1. Economic Policy: A History Ch. 18 How did ideas of government regulation of the economy change over time? Why was there a shift away from laissez-faire attitudes? How did the interventionist state change the idea of government involvement in regulating the private economy?

2. 19 th century (1800s) State governments were active in promoting/regulating private economic activity –Regulation—use of governmental authority to control or change a practice in the private sector National regulatory programs few, restricted Post-1865, major period of economic growth (industrialization) –Problems from industrialization (accidents, disease, corporations…) –Downturn in business cycles—fluctuations between growth and recession (typical in capitalist economy) –Limited jurisdictions of states couldn’t compete with national corporations

4. However, businesses/conservatives supporting gov’t intervention and aid for econ. development now supported laissez-faire (“let it be”) policy –Britain’s Adam Smith Wealth of Nations –Gov’t involvement in economy wrong; role limited to law/order and that not profitable for private citizens –Involvement: “econ system and set of gov’t policies that would encourage private profit” Interstate Commerce Act 1887 regulated by new Interstate Commerce Commission (ICC) to regulate railroad system “trust-busting”—splitting up monopolistic business practices –Sherman Anti-Trust (1890) –These two acts key legislative responses to industrialization

5. Progressive Era (1890-1917) Movement to reform political, economic, social systems (“make progress”) Desire for corporations under control of government for democratic ends –Strengthen/establish regulatory programs under TR and Wilson Pure Food and Drug Act (1906) beginning of consumer protection Banking and regulation of business: –Federal Reserve Act (1913): creates Federal Reserve System to reg. nat’l banking system, flexible $ system –Federal Trade Commission Act (1914)—creates Federal Trade Commission to reg. competition (along w/Clayton) –Clayton Act (1914)—supplements Sherman Act; “the labor of a human being is not a commodity or article of commerce.”

6. 16 th amendment Fiscal (government spending) constraints forced public officials to focus on income tax to raise money 1895: SC rules income tax was a direct tax, which had to be allocated among states in proportion to their population (political/admin impossibility) 16 th Amendment (1913)— “to lay and collect taxes on incomes, from whatever source derived” –Now major source of general revenues

7. Great Depression/New Deal After 1929 stock market crash, all sectors of economy suffered –Initial response of Hoover admin was that “economically sound” (1/4 all workers unemployed by 1933) Major turning point when laissez-faire state replaced with interventionist state—gov’t active/extensive role in guiding/regulating private economy

8. Reforms Financial –Glass-Steagall Act (1933): separation of commercial and investment banks; set up FDIC; control stock market abuse –Securities and Exchange Act (1934): created SEC to regulate stock exchange, enforce act, reduce stocks on margin Agricultural –Agricultural Adjustment Act (1933, 1938): first (unconstitutional) to bring farm production to meet supply/demand; second to give subsidies in order to regulate interstate commerce

9. Labor –National Labor Relations Act (Wagner Act, 1935): guaranteed workers’ rights to organize, unionize under National Labor Relations Board –Fair Labor Standards Act (1938): set a minimum wage; banned child labor Industrial –Federal Communications Commission (FCC, 1934): regulates public airwaves (radio, telephone, telegraph) –Interstate Commerce Commission to regulate transportation Gov’t regulation replacing most competition in these industries; established legitimacy and viability of n’tl gov’t intervention in economy

10. Social Regulation Era (1950-1980) Economic regulation—gov’t regulation of business practices, industry rates, routes; tailored to conditions of particular industry Social regulation—gov’t regulation of quality and safety of products and conditions under which goods/services produced; protect/enhance q.o.life –Clean Air Act 1970 –Occupational Safety and Health Act (OSHA) –Environmental Protection Agency (EPA)

11. Why Social Regulation? Social activism of 60s/70s through interest group involvement Public consciousness of dangers to health, safety, environment Advocacy of social regulation as a re- election ploy (visibility, n’tl prominence) Presidents give support to social regulation; direct costs to gov’t legislation minimal

12. Current issues with the economic policy: https://www.youtube.com/watch?v=Jjv- MtGpj2U