Laissez-Faire


The American Civil War fades away. It now appears that a new social unrest has taken root in
America. But the debate was to be fought in the economic world. The question was, how should the
government interact with business? The issue splits into two main views, that of Laissez-faire, and
that of General Welfare. Laissez-faire is a rather straight-forward philosophy. It can be best
described by saying that the government should have absolutely no interaction within the business
world. These thinkers trust that the government’s sole purpose is to protect life and property, and
that the role of government should end there. The tree of Laissez-faire has many branches, two of
which are classical economics and Social Darwinism. Believers in classical economics base most of
their philosophy on mercantilism and its effects. They have no doubt that government interaction with
the business world is inept, and can only hurt economic growth. Social Darwinism was a popular
belief. It grew from studies of Charles Darwin, and his publication, The Origin of Species. Charles
Darwin argued that species had not been created, but had evolved. But most importantly to the
philosophy of Social Darwinism, Darwin theorized that evolution takes place by survival of the fittest.
It was that idea in s! urvival of the fittest that became the backbone for Social Darwinists. The Social
Darwinists believed that the involvement of government in business interfered with the natural
selection of those that were best suited to survive.(Lesson14 74) On the other side of the issue was
the general welfare state. The philosophy of the general welfare state, called the Social Gospel, was
advocated in part by Christians in the United States. They believed that individuality had gone too far
and that it was necessary for government involvement. Increased urbanization and industrialization
also led to the belief in the general welfare state. It was the opinion of these thinkers that laissez-faire
was not the answer to the problems of economics.(Lesson14 74) Laissez-faire may have been a
significant step in the evolution of economics to many people, but there were also many silent threats
that it carried. Without government protection, big business can exploit the many people that make it
work. Such exploitation could be brought about in low wages and poor working conditions, long
working hours, and many others. Many believed that government protection was needed to insure
fair competition and high standards of morality. In the 1860s oil became more and more essential as
an everyday item. Its demand grew dramatically. The main use at that time for oil was kerosene.
Kerosene was used in several ways, although its most popular use was in lamps. Crude oil needs to
be refined to produce products such as Kerosene. Pennsylvania was the main location that oil
refining was done in the 1860s, but times were changing. The Lake Shore Railroad helped Cleveland
become one of the new centers for oil refining. It was obvious that the railroads were invaluable to
the oil business. In the new refining city of Cleveland, Ohio, a new refining company was created.
This company was the Standard Oil Company, owned primarily by John D. Rockefeller.(Lesson16
95) John D. Rockefeller is a legend of the business world. He started a relatively small oil refinery in
Cleveland, Ohio in 1870. In just two years, it grew into an enormous monopoly, producing ninety
percent of the nations refined oil (Chapter4 15). His business ethics have been hotly debated
because of many apparent rebates and other schemes. The Standard Oil Company’s success can be
attributed to Rockefeller’s business aptitude. Aside from his great business qualities, the Standard
Oil Company’s success in the oil industry is because of the secret illegal rebates by the railroads. A
rebate in the railroad business is a reduction in shipping fares in exchange for promised use of the
railroad’s services. These rebates were brought about through the South Improvement Company,
which was set up in 1872 (Lesson16 96). The South Improvement Company was designed with one
mission, to destroy all competition to the Standard Oil Company, and other companies that were
part of the South Improvement Company. It was started by several large corporations, including the
Standard Oil Company. Rockefeller is reported to have met with other oil businesses and tell them
that if they do not join the South Improvement Company, they will be wiped out of business due to
the lower shipping rates given to the South Improvement Company (Lesson16 96). Eventually the
public gained knowledge of this conspiracy through . After nonstop opposition, the