The End of Laissez Faire in the U.S. Economy

Civil war period marks a period of great change in the American Economy
Per capita GNP increasing at 2 % per Year
average value of manufacturing increasing greater than agriculture

What happened in England in 1801 was happening in the U.S.- 2nd industrial revolution

**transformed the U.S. economy into something other than Adam Smith's world of small shops and factories--after Lynne what happens next.

The Transformation of the nature of business organization

Robber Barrons-


**amount of capital needed to finance large scale industry meant seeking private banks and stock and bond market for money

** Few gov regulations on business--separtation of ownership and production opened the door for irresponsible financial manipulation at a time when competition became intense

**Competiton obsolete--too risky

**Investment in plant and equipment necessary

1893-97 Financial panic

1897 on--revolution caused by
1. sudden mergers
2. capitalization of new combinations

These were restricted to a minority of dominant American industries-


1. growth of capital market for industrial stocks
2. shifting economic interests--institutionsal struggles to raise funds- mergers-monopoly
3. capital in 1890 form st loans and profits (stock 1890 xchange 1893
4. instability bankruptcy in depressions
5. mergers created new sources of capital


1. growing competition
2. expansion
3. greater concentration in many industries
a. of capital
b. of output

Paved way for political importance--many worse off after mergers

Decline due to

1. technological concervitivism
2. lack of flexible leadership
3. rapid growth in industry/innovation
4. increased competition

Private control failed