The Government and its Economy

The Growth of Intervention in Domestic Policies

Metal globe resting on paper currency.
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The founding fathers of the United States wanted to create a nation where the federal government was limited in its authority to dictate one's inalienable rights, and many argued this extended to the right to the pursuit of happiness in the context of starting one's own business.

Initially, the government did not meddle in the affairs of businesses, but the consolidation of the industry after the Industrial Revolution resulted in a monopoly of markets by increasingly powerful corporations, so the government stepped in to protect small businesses and consumers from corporate greed.

Since then, and especially in the wake of the Great Depression and President Franklin D. Roosevelt's "New Deal" with businesses, the federal government has enacted more than 100 regulations to control the economy and prevent monopolization of certain markets.

Early Involvement of Government

Near the end of the 20th century, the rapid consolidation of power in the economy to a few select corporations spurred the United States government to step in and begin regulating the free trade market, starting with the Sherman Antitrust Act of 1890, which restored competition and free enterprise by breaking up corporate control of niche markets.

Congress again passed laws in 1906 to regulate the production of food and drugs, ensuring that the products were correctly labeled and all meat tested before being sold. In 1913, the Federal Reserve was created to regulate the nation's supply of money and establish a central bank that monitored and controlled certain banking activities.

However, according to the United States Department of State, "the largest changes in the government's role occurred during the "New Deal," President Franklin D. Roosevelt's response to the Great Depression." In this Roosevelt and Congress passed multiple new laws that allowed the government to intervene in the economy to prevent another such catastrophe.

These regulations set rules for wages and hours, gave benefits to unemployed and retired workers, established subsidies for rural farmers and local manufacturers, insured bank deposits, and created a massive development authority.

Current Government Involvement in the Economy

Throughout the 20th century, Congress continued to enact these regulations meant to protect the working class from corporate interests. These policies eventually evolved to include protections against discrimination based on age, race, sex, sexuality or religious beliefs and against false advertisements meant to purposefully mislead consumers.

Over 100 federal regulatory agencies have been created in the United States by the early 1990s, covering fields from trade to employment opportunity. In theory, these agencies are meant to be shielded from partisan politics and the president, meant purely to protect the federal economy from collapse through its control of individual markets.

According to the U.S. Department of State, by law members of the boards of these agencies must " include commissioners from both political parties who serve for fixed terms, usually of five to seven years; each agency has a staff, often more than 1,000 persons; Congress appropriates funds to the agencies and oversees their operations."

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Moffatt, Mike. "The Government and its Economy." ThoughtCo, Feb. 16, 2021, Moffatt, Mike. (2021, February 16). The Government and its Economy. Retrieved from Moffatt, Mike. "The Government and its Economy." ThoughtCo. (accessed July 28, 2021).