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CHAPTER IX - American economic policy, 1865–1939

Published online by Cambridge University Press:  28 March 2008

By
William Letwin
Edited by
Peter Mathias  and
Sidney Pollard
William Letwin
Affiliation:
London School of Economics and Political Science
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Summary

The general character of American economic policy

‘Laissez-faire’ and the welfare state

Many historians have said that the whole history of American economic policy is a movement from laissez-faire to the welfare state or alternatively from capitalism to a mixed economy, the turn having been briskly executed by the New Deal between 1933 and 1939. As the raw material for this history consists of a mass of evidence, overabundant yet fragmentary, much of it dubious and more contradictory, it is no wonder that historians try to extract from it a compact digestible capsule. But the necessary work of distillation can go too far, as it has in this instance.

The critical terms used in the common summary of American economic policy are misleading because they were alien to American experience. ‘Capitalism’ and ‘laissez-faire’ do not appear in the Constitution of the United States, nor do any even remote synonyms, contrary to the suggestion by Charles Beard and others that the Constitution was chiefly intended to guarantee a capitalist economic order. It is not surprising, in any event, that those particular terms are absent from the Constitution. Capitalism, as the name for one kind of economic order, was not invented until the middle of the nineteenth century. Laissez-faire, to be sure, was available for use by the founders of American economic policy, but there was no strong reason why Americans should reach out for a French term, or that French term, when Adam Smith had supplied a perfectly good English one, ‘the system of natural liberty’, to go with the economic policy worked out in The Wealth of Nations, published, as it happened, in the same year as the Declaration of Independence.

Type
Chapter
Information
The Cambridge Economic History of Europe from the Decline of the Roman Empire , pp. 641 - 690
Publisher: Cambridge University Press
Print publication year: 1989

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