Preserving Jeffersonian ideals through government regulation

By Kristopher A. Nelson
in November 2014

1000 words / 5 min.
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In the contentious years of Gilded Age America – 1870-1900 – the general consensus has been than the United States, laissez-faire capitalism and “liberty of contract.” Reality, unsurprisingly, was more complex.

Please note that this post is from 2014. Evaluate with care and in light of later events.

In the contentious years of Gilded Age America — 1870-1900 — the general consensus has been than the United States, as a whole, favored industrialists and free-market capitalism (laissez faire), with the law of contracts coming to dominate the legal landscape, culminating in the triumph of “liberty of contract.”

Reality, unsurprisingly, was more complex. Tort law, for example, became increasingly important, particularly as judges and juries sought to compensate the victims of increasingly deadly technologies (railroads, factory machinery, and so on) in the face of horrific injuries and limited social protections (most charity was private, there was no Worker’s Compensation, no Social Security, no Medicare, and so on).

Indeed, the late nineteenth century was less a libertarian paradise and more a time of contentious debate between old and new approaches to economic and governance matters. It was the turn of the century that brought us the triumph of laissez faire in the Supreme Court (“liberty of contract“) — but also saw the development and growth of new state and federal administrative agencies.

In the conflicted late nineteenth century, then, not all American, and not even all American capitalists, bought into a laissez faire economic philosophy. Some, like Francis B. Thurber, owner of the nation’s largest wholesale grocery firm of the 1880s, fought back on quite conservative principles, invoking the ideals of Jeffersonian democracy (with the virtuous, but suspicious, small-scale farmer as their ideal man, and centralized government power as their core worry) to argue against the growing trend towards promoting economic freedom from government intervention as the highest ideal of liberty. Lee Benson writes that Thurber felt that

to preserve Jeffersonian social ideals amidst the centralizing tendencies of the Communication Revolution, it was necessary to stand Jeffersonian … laissez-faire political economy on its head.

Mitchell Okun quotes a speech by Thurber in Fair Play in the Marketplace:

The time for a laissez faire policy is past. Our civilization is constantly growing more complex and the forces which now control it must themselves be controlled and directed or disastrous collisions will surely result. … I am opposed to the centralization of power either in the hands of Government or of corporations, but centralization is a fact staring us in the face and we must see if we cannot make one form of centralization neutralize the other. (105)

The back-and-forth of legal decisions provides evidence that the late nineteenth century was not incontestably in favor or a pure “free market”; in fact, the case most associated with the doctrine — Lochner v. New York — is from 1905.

Before Allgeyer v. Louisiana in 1897 gave us the first Supreme Court decision that constitutionalized liberty of contract (and started the so-called Lochner era, which lasted well into the late 1930s), holdings like that in the so-called Slaughter-House Cases (1873) actually supported government intervention in economic matters, at least in cases involving public health (Lochner itself was also very much a public-health case).

Even before the Civil War fundamentally shifted power towards the federal government, laws in 1842 and 1848 attempted to regulate imports of “indecent and immoral” materials and substandard drugs, respectively (Okun 13-14). (The first law would become the basis of the later so-called “Comstock Acts” that prohibited contraception, and the second presaged the eventual creation of what would become the FDA in 1906).

By the time of the Civil War, in both England and America, laws were passed against the adulteration of food and drugs (though usually at the state level in the U.S.); these suggest  “an increasing tendency to set aside the belief in laissez-faire” (30), even as that belief would eventually triumph — in a limited form and for a relatively brief time — at the turn of the century. This also marked, according to Lawrence M. Friedman’s A History of American Law, a move away from the traditional common-law doctrine of caveat emptor and towards the civil law’s caveat venditor approach.

Soon after the Civil War, American states and cities turned an even more careful eye on the practices of the increasingly industrialized and depersonalized food and drug market. New York’s Metropolitan Board of Health, for example, was created in 1866, and granted vast “autocratic” powers to create and enforce its own “sanitary legislation” (Okun 35). The New York state trial court tried to check this power in 1867, but New York’s highest court reversed that decision in 1868, upholding the Board’s new powers (40).

In a similar vein, the United States Supreme Court upheld Louisiana’s forced relocation of butchers in New Orleans — along with the creation of a new monopoly company to manage them — in 1873’s Slaughter-House Cases, despite the obvious interference with the freedom of the butchers to run their operations their own way.

The Gilded Age, for all its triumphant capitalism, was also an era in which a “tempting new concept of government in loco parentis was beginning to emerge” (Okun 185). While certainly couched in terms of protecting the public — partly, according to Friedman, to “convince judges that some public interest was at stake,” regulations were often sought by professionals and businesses in order to protect their “little citadels or privilege” and felt they could “generate business if they drove out dishonest promoters” (186-87).

The story of the Gilded Age, like the story of the nineteenth century as a whole, is thus not the simple “triumph of contract” and unbridled laissez-faire capitalism it is sometimes portrayed as. Instead, it is a more complex back-and-forth of competing interests and ideas. One of those competing interest were represented by businessmen like Thurber, who sought to use government regulation to reign in the revolutionary changes brought by capitalist industry and thus to preserve old, conservative ideals of republican virtue and small-scale rural values.

Relevant cases