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Big Business and the Rise of American Statism: Conflicting Schools of Thought

Liberal, conservative, and Marxist historians all offer flawed interpretations of the Progressive Era. A different historical lens is needed.

In historiography different schools of thought exist in much the same way and for the same reason as in many other fields. And in history, as in those other fields, different interpretations, no matter how far removed from reality, tend to go on forever, oblivious to new evidence and theories. In his book, The Structure of Scientific Revolutions, Thomas Kuhn shows in the physical sciences how an existing paradigm of scientific explanation tends to ignore new evidence and theories, being overthrown only when: (a) the puzzles and problems generated by a false paradigm pile up to an increasingly obvious extent, so that an ever-wider range of material cannot be integrated into the paradigm, and an ever-growing number of problems cannot be solved, and (b) there arises on the scene a new paradigm to replace the old.

In history, perhaps more than in most other fields, the criteria of truth have not been sufficiently developed, resulting in a great number of schools of thought that tend to rise and fall in influence more because of political and cultural factors than because of epistemological factors. The result also has been that in history there are a number of competing paradigms to explain different sets of events, all connected to specific political views. In this essay, I shall consider three of them: the Marxist view, the conservative view and the liberal view. I shall examine how these paradigms function with reference to one major area of American history – the Progressive Era – and with respect to one major issue: the roots of government regulation of the economy, particularly through the antitrust laws and the Federal Reserve System. Other incidents will also be mentioned, but this issue will be the focus.

Among these various schools, nearly everyone agrees on the putative facts of American history; disagreements arise over frameworks of interpretation and over evaluation.

The Marxists, liberals, and conservatives all agree that in the economic history of America in the nineteenth century, the facts were roughly as follows. After midcentury, industrialization proceeded apace in America, as a consequence of the laissez-faire policies pursued by the United States government, resulting in increasing centralization and concentration of economic power.

According to the liberal, in the nineteenth century there was an individualistic social system in the United States, which, when left unchecked, led inevitably to the “strong” using the forces of a free market to smash and subdue the “weak,” by building gigantic, monopolistic industrial enterprises which dominated and controlled the life of the nation. Then, as this centralization proceeded to snowball, the “public” awoke to its impeding subjugation at the hands of these monopolistic businessmen. The public was stirred by the injustice of it all and demanded reform, whereupon altruistic and far-seeing politicians moved quickly to mash the monopolists with antitrust laws and other regulation of the economy, on behalf of the ever-suffering “little man” who was saved thereby from certain doom. Thus did the American government squash the greedy monopolists and restore competition, equality of opportunity and the like, which was perishing in the unregulated laissez-faire free market economy. Thus did the American state act to save both freedom and capitalism.

The Marxists also hold that there was in fact a trend toward centralization of the economy at the end of the last century, and that this was inherent in the nature of capitalism as an economic system. (Some modern, more sophisticated Marxists maintain, on the contrary, that historically the state was always involved in the so-called capitalistic economy.) Different Marxists see the movement towards state regulation of the economy in different ways. One group basically sees state regulation as a means of prolonging the collapse of the capitalistic system, a means which they see as inherently unstable. They see regulation as an attempt by the ruling class to deal with the “inner contradictions” of capitalism. Another group, more sophisticated, sees the movement towards state regulation as a means of hastening the cartelization and monopolization of the economy under the hands of the ruling class.

The conservative holds, like the liberal, that there was indeed such a golden age of individualism, when the economy was almost completely free of government controls. But far from being evil, such a society was near-utopian in their eyes. But the government intervened and threw things out of kilter. The consequence was that the public began to clamor for regulation in order to rectify things that were either not injustices at all, or were injustices imposed by initial state actions. The antitrust laws and other acts of state interference, by this view, were the result. But far from seeing the key large industrialists and bankers as monopolistic monsters, the conservatives defend them as heroic innovators who were the victims of misguided or power-lusting progressives who used big businessmen as scapegoats and sacrifices on the altar of the “public good.”

All three of the major schools of interpretation of this crucial era in American history hold two premises in common: (a) that the trend in economic organization at the end of the nineteenth century was in fact towards growing centralization of economic power, and (b) that this trend was an outcome of the processes of the free market. Only the Marxists, and then only a portion of them, take issue with the additional premise that the actions of state regulation were anti-big business in motivation, purpose and results. And both the conservatives and the liberals see a sharp break between the ideas and men involved in the Progressive Movement and those of key big business and financial leaders. Marxists disagree with many of these views, but hold the premise that the regulatory movement itself was an outgrowth of the capitalistic economy.

The Marxists, of course, smuggle in specifically nonhistorical conclusions and premises, based on their wider ideological frame of reference, the most prominent being the idea of necessity applied to historical events.

Although there are many arguments and disputes between adherents of the various schools, none of the schools has disputed the fundamental historical premise that the dominant trend at the end of the last century was toward increasing centralization of the economy, or the fundamental economic premise that this alleged increase was the result of the operations of a laissez-faire free market system.

Yet there are certain flaws in all three interpretations, flaws that are both historical and theoretical, flaws that make any of the interpretations inadequate, necessitating a new explanation. Although it is not possible here to argue in depth against the three interpretations, brief reasons for their inadequacy can be given.

Aside from the enormous disputes in economics over questions such as whether or not the “capitalistic system” inherently leads toward concentration and centralization of economic power in the hands of a few, we can respond to the Marxists, as well as to others, by directing our attention to the premise that there was in fact economic centralization at the turn of the century. In confronting the liberals, once more we can begin by pointing to the fact that there has been much more centralization since the Progressive Era than before, and that the function, if not the alleged purpose, of the antitrust and other regulatory laws has been to increase, rather than decrease, such centralization. Since the conservatives already question, on grounds of economic theory, the premise that the concentration of economic power results inevitably from a free market system, we must question them as to why they believe that (a) a free market actually existed during the period in question, and (b) how, then, such centralization of economic power resulted from this supposed free market.

Aside from all the economic arguments, let us look at the period in question to see if any of the schools presented hold up, in any measure or degree.

Reprinted, with permission, from the February 1971 (pp. 12-18) and March 1971 (pp. 9-12) issues of Reason magazine. Copyright 2004 by Reason Foundation, 3415 S. Sepulveda Blvd., Suite 400, Los Angeles, CA 90034:

Originally delivered as a speech before the first convention of the Society for Individual Liberty, University of Pennsylvania, 15-16 November 1969.

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