the early years of American history, most political leaders were reluctant to involve the federal government too
heavily in the private sector, except in the area of transportation. In general, they accepted the concept of
laissez-faire, a doctrine opposing government interference in the economy except to maintain law and order. This
attitude started to change during the latter part of the 19th century, when small business, farm, and labor
movements began asking the government to intercede on their behalf.
the turn of the century, a middle class had developed that was leery of both the business elite and the somewhat
radical political movements of farmers and laborers in the Midwest and West. Known as Progressives, these people
favored government regulation of business practices to ensure competition and free enterprise. They also fought
corruption in the public sector.
enacted a law regulating railroads in 1887 (the Interstate Commerce Act), and one preventing large firms from
controlling a single industry in 1890 (the Sherman Antitrust Act). These laws were not rigorously enforced,
however, until the years between 1900 and 1920, when Republican President Theodore Roosevelt (1901-1909),
Democratic President Woodrow Wilson (1913-1921), and others sympathetic to the views of the Progressives came to
power. Many of today's U.S. regulatory agencies were created during these years, including the Interstate
Commerce Commission, the Food and Drug Administration, and the Federal Trade Commission.
involvement in the economy increased most significantly during the New Deal of the 1930s. The 1929 stock market
crash had initiated the most serious economic dislocation in the nation's history, the Great Depression
(1929-1940). President Franklin D. Roosevelt (1933-1945) launched the New Deal to alleviate the
of the most important laws and institutions that define American's modern economy can be traced to the New Deal
era. New Deal legislation extended federal authority in banking, agriculture, and public welfare. It established
minimum standards for wages and hours on the job, and it served as a catalyst for the expansion of labor unions
in such industries as steel, automobiles, and rubber. Programs and agencies that today seem indispensable to the
operation of the country's modern economy were created: the Securities and Exchange Commission, which regulates
the stock market; the Federal Deposit Insurance Corporation, which guarantees bank deposits; and, perhaps most
notably, the Social Security system, which provides pensions to the elderly based on contributions they made
when they were part of the work force.
Deal leaders flirted with the idea of building closer ties between business and government, but some of these
efforts did not survive past World War II. The National Industrial Recovery Act, a short-lived New Deal program,
sought to encourage business leaders and workers, with government supervision, to resolve conflicts and thereby
increase productivity and efficiency. While America never took the turn to fascism that similar
business-labor-government arrangements did in Germany and Italy, the New Deal initiatives did point to a new
sharing of power among these three key economic players. This confluence of power grew even more during the war,
as the U.S. government intervened extensively in the economy. The War Production Board coordinated the nation's
productive capabilities so that military priorities would be met. Converted consumer-products plants filled many
military orders. Automakers built tanks and aircraft, for example, making the United States the "arsenal of
democracy." In an effort to prevent rising national income and scarce consumer products to cause inflation, the
newly created Office of Price Administration controlled rents on some dwellings, rationed consumer items ranging
from sugar to gasoline, and otherwise tried to restrain price increases.