A mong the ideas now vehemently asserted in forums, chambers of commerce, and legislative halls, probably none is more frequently encountered than the idea of laissez faire, which is taken to mean “no government intervention in business”; “let us alone”; “free competition”; and in general, individual and corporate emancipation from legal restraints. To be sure, the theory is often violated flagrantly in practice, even by the very expositors who proclaim it vociferously, but this has little apparent effect upon the tenacity with which it is held, the constancy of the reiteration, or the power of the formula.
Whence came this idea of laissez faire? How and by whom was it so deeply anchored in American thought? What validity does it have as a description of actual conduct, as a promise that its right reason will prevail?
At the outset comes a query: Was the idea a theory of life and economy which the first settlers brought over from the Old World and looked upon as reinforced by the daily transactions of colonial living? This question may be answered with some assurance. The first settlers did not come from societies of “free enterprise” but from countries heavily burdened by feudal hangovers and conceptions; and as the scattered settlements grew into colonies, states, and a nation, their cultural contacts were with feudal and mercantilist governments in England, France, Germany, and other parts of the Old World.
Accordingly, it would seem safe to say that laissez faire was not an original importation brought with the first immigrants. It is possible, of course, that some early scholars and practitioners were familiar with the sketch of the system in the writings of the French philosopher, Jean Bodin (1530-1596), but if so, the fact made no obvious impression on the generality of early American thought. Laissez faire did not come with John Smith or Elder Brewster.
Nor did early Americans derive the idea from a rigorous observation of their own conduct in matters economic or cultural on the soil of the New World. South and North, community life was subject to strict controls. Southern planters were doughty individuals, no doubt, but they did not compete savagely among themselves. Indeed they looked with some contempt on the gain-seeking, haggling merchant, and every plantation was the scene of an economy that was severely regimented from morning till night, and even at night. Nor were the farming communities of the North or the frontier settlements competitive in spirit and practice. Farming families were not struggling with one another over the means of livelihood. In log-rolling, house-building, barn-raising, harvesting, and the care of health, cooperation and mutual aid were stronger features than competitive rivalry.
No, the idea of laissez faire was not an original American idea derived from daily practice. It was a later importation from abroad which never did correspond with comprehensive exactness to the configurations of American economic, social, and political life.
Leaving aside for the present the origins of laissez faire in American thought, we may say summarily that the intensive cultivation and propaganda of the idea was in large part the work of professors engaged in teaching what was called the science of political economy in the universities. And the idea as they taught it was mainly derived from English sources. Recognition was given, no doubt, to the doctrine’s physiocratic beginnings in France, but American teachings bore the British brand mark.
Among the mighty proponents of the doctrine just after the triumph in America of capitalism over agriculture, none was mightier than William Graham Sumner in the East and J. Laurence Laughlin in the Middle West. To the former little more than a reference need be given here, for his work is more generally known and he at least ground his borrowings through his own mill. Laughlin requires more attention. He seems to have faded out of view more quickly than Sumner; his methods have received less critical consideration; and his work illustrates more copiously the ingrained spirit of academic propaganda.
The year before the devastating panic of 1873, William Graham,Sumner was called to the chair of political and economic science at Yale University. The offspring of British parents who had migrated from Lancashire, the home of Manchesterism, he was trained for the priesthood in the Protestant Episcopal Church, and for a time he was active as a preacher. Later he had turned to the study of political and economic questions, throwing off one kind of theology in favor of another. In his youth he had been profoundly impressed by Harriet Martineau’s summary of laissez faire in her early work on political economy and later he became a disciple of the Olympian Herbert Spencer. Having taken on the new creed, Sumner applied it in every direction.
A man of great vigor, a logician, and as courageous a teacher as he had been a preacher, Sumner went all the way. He repudiated the bastard laissez faire of the Republicans and assailed the protective tariff. In the spirit of Richard Cobden he also attacked the imperialism that followed the war with Spain in 1898. When he said “laissez faire,” he meant it, and in meaning it he rejected the use of government to protect domestic industries and to promote foreign commerce by the application of naval and military power.
In all this Sumner imagined himself to be a pure scientist of the objective school. An admiring biographer has said: “He is one of the very few ‘sociologists’ who have had the disposition and the industry to eschew a priori reasoning and sentimentality in favor of induction from arduously gathered facts.” That he earnestly sought to do this in his sociology may be readily conceded; but in his economics Sumner regularly rested his propositions upon “deductions which are implicit in our initial definition of the subject-matter of Economic Science,” as Lionel Robbins might put the case. And yet he never ceased to look upon his “findings” as constituting a science as distinguished from a mere Mid-Victorian frame of economic reference.
If Republicans were alarmed and shocked by Sumner’s assaults on the protective tariff and imperialism, they found compensation in his vigorous defense of private property and laissez faire in domestic economy. During the years from 1872 to Sumner’s death in 1910, owners of industrial and railway property felt the need of protection against Greenbackers, Socialists, and Populists quite as much as against Southern cotton growers and other low-tariff advocates. Perhaps more. At all events, during those thirty-eight years, Sumner trained thousands of undergraduates in laissez faire as an exact science, even if he failed to convince them that the protective tariff was no permissible exception to the rules of the science. In the meantime, he also trained a small army of graduate students who spread over the country as teachers of the science expounded at Yale by the master. By no means all of them—a notable exception was Thorstein Veblen—accepted the system as a perfect one delivered from Olympus, but probably not many were as critical as the Norwegian farm boy born in Wisconsin.
At three other strategic centers of higher education— Harvard, Cornell, and Chicago—the other exponent of laissez faire, J. Laurence Laughlin, taught the creed from 1878 to 1916, with a brief intermission when he served as president of the Manufacturers’ Mutual Fire Insurance Company. While at Harvard, in 1884, Laughlin established his position as master and exponent of the system in its most rigid form by bringing out an American edition of John Stuart Mill’s “Political Economy,” stripped of chapters and passages in which Mill expressed qualifications, limitations, and contradictions. In his editorial operations Laughlin disclosed the configuration of his mentality and the bent of his thought.
Having established his reputation as an economist of a given direction, Laughlin was called in 1892 to Chicago, where he taught, wrote, and trained a body of graduate students who spread over the country as teachers of youth. Owing to the fact that the University of Chicago drew heavily for students on the Middle West and the South, Professor Laughlin reached sections of the country less thoroughly cultivated by Sumner at Yale. An expert in money and an ardent advocate of the gold standard, he became closely affiliated with Republican leadership and did not hammer the protective tariff as vigorously as his colleague at Yale. Either temperament or circumstances, or perhaps both, led Laughlin into a position less intransigent on tariff “paternalism,” though he was scarcely less intransigent on the other phases of laissez faire.
From start to finish, Laughlin’s edition of John Stuart Mill’s work is a revealing document—a document revealing the state of professional thought about the subject and academic valuations of its elements and relations. Despite all the writing and publishing in the United States, no satisfactory treatment of political economy embodying realistic reference to American conditions had been produced by 1884. Materials and ideas for such a treatise lay scattered around in the legacy left by the founders of the republic, especially in “The Federalist,” the works of John Adams, and the writings of Jefferson. The works of H. C. Carey were also at hand. But the American mind had not been able to create a great structure of political and economic thought deemed appropriate to the age that saw the mighty upswing of industrial capitalism; at least it had not accomplished this feat. Hence Laughlin resorted to borrowing from English thought. If we could not create, we could borrow, and in borrowing there was an implicit assumption that there was something universal, not something merely temporal and local, in English speculations and inductions. Here was revealed the weakness of American thinking at the opening of the industrial expansion which came after the Civil War. It would have been one thing to take advantage of English thought and work it over in terms of a continental economy; it was another type of intellectual operation to lift a huge body of English speculation and induction and add mere trimmings from the peculiarities of American life.
Very significant for the future of American thinking were the excisions and modifications which Laughlin made in preparing his edition of Mill. The fundamental preconceptions of the American editor began to appear on the title page. Mill called his work “Principles of Political Economy with Some of Their Applications to Social Philosophy.” Laughlin put on his title page merely “Principles of Political Economy.” Then the American mutilator explained his operations in his Preface. “Believing, also,” he wrote, “that the omission of much that should properly be classed under the head of Sociology, or Social Philosophy, would narrow the field to Political Economy alone, and aid, perhaps, in clearer ideas, I was led to abridge the two volumes. . . .” The chapter on “the influence of Government,” Laughlin added, was “simply omitted.” Thus, although he did not change Mill’s title from “political economy” to “economics,” Laughlin did omit Mill’s chapter on the influence of government, and in effect narrowed the work almost to a discussion of economics alone. In other words, the American editor evidently assumed that forms of government and the whole body of law which government enforces are irrelevant to economics or that they are constants which economics can take for granted, perhaps somewhat as engineering takes for granted the law of gravitation. Had Laughlin been writing his own book this type of thinking might have been explained on grounds of naivete, but it is manifest in the record that he knew the range of Mill’s thought and deliberately threw out elements and interpretations which Mill deemed essential to his system, and consciously misrepresented Mill’s conception of economics as inseparable from the political and social context.
The extent of this deliberate transformation appears explicitly as the two texts are compared chapter by chapter and line by line. In condensing Book I, on production, Laughlin either omitted or materially reduced Mill’s chapters on labor as an agent of production, on cooperation or the combination of labor, and on large and small scale production. In condensing Book II, on distribution, Laughlin reduced Mill’s two chapters on property to one chapter; he omitted Mill’s chapter on the classes among which the product is distributed; he materially slashed Mill’s chapter on competition and custom; he omitted the chapters on slavery, peasant proprietors, metayers, and tenancy; he condensed to one chapter Mill’s two chapters on remedies for low wages; he reduced by about one-half Mill’s chapter on differences of wages in different employments. In short, Laughlin cut Mill’s sixteen chapters on distribution to six chapters. Mill’s twenty-six chapters on exchange were cut to twenty-one. Mill’s seven chapters on the influence of the progress of society on production and distribution were cut to five. For Mill’s chapter on the probable future of the laboring classes, Laughlin substituted one of his own.
Laughlin’s departure from Mill’s text on the probable future of labor reveals so completely the nature of his own thought that it must be considered in detail if we are to discover the configurations of academic mentality about 1884, and to comprehend the pattern of thought and morals imposed on the coming generation of students. In the chapter which Laughlin omitted in favor of his own views, Mill protested vigorously against the law and custom which excluded women from economic opportunities and pleaded for complete equality in the economic sphere. To restrict the opportunities of women, Mill insisted, is “a flagrant social injustice.” And the language he employed in his argument is significant for his whole thought: “The same reasons which make it no longer necessary that the poor should depend upon the rich, make it equally unnecessary that women should depend upon men.” This conception may be deemed irrelevant to the kind of system which Laughlin wished to construct in the minds of his own readers and pupils, but its omission misrepresented the letter and spirit of Mill’s treatise.
Mill spoke, in the chapter omitted by Laughlin, of the growing political power of the working classes, of the hostility between capital and labor, and of “the total absence of regard for justice or fairness in the relations between the two.” Although Mill conceded that conditions might be different in new countries such as Australia and the United States, this was his sober judgment on capital and labor relations in the older countries of matured industrialism. Furthermore, when Laughlin was preparing the text of his edition of Mill in the early ‘eighties, echoes of the bitter industrial strife that raged between 1873 and 1878 were still ringing throughout the United States. The Paris Commune of 1871 and the great railway strikes of 1877 had frightened observers like John Hay into the belief that the perils of revolution lurked in the shadows. It is scarcely thinkable that in 1884 Laughlin could have been unaware of the fact that the hostility between capital and labor which Mill had noted in the Old World was also manifest in the industrial conflicts of the United States.
In developing his thought on the point of labor relations, Mill took note of ideas in circulation as well as of the passions of individuals engaged in the pursuit of material gain.
In the present stage of human progress [he wrote], when ideas of equality are daily spreading more widely among the poorer classes, and can no longer be checked by anything short of the entire suppression of printed discussion and even of freedom of speech, it is not to be expected that the division of the human race into two hereditary classes, employers and employed, can be permanently maintained. . . . We look in vain among the working classes in general for the just pride which will choose to give good work for good wages: for the most part, their sole endeavour is to receive as much, and return as little in the shape of service, as possible.
In other words, the whole laissez faire theory, which assumed that the general good would be served if every person pursued his own material interest with all the zeal he could command, was held by Mill to be incompatible with high productivity, even dangerous to the moral foundations of society. In short, in this chapter which Laughlin omitted, Mill condemned the capitalist wage-system as uneconomical because it restrains production, fails to release the energies of I labor, breeds class hostility, threatens the progress of civilization, and can be kept going only by suppressing liberty of press and discussion; that is, by dictatorial military force.
Mill further regarded it as an obligation of political economists to find a way out of the dilemma posed by capitalist laissez faire. The way that he then deemed most promising was cooperation in production and distribution, a form of copartnership which united capital and labor in common association :
In this or some such mode, the existing accumulations of capital might honestly, and by a kind of spontaneous process, become in the end the joint property of all who participate in their productive employment: a transformation which is thus effected, (and assuming of course that both sexes participate equally in the rights and in the government of the association) would be the nearest approach to social justice, and the most beneficial ordering of industrial affairs for the universal good, which it is possible at present to foresee. I agree, then, with the Socialist writers in their conception of the form which industrial operations tend to assume in the advance of improvement; and I entirely share their opinion that the time is ripe for commencing the transformation, and that it should by all just and effectual means be aided and encouraged.
After throwing overboard Mill’s chapter on the prospects of labor, with a meager reference to its contents, Laughlin substituted his own conception of the issues. And what was Laughlin’s conception? He said briefly: “We are, at present, living under a regime of private property,” but he did not indicate, with Mill, the changing forms and limitations of that regime, nor consider changes in the forms and rights of private property that might increase economic productivity and assure the orderly progress of society. Having dismissed property with a few words, Laughlin continued: “Certainly the progress of the laborer is not that which can excite enthusiastic hopes for the future, so long as he remains a mere receiver of wages.” Then Laughlin dismissed Mill’s theory that capitalists take too large a share of the total product; he quoted Cairnes to the effect that the large addition to wealth resulting from industrial progress has gone neither to profits nor to wages, but to swell “the rent-roll of the owners of the soil.” Should the “unearned increment” of landlords be expropriated for the benefit of industrialists and laborers? Laughlin did not venture a positive conclusion on the point he raised:
Under these conditions, it seems that the only hope of improvement for the laboring classes lies in the limitation of population—or at least an increase of numbers less than the increase of capital and improvements. It is possible, however, that Mr. Cairnes, with many others, has failed to recognize the full extent of the improvement which is taking place in the wages of the laborer under the existing social order. Although we hear much of the wrongs of the working men— and they no doubt exist—yet it is unquestionable that their condition has vastly improved within the last fifty years; largely, in my opinion, because improvements have outstrip, ped population, and because wide areas of fertile land in new and peaceful countries have drawn off the surplus population in the older countries, and because the available spots in the newer countries have not yet been covered with a population sufficiently dense to keep real wages anything below a relatively high standard.
In fine, while ostensibly editing Mill, Laughlin went back to Malthus, carrying over the biological mechanism of Darwin’s struggle for existence into social relations and making it, in substance, the supreme law of “political” economy.
But Mill’s Book V, on “the influence of government,” raised fundamental questions of hard fact respecting law, property, and the functions of government. Mill opened this book with a general chapter on the functions of government; Laughlin omitted it and began with taxation. In two chapters Mill dealt with the laws of inheritance, primogeniture, entails, compulsory division of inheritances, laws of partnerships and chartered companies, and laws relating to insolvency—all powerful realities in society, affecting the operation of economy and the distribution of wealth. Laughlin slashed them. In Chapter Eleven, Mill dealt with the limits on laissez faire and by his qualifications destroyed the whole dogmatic, mechanistic system of “non-interference.” Laughlin omitted this also.
The violence which Laughlin did to Mill may be illustrated by another reference. In the chapter on the functions of government in general, omitted by Laughlin, Mill boldly faced that high if not supreme function of government known as the definition and protection of the rights of private and public property. Here Mill, with the exactness and comprehensiveness of the true man of science, adverted to the complexity of this subject:
Nor is the function of the law in defining property itself, so simple a thing as may be supposed. It may be imagined, perhaps, that the law has only to declare and protect the right of everyone to what he has himself produced, or acquired by the voluntary consent, fairly obtained, of those who produced it. But is there nothing recognized as property except what has been produced? Is there not the earth itself, its forests and waters, and all other natural riches, above and below the surface? These are the inheritance of the human race, and there must be regulations for the common enjoyment of it. What rights, and under what conditions, a person shall be allowed to exercise over any portion of this common inheritance, cannot be left undecided. No function of government is less optional than the regulation of these things, or more completely involved in the idea of a civilized society.
. . . Governments do not limit their concern with contracts to a simple enforcement. They take upon themselves to determine what contracts are fit to be enforced. . . . There are promises by which it is not for the public good that persons should have the power of binding themselves. . . . Every question which can possibly arise as to the policy of contracts, and of the relations which they establish among human beings, is a question for the legislator; and one which he cannot escape from considering, and in some way or other deciding. . . .
There is a multitude of cases in which governments, with general approbation, assume powers and execute functions for which no reason can be assigned except the simple one, that they conduce to general convenience. . . .
By stripping down Mill’s chapters on the distribution of wealth, by omitting his chapter on the prospects of labor, by riddling his chapters on the functions of government, and by making substitutions as he liked, Laughlin discarded the realism which Mill applied to the distinction between the laws, natural and human, governing the production and distribution of wealth. It is impossible to believe that in his study of Mill’s text he overlooked this basic distinction.
But if he had not grasped its significance during his examination of the text, he surely could not have missed it in Mill’s “Autobiography,” published many years before he macerated the English writer’s great treatise. In his memoir Mill referred to his own intellectual progress and to the “tone” which he had introduced into his later thought, including the “Political Economy.” The origins of this tone Mill ascribed to the humanizing influences of Mrs. Taylor, who later became his wife, and to the thought of St. Simon, the French social philosopher. Its effect upon his thinking was so profound that it made him break away from the rigid and mechanical economic theory of his earlier days.
This tone [he wrote in the “Autobiography”] consisted chiefly in making the proper distinction between the laws of the Production of Wealth, which are real laws of nature, dependent on the properties of objects, and the modes of its Distribution, which, subject to certain conditions, depend on human will. The common run of political economists confuse these together, under the designation of economic laws, which they deem incapable of being defeated or modified by human effort; ascribing the same necessity to things dependent on the unchangeable conditions of our earthly existence, and to those which, being but the necessary consequences of particular social arrangements, are merely coextensive with these: given certain institutions and customs, wages, profits, and rent will be determined by certain causes; but this class of political economists drop the indispensable presupposition, and argue that these causes must, by inherent necessity, against which no human means can avail, determine the shares which fall, in the division of the produce, to labourers, capitalists, and landlords. The ‘Principles of Political Economy’ yielded to none of its predecessors in aiming at the scientific appreciation of these causes, under the conditions which they presuppose; but it set the example of not treating those conditions as final. The economic generalizations which depend, not on the necessities of nature but on those combined with the existing arrangements of society, it deals with only as provisional, and as liable to be much altered by the progress of social improvement.
In another section of his “Autobiography,” while s])eaking of the transition in his way of thinking, and of Mrs. Taylor’s influence on this modification of views, Mill wrote:
In those days I had seen a little further than the old school of political economists into the possibilities of fundamental improvement in social arrangements. Private property, as now understood, and inheritance, appeared to me, as to them, the dernier mot of legislation: and I looked no further than to mitigating the inequalities consequent on these institutions, by getting rid of primogeniture and entails. . . . In short, I was a democrat, but not the least of a Socialist. We [Mill and his wife] were now much less democrats than I had been, because so long as education continues to be so wretchedly imperfect, we dreaded the ignorance and especially the selfishness and brutality of the mass: but our ideal of ultimate improvement went far beyond Democracy, and would class us decidedly under the general designation of Socialists.
If Laughlin was not fully aware of the violence which he did to Mill’s system by excluding the social philosophy and curtailing the references to the social realities that condition economic transactions, he had before him in Mill’s “Autobiography” a solemn warning against cutting economics off from its social and economic context. Mill said that he had come into contact with continental thinkers who held that “government is always either in the hands, or passing into the hands, of whatever is the strongest power in society, and that what this power is does not depend on institutions, but institutions on it; and that any general theory or philosophy of politics supposes a previous theory of human progress, and that this is the same thing with a philosophy of history.”
What then should be said of the morals and the intellectual operations displayed by Laughlin as “editor” of Mill’s “Political Economy”? Evidently, from the record, a great deal can be said. Laughlin cut and slashed the work of Mill, making it conform to the work of the classical economists whom Mill repudiated and whom later British writers repudiated. He used Mill to sustain economic theories which Mill openly rejected. He took a treatise on political economy and turned it into a mechanistic Manchesterism on the level of Malthus. He reduced one of the greatest personalities and thinkers of the Enlightenment to the stature of a former president of the Manufacturers’ Mutual Fire Insurance Company. He brushed aside the fundamental thinking of such Americans as Hamilton and Jefferson and raised to the position of a “science” a mutilated and falsified edition of a treatise by a man worthy of a place beside them.
If Laughlin’s operation was good economics, it was poor history and worse science. But apart from all that, it certainly exerted a powerful influence on the thought, ambitions, and actions of a multitude of American students who unwittingly accepted it as genuine Mill and as “science.” From this kind of thinking and economic dogmatizing a whole generation of lawyers, teachers, business men, and general readers drew defense for greed in its rawest forms and derived mistaken conceptions of the role which legislation and humane forces play in the maintenance and government of the American nation. If a worse offense against intellectual integrity could be imagined, certainly few academic treatises of the time had a more demoralizing influence.
If a leader of the academic intelligentsia could violate with so little impunity the work and thought of John Stuart Mill, it is not surprising that men of affairs, less trained in methods of critical research, could with even less impunity harden Laughlin’s ideas into dogmas and seek to impose them on political practice as “iron laws of nature.” At all events, by devious processes, the idea of laissez faire was given a circulation almost as wide as the silver dollar bearing the motto “In God We Trust.” When students of history pay less attention to diplomatic documents and official messages, and more attention to the history of ideas and associated interests, we shall know more about the methods by which our leading conceptions have acquired a place of power in the domain of thought and action.