The Myth of America's Laissez-Faire Past

Tariffs, trusts, corporate-state collusion and "communism of pelf" did not equal free markets

In 1888, at the height of the Gilded Age, a rather prominent American said some startling things. First he observes:

Our cities are the abiding places of wealth and luxury; our manufactories yield fortunes never dreamed of by the fathers of the Republic; our business men are madly striving in the race for riches, and immense aggregations of capital outrun the imagination in the magnitude of their undertakings.

But this did not mean all was well with America. The speaker goes on:

We view with pride and satisfaction this bright picture of our country's growth and prosperity, while only a closer scrutiny develops a somber shading. Upon more careful inspection we find the wealth and luxury of our cities mingled with poverty and wretchedness and unremunerative toil.

Assigning Blame

Has this man forgotten, as many people do, that in market-based societies the growth of wealth, while inevitably uneven, is over time steady and general? That's not relevant to what he has in mind: He wishes to assign blame for the poverty he observed:

We discover that the fortunes realized by our manufacturers are no longer solely the reward of sturdy industry and enlightened foresight, but that they result from the discriminating favor of the Government and are largely built upon undue exactions from the masses of our people. The gulf between employers and the employed is constantly widening, and classes are rapidly forming, one comprising the very rich and powerful, while in another are found the toiling poor.

As we view the achievements of aggregated capital, we discover the existence of trusts, combinations, and monopolies, while the citizen is struggling far in the rear or is trampled to death beneath an iron heel. Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people's masters.

Rewards unrelated to effort! Undue exactions from the masses! Widening gulf between employers and employed! Rapidly forming classes! Rich and powerful versus the toiling poor!

We've heard this somewhere.

Powerful Minority

But he's got more to say:

Under the . . . laws . . . the Government permits many millions more to be added to the cost of the living of our people and to be taken from our consumers, which unreasonably swell the profits of a small but powerful minority. . . .

[T]he Government, under pretext of an exercise of its taxing power, enters gratuitously into partnership with these favorites, to their advantage and to the injury of a vast majority of our people.

This is not equality before the law.

Sounding like one of today's Progressives attacking "trickle-down economics," he continues:

He mocks the people who proposes that the Government shall protect the rich and that they in turn will care for the laboring poor. Any intermediary between the people and their Government or the least delegation of the care and protection the Government owes to the humblest citizen in the land makes the boast of free institutions a glittering delusion and the pretended boon of American citizenship a shameless imposition.

Call for Reform

And he's not finished. The speaker calls for reform, which he expects would have the support "of all who believe that the contented competence and comfort of many accord better with the spirit of our institutions than colossal fortunes unfairly gathered in the hands of a few" (emphasis added).

Who is this man? Progressive politician William Jennings Bryan? Socialist Party presidential candidate and union leader Eugene V. Debs?

No. It is neither of them.

Casting a wider net, perhaps it is the "free market socialist" writer and editor Benjamin Tucker?

Again, no.

It is Grover Cleveland, the 22nd and 24th president of the United States. The occasion: his December 1888 State of the Union address, delivered a month after losing his reelection bid in the electoral college (but not in the popular vote) to Benjamin Harrison.

Source of Privilege: The Tariff

The source of corporate privilege that raised Cleveland's ire was the tariff, one of Tucker's despised "four monopolies." (Back in the day, it was said, "The tariff is the mother of trusts.") As Cleveland puts it, "It can not be denied that the selfish and private interests which are so persistently heard when efforts are made to deal in a just and comprehensive manner with our tariff laws are related to, if they are not responsible for, the sentiment largely prevailing among the people that the General Government is the fountain of individual and private aid."

Then, astoundingly, he adds:

Communism is a hateful thing and a menace to peace and organized government; but the communism of combined wealth and capital, the outgrowth of overweening cupidity and selfishness, which insidiously undermines the justice and integrity of free institutions, is not less dangerous than the communism of oppressed poverty and toil, which, exasperated by injustice and discontent, attacks with wild disorder the citadel of rule. [Emphasis added.]

Note what Cleveland is saying: The impetus for communism is not the masses' or intellectuals' envy of wealth earned through achievement in the market, but rather honest people's frustration at being exploited through the collusion of capital and State, which Cleveland also labels a form of "communism." In another place he refers to the "communism of pelf."

No Laissez Faire

Thus, judging by Cleveland's address, America in the Gilded Age was no era of laissez faire characterized by rugged entrepreneurship. Rather, it was a neomercantilist corporate state, where government – as only government can – empowered privileged business interests to make fortunes at the expense of regular working and consuming Americans. Cleveland, in this speech at least, echoes the pro-market "anti-capitalist" critique voiced by Lysander Spooner, Benjamin Tucker, and their compatriots for whom justice for worker-consumers was the very basis of their seminal libertarian movement. (Yet see Spooner's letter to Cleveland and Cleveland's role in the Pullman strike.) Later classical-liberal historians Arthur A. Ekirch Jr. and George C. Roche III shared their critique. (See also Joseph R. Stromberg's article "The Gilded Age: A Modest Revision.")

Cleveland's words will undoubtedly surprise most people—regardless of their political philosophy.

Sheldon Richman is editor of The Freeman, where this article originally appeared.