Growth Of Government Intervention

In the American economy, the balance between laissez-faire and government intervention has not been constant over time. Rather, in the early days of the nation, government leaders refused to do almost anything to control business. Except for helping support the development of agriculture and granting financial support to companies building the railroad system in the late 19th century, the government played little role in business affairs.

As the 20th century approached, however, the consolidation of U.S. industry into increasingly powerful groupings spurred the growth of a nationwide movement of citizens supporting economic reforms. Many of those who supported these reforms came from the ranks of business itself, especially small businesses. With this movement came increased support for government intervention and control of the economy. Gradually the government began to take action. In 1890 Congress passed the Sherman Antitrust Act, a law aimed at restoring competition and free enterprise by breaking up big business combinations known as monopolies. In 1906 laws were passed to make sure that food and drugs were correctly labeled, and that meat was inspected before being sold. In 1913 the government established a new federal banking system, the Federal Reserve, to regulate the nation's money supply and to place some controls on banking activities.

The largest changes in the government's role occurred as part of the "New Deal," President Franklin D. Roosevelt's response to the Great Depression. During this period in the 1930s, the United States endured the worst business crisis and the highest rate of unemployment in its history. To ease hardships, President Roosevelt and the Congress enacted many new laws including measures regulating sales of stock, recognizing the right of workers to form unions, and setting rules for wages and hours for workers. In addition, stricter controls were put on the manufacture and sale of food, pharmaceutical drugs and cosmetics.

The many laws and regulations enacted since 1930 have altered the shape of the American economy. There is virtually nothing a person can buy in the United States that is not affected by some kind of government regulation. Food manufacturers must tell exactly what is in a can or box or jar. No pharmaceutical drug can be sold until it is thoroughly tested and then approved by a federal agency. Many types of businesses must pass inspections by government workers for compliance with health, safety or both types of regulations. Automobiles must be built according to safety standards, and must carry pollution-control devices. Prices for goods must be clearly marked and advertising must be honest. These are just a few of the ways in which the government currently protects consumers.

Laws and regulations also protect American workers in many ways. Laws prohibit discrimination in hiring; forbid hiring children for most jobs and set rules for using children in others (such as acting): set standards for working conditions; and protect the rights of independent labor unions to organize, bargain and strike peacefully.

Additionally, in the 20th century, the federal government's role in the U.S. economy has expanded to include major efforts to meet the economic needs of the poor, the old and the disabled, and to protect the environment.