due to
the lower shipping rates given to the South Improvement Company (Lesson16 96). Eventually
the
public gained knowledge of this conspiracy through . After nonstop opposition, the
railroads
eventually gave in and stooped giving the rebates. The South Improvement Company
collapsed in
April of 1872, and the Congressional Committee on Commerce denounced it as one of the
most
gigantic and dangerous conspiracies ever committed (Lesson16 97). After the failure of
the South
Improvement Company, the Standard Oil Company also tried secret pacts and bribing.
Rockefeller's objective was to keep the price of crude oil down. If he could buy oil at
cheap prices,
transport it at low rates, and could sell the refined oil at high prices, he could make
enormous profits.
Through his deceiving ways, Rockefeller turned the Standard Oil Company to one of the
most
famous monopolies of all time. He had turned the oil refining industry away from free
market
competition and towards monopolization. Ida Tarbell, lady journalist and famous
muckraker,
became John D. Rockefeller's greatest nemesis. As a journalist for the popular McClure's
Magazine, Ida Tarbell was hired by S.S. McClure at the age of thirty-seven. She became
an
immediate sensation with readers. By 1900 McClure's was reaching 350,000 homes thanks to
her.
She became known for her biography on Napoleon, and then her series on Abraham Lincoln,
which
took her four years of research. But she earned her place in the history books for her
pursuit of the
Standard Oil Company, and the Famous Tycoon that ran it, John D. Rockefeller. In the
October,
1902 issue of McClure's Magazine Ida announced that she had finished her research on the
most
perfectly developed trust in existence (The Gentlewomen and the Robber Barron 185). For
two
years and in eighteen installments, Ida Tarbell revealed the scandalous nature of the
Standard Oil
Company and its primary owner, John Rockefeller. She gained her knowledge of the
monopoly,
through interviews with business people with first-hand knowledge of the Standard Oil
Company,
and Rockefeller. As the months passed, Ida Tarbell published her installments, which
portrayed
Rockefeller as a ruthless tycoon, obsessed with taking over control the oil industry.
Miss Tarbell
urged her readers not to support monopolists such as Rockefeller. She argued that a thing
won by
breaking the rules of the game, is not worth winning (The Gentlewomen and the Robber
Barron
190). In 1909, the Standard Oil Company was accused with violation of the Sherman Act. On
May
15, 1911, the U.S. Supreme Court had finally come to a decision. It found the Standard
Oil
Company, guilty (The Gentlewomen and the Robber Barron 191). Essentially, the supreme
court
agreed with Ida Tarbell. Ida Tarbell's study of the Standard Oil Company had raised a
controversial
question. Is it better to have free competition, with fierce survival of the fittest, or
is it better to have
industry fall under the control of a single dominance which could maintain order and
profits (The
Gentlewomen and the Robber Barron 192)? Ida Tarbell wrote and published many other works
of
literature after that of the Standard Oil Company, but none had such an impact on
society. Ida was
and is a role model for women of all ages, races, and social classes. She proved that a
woman can
gain the same amount of admiration and respect as a man. The issues of Laissez-faire
versus General
Welfare and competition versus Monopoly were becoming more and more hotly debated. It
was
time for the U.S. Government to start taking sides and making decisions. This was done
through the
U.S. Supreme Court. By the mid 1880s people were starting to take notice to the fact that
the
practices of John D. Rockefeller in the oil industry was not an isolated phenomenon. The
same
practices of monopolizing were happening in the meat packing, copper, steel, coal, sugar,
and
countless other industries. It was obvious that Adam Smith's philosophy of laissez-faire
was leading
the economic world into one populated and governed by monopolies. The question was,
whether or
not to do anything about that. The question started to get answered in 1887 by the
Interstate
Commerce Act. The Interstate Commerce Act was the first of several laws that were a
turning point
on the governments position of Laissez-faire and monopolies. The Interstate Commerce Act
was
designed to prevent particular unfair actions, taking place within the railroads (The
Supreme Court
Decides 37). Examples of such unfair actions are rebates, discrimination, 'unreasonable'
rates, and
several others. In 1890 the Sherman Anti! -Trust Act was passed. This act was designed to
forbid
unfair competition among large firms, and essentially, make monopolies illegal. The
Sherman
Anti-Trust Act was written with very broad language, which left it to the courts decide
how to
interpret it (The Supreme Court Decides 37). We would now have to wait to see how the
courts
would use these new weapons against monopolies. It was soon found out how the courts
would use
the Sherman Act in the court case, U.S. v. E.C. Knight, 1894. The court case revolved
around the
purchase of four sugar refineries in the Philadelphia area, by the American Sugar
Company. This
purchase gave the company control of 98% of the nations' sugar refining capacity (The
Supreme
Court Decides 38). The American Sugar Company was found not guilty of attempting to
monopolize. This loss seemed to make the Sherman Act look like a failure, and for the
time being it
was. Several other businesses were taken to court, and only a small percent were won by
the
government. After Theodore Roosevelt took office as president, the prosecution of big
business with
the Sherman Act was altered, to the disadvantage of big business. Theodore Roosevelt
took
forty-four different businesses to the supreme court. The most famous one was U.S. v.
Standard Oil,
1907. The Government claimed that John D. Rockefeller led his Standard Oil Company! to a
monopoly through illegitimate means. The Government won. This lawsuit was one of the
most
dramatic because the government was taking on the largest corporation in the nation at
the time (The
Supreme Court Decides 39). It now appeared that the government and the courts had made
their
decision. There was to be no Laissez-faire economy, and monopolies would not be tolerated
in the
United States of America. What role the government plays in the regulation and
intervention of
American life is not just a eminently debated issue from the past. It is an issue that
has proved to be a
major concern and interest of almost all Americans. It is the feeling of many people that
business
should be unregulated by the federal government. But there are also those many Americans
that
believe that the government should regulate the growth and behavior of economics, to
protect the
American Citizen. These two opposite opinions are one of the main divisions of political
parties. The
Republican party is one that is very attractive to big business. It stands for smaller
government
intervention in the business world. The Democratic Party stands for larger government
interaction in
the economy and lives of America's citizens. It stands to protect the citizens from the
dangers small
government intervention. Many people fear a large unregulated economy. It is possible
that an
economy can run out of control and exploit the consumers and workers. This was
illustrated by a
study of the Standard Oil Company, headed by the 'ruthless' Rockefeller. When a business
is able
to monopolize within a single industry the outcomes can be potentially devastating. The
abuse of
consumers is no longer a difficult task. When a consumer has no choice but to purchase
from a
certain company, that monopoly is able to regulate prices to whatever they deem 'fair'.
It is not
always the consumer that is defiled. One may overlook the common worker. When there are
no
unions to watch over the treatment of workers, employers may exploit them. Long work
hours with
little pay, and poor working conditions were just two of the many cruelties that early
muckrakers
uncovered. It is also possible that too much government control over the economy can be
present.
This is why our present day society exists in a mixed economy. In a mixed economy,
private
ownership is combined with some government control. This system attempts to eliminate
inefficiencies inherent in capitalism or socialism alone. It is in this mixed economy
state that a
potential median between both philosophies is found. But our philosophies are always
changing, as is
our government.