The Myth of 19th-Century Laissez-Faire: Who Benefits Today?

by Roderick Long
The Myth of 19th-Century Laissez-Faire: Who Benefits Today?

Last week Michael Lind asked a silly question (“The question libertarians just can’t answer”): if libertarianism is so great, why hasn’t any country tried it?

The question is silly because the libertarian answer is obvious: Libertarianism is great for ordinary people, but not for the power elites that control countries and determine what policies they implement, and who don’t welcome seeing their privileged status subjected to free-market competition. And ordinary people don’t agitate for libertarian policies because most of them are not familiar with the full case for libertarianism’s benefits, in large part because the education system is controlled by the aforementioned elites.

Lind’s question is analogous to ones that might have been asked a few centuries ago: If religious toleration, or equality for women, or the abolition of slavery are so great, why haven’t any countries tried them? All such questions amount to asking: If liberation from oppression is so great for the oppressed, why haven’t their oppressors embraced it?

Now E. J. Dionne proposes a different answer (“Libertarianism’s Achilles’ Heel”) to Lind’s question: “We had something close to a small government libertarian utopia in the late 19th century and we decided it didn’t work.”

Leaving aside the Orwellian use of “we” – as a serious claim about history, this is absurd. Even if we ignore, as we shouldn’t, the anti-libertarian legal disabilities imposed on women, nonwhites, and homosexuals (i.e, the majority of the population), it remains true that the late 19th century American economy was characterized by vigorous and systematic government intervention on behalf of big business (wrapped sometimes in laissez-faire rhetoric and sometimes in progressive rhetoric). A government that routinely brings in police or the army to break up strikes is hardly a laissez-faire regime.

In the 1880s, free-market anarchist Benjamin Tucker identified the domination of business interests in the Gilded Age as grounded in a variety of state-imposed monopolies, stressing four in particular: Protectionist tariffs; the monopolization of credit through government control of the money supply; the suppression of competition via informational monopolies (patents and copyrights); and the assignment of titles to land and natural resources on the basis of expropriation and political pull rather than homesteading and trade. Alongside these, Tucker listed the monopolization of security services represented by the institution of the state itself.

The rigging of the market in favor of big business did not end with the Gilded Age. Dionne’s claim that in that era “monopolies were formed too easily” ignores historical research by James Weinstein and Gabriel Kolko showing that the supposedly anti-business regulations of the Progressive era (and likewise, Butler Shaffer has shown, those of the New Deal) were actually lobbied for by the corporate elite, in order to prop up monopolies that could not survive in an unhampered market. Dionne’s vision of the New Deal as coming to the rescue of a government that was previously “helpless” and “handcuffed” by “anti-government ideology” is ludicrous; Roosevelt’s big-government, pro-cartelization policies were largely a continuation of Hoover’s. And given the destruction of affordable health insurance in the early 20th century via the political might of the medical establishment, as documented by historian David Beito, Dionne’s claim that laissez-faire left the poor “unable to afford health insurance” is literally adding insult to injury.

The myth of 19th-century laissez-faire is useful to statists on both the left and the right. As contemporary market anarchist Kevin Carson observes, “advocates of the regulatory-welfare state must pretend that the injustices of the capitalist economy result from the unbridled market, rather than from state intervention in the market,” since otherwise “they could not justify their own power as a remedy.” And by the same token, “apologists of big business” need to “pretend that the regulatory-welfare state was something forced on them by anti-business ideologues, rather than something they themselves played a central role in creating.”

Dionne’s identification of the Tea Party as representing “anti-statist libertarianism” shows that he has let himself be bamboozled by the anti-government rhetoric of what is mainly (with some honorable exceptions) a pro-big-government campaign for crony capitalism, intrusive morals legislation, harassment of peaceful immigrants, and a sanguinary foreign policy. The regulations against which Tea Partiers rail are mainly secondary regulations, the belt over the bones, designed merely to ameliorate the effects of those primary regulations that maintain the essential power structures in place.

A better question we might ask Lind and Dionne: if the intrusive state is so great, why does it need to retain its clients by force, rather than letting them peacefully opt out?

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3 responses to “The Myth of 19th-Century Laissez-Faire: Who Benefits Today?

  1. Nick diPerna

    Here’s a similar interpretation for anyone interested:

  2. The main free trade supporting economist in mid to late 19th century America was A.L. Perry (the leading follower of Bastiat in the United States).

    A.L. Perry was followed by Frank Fetter (who helped bring Ausrtrian School ideas to the United States and made real contributions of his own). Tucker contributed nothing of note to economics and some of his ideas were just flat wrong.

    No country is a perfect example of laissez faire – not even in the United Kingdom in, say, 1870.

    However, the United States was vastly more free enterprise in the 19th century than it is today.

    Yes cartel activity existed (a classic example is the railroad cartel which the Interstate Commerce Commisssion, created in 1887, tried to enforce), but to imply that the United States was DOMINATED by cartels and monoploies is false (in fact it is B.S.). And quoting a bunch of socialists (such as Kolko) and other such does not change that.

    David Friedman (in “The Machinery of Freedom”) points out that the claim that “in the 19th century there would not have been mass poverty if it had not been for….. ” (this or that state policy) is nonsense.

    At the level of technology that existed in the 19th century mass poverty was INEVITABLE. Certainly (I agree) taxes and regulations made things worse – but even without the limited taxation and regulation that existed in the United States in the 1880s things would have been much the same (a bit better – but not vastly better).

    Improving living standards takes time – buiding up capital, and developing new ways of doing things, over generations. Pretending that things would have been dramatically better in the 19th century if only there had been less government is dishonest – things would have been a bit better, but (given as government was very small anyway) not vastly better. Most people would still (by the standards of today) have been dirt poor.

    As for the idea (that some people push) that, if it were not for this or that state intervention, industry would have not have been organised on a large scale (with most people in industry being employees and only a small minority being employers) – that is not just nonsense, it is nonsense on stilts.

    Tell the truth – that is all I ask.

    Libertarianism does not promise Heaven on Earth – and it certainly does not promise there will be equality of income or wealth (or anything like material equality) or that a few people will not employ many thousands of people.

    Want to improve the United States of the 1880s by getting rid of some regulations and reducing taxation and government spending? Then I am all for you – start by getting rid of the systems of STATE EDUCATION (this was the largest part of statism in the late 19th century – in the United States and other countries).

    But try and sell people Moonbeams and Magic Pixie Dust (the various schemes of Edward Bellamy, B. Tucker and others), well then you are just a conman.

  3. By the way – the idea that state education is controlled by people who are hostile to the free enterprise because they represent a rich “power elite” who do not want free market compeition to undermine their wealth, is insane.

    It is more that just wrong – it is actually crazy.

    I do think that Roderick Long believes this stuff – not for a second.

    Education (both government – and a lot of supposedly private education) is actually dominated by leftists (people in a cultural tradition that goes all the way back to Plato – but which waxes an wanes in various periods of time, presently it is very much on the rise and has been for more than a century) who have an intellectual and cultural dislike for businessmen (especially rich businessmen – “big business” is what they hate most of all) and do their best to teach students anti business, “Social Justice” ideas.