Factors Fueling American Industrialization – Govt Intervention/Laissez Faire

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    I teach high school US History and am often frustrated by textbook history. For example…

    Causes of American Industrialization:

    1. Vast Natural Resources
    2. Large labor force
    3. Technological advances
    4. Tariffs and gov’t intervention
    5. Laissez Faire – economic freedom and entrepreneurial spirit

    4 and 5 contradict one another so I have chosen to not even address them.

    Did tariffs really help? They hurt the south. Would American industry have boomed without them? The Austrian in me quickly says yes. What is a good talking point or fact to support this? Or am I wrong?

    How Laissez Faire was America? If tariffs supposedly allowed for our industrial base and the railroads were a complete gov’t corruption mess of spending and bankruptcies, was American really that Laissez Faire?


    It’s great to see a U.S. History teacher on Liberty Classroom! Let’s give our kids the real American History!

    The basic theoretical point (Hazlitt has all the basics in Economics in One Lesson): Tariffs hinder production and increases in the standard of living. If consumers can buy sweaters for $30 that are imported rather than buy domestic sweaters for $50, then they have $20 left over to save, invest, or purchase something else. When the govt uses a tariff and to bump up the price of foreign sweaters, then consumers don’t have as much leftover money to save, invest or purchase something else. However, we want consumers to have the extra money because when they save, invest, and purchase other items that gives other businesses a chance to produce and sell goods that otherwise would have gone un-produced or un-sold. Ultimately, productivity is what allows for increases in the standard of living.

    Also, a separate issue is that countries frequently issue tariffs in retaliation. So, the consumers lose twice because the have to pay higher prices on more than one item (on sweaters AND shoes for example).

    The experts can probably articulate that better than I did above, but that is the gist!


    Thanks for the response John, I am a big fan of “Economics in One Lesson” and share your understanding. I’m curious if there is an article that basically says, “The tariff did not assist in the American Industrial Revolution because…”


    Well I think an indictment of tariffs across the board is the most appropriate response. There may be a specific article about a good that was taxed that got more expensive for consumers or something. But usually the benefits of what would have happened without the tariff go unseen. Moreover, we wouldn’t want people to think that the absence of some article against a specific tariff is an endorsement of that tariff’s success. But glad to see we agree on this in general.

    Hopefully an expert or someone can provide a citation of something to further your case!


    I think this question has to be answered on the theoretical level, since you can argue about contrary-to-fact scenarios forever. I like how Gary North handles it:


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