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Monday, January 24, 2005

Lessons of history - #1, govt-bus partnership

"Is less government really better for business? Not if history provides a reliable guide." So reads the subtitle of Jeff Madrick's column, "Economic Scene," in Thursday's New York Times (NYT, 1/20/05, C2).

Madrick is absolutely right. The only problem is that he doesn't sort out differences over time in the roles of the federal and state government. As a result, he neglects to mention that "an active partnership between government and business" actually generated enormous controversy before the Civil War when the government in question was the federal government. This was largely because acceding to an activist federal role in promoting internal (transportation) improvements, banking, or domestic manufacturing threatened to open the door to federal abolition of slavery. "An active partnership between government and business" did indeed characterize the U.S. in both the nineteenth and twentieth centuries, but the locus of government action shifted from the state to the national level in the nineteenth century as the biggest businesses crossed state lines with increasing frequency. Regulation of steam boilers on interstate waters (1850s - if I remember right) and creation of the Interstate Commerce Commission to regulate interstate railroad rates (1886) marked the first steps, and the decisive movement came during the New Deal.

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