The rapid expansion of industry and the concentration of ownership by fewer and fewer people changed the way many Americans felt about the role of government in economic affairs. With the growing number of trusts in America, reformers in the late nineteenth century began to voice their concerns about the expanding gulf between the rich and the poor. Although the new class of millionaires brought economic and material progress, they also created deepening class divisions. Reformers feared that businessmen held an increasing amount of power that would eventually succeed in destroying republican institutions and placing captains of industry in direct control of the government.

Along with the reformers, the “old blood” American aristocracy was highly resentful of the "nouveau riche." Long-established merchants and professionals did not like the change in the order of society and felt that this arrogant class of "new rich" should be held in check. Small business owners and farmers resented both classes, and a new “civil war” was brewing.

In contrast, some theorists and wealthy business leaders used Charles Darwin’s The Origin of Species (1859) to champion the extreme success of such a small percentage of Americans. Although Darwin’s argument that existing species had all evolved through a long process of “natural selection,” described as a basic process of biology, many theorists drew broader economic inferences from his writings. William Graham Sumner applied Darwin’s “survival of the fittest” theory to the social world, touting in What Social Classes Owe to Each Other that “the millionaires are a product of natural selection.”

Herbert Spencer, one of the first major prophets of Social Darwinism, used Darwin’s theory as a foundation for promoting the virtues of free-market capitalism. He felt that Social Darwinism was the logical explanation for small businesses being crowded out by trusts and monopolies, and that the government should not interfere in this natural process. Spencer warned that “fostering the good-for-nothing at the expense of the good is an extreme cruelty.”

Andrew Carnegie did not advocate Social Darwinism, but instead felt the wealthy had to prove that they were morally responsible. Carnegie’s The Gospel of Wealth, published in 1889, stated that the concentration of wealth was necessary for society to progress. Carnegie felt that that the contrast between a millionaire and a laborer was an indication of how far humanity had come and that in the long run extreme disparities of wealth were good for the "race."

Political action against big business came first at the state level with legislation aimed at regulating railroads. This approach failed, in part due to the Wabash case, which confirmed the federal role in regulating interstate commerce. Congress stepped in and passed the Interstate Commerce Act in 1887 as a response to the plight of farmers as well as to the widespread practice among the railroads of giving kickbacks and preferential treatment to certain customers. The act was aimed at stopping discrimination against small business customers by requiring that all charges made by railroads must be reasonable. The railroads were also required to publish their rates and were not allowed to charge a different rate without giving public notice.

The Interstate Commerce Act spawned the first federal regulatory board, the Interstate Commerce Commission (ICC). The ICC supervised the affairs of the railroads, investigated any complaints, and issued orders when they determined the railroads had acted illegally. The most important outcome of the Interstate Commerce Act was that it established a precedent for Congress to regulate businesses engaged in interstate trade.

In 1890, President Benjamin Harrison signed the Sherman Anti-Trust Act, which declared that any combination “in the form of trust or otherwise” in restraint of trade or commerce was illegal. Unfortunately, the act turned out to be largely symbolic since succeeding administrations did little to enforce it, and when it was enforced it contained legal loopholes. The actions of the Federal government seemed to reflect the general public’s perception that the laissez-faire approach, a philosophy that the government leaves business alone, was best for the burgeoning capitalistic nation.

Copyright 2006 The Regents of the University of California and Monterey Institute for Technology and Education