Chapter 18: Big Business and Government Intervention
Summary
The beginning of the 1880s marked the beginning of U.S. federal involvement in the regulation of
everyday business affairs. This chapter highlights key developments in federal regulation of the private
sector. It features the groups favored by these developments and points out the groups inconvenienced
by them.
Key Terms and Concepts
Big business
Corporation
Federal government
Federal fiscal policy
Immigration policy
Public domain
State and local governments
Rents
Size effect
Subsidies
Tariff
Transfer society
Teaching Tips
1. Discuss the protective and productive roles of government in a free market economy. Explain
that government promotes economic growth and development by protecting the private rights
of individuals and supplying goods and services that cannot be provided efficiently through
competitive markets.
2. Describe the rise in big business in size, scale and scope between the Civil War and World War I.
Compare and contrast Schumpeter and Chandler’s view on the role played by big business in
economic growth. Discuss how to bridge the gap between their views. If time permits, bring in
the research of other scholars on this topic.
3. Explain why the rise in big business threatened various groups. Let students bring forth the
obvious threats – price fixing, output controls, market manipulation, collusive agreements,
exploitation of labor, etc. Then describe some of the problems new capital-intensive industries
faced during economic downturns. Explain that sales revenue, not cash reserves, are crucial to
new industries of this sort. Hence any unexpected or deep drop in sales often led to layoffs
because new companies had to meet fixed capital commitments to stay in business. Discuss the
secondary effects and indirect consequences of these layoffs in terms of fueling animosity
toward big business.
4. Ask students to research the case of Munn v. Illinois (1877) in order to broaden the text’s
discussion on why economic historians consider this case as a pivotal point in regulatory history
in the U.S. Explain how the Commerce Clause of the U.S. Constitution was used in this case to
advance federal government’s involvement in the private affairs of individuals
5. Ask students to use one of the court cases featured in Chapter 18 to illustrate how one special
interest group can influence government regulation in order to distribute benefits to itself at the
expense of another group.
6. Using the Interstate Commerce Commission (1887) as a case study, evaluate the government’s
ability to monitor and coordinate activities through central planning.
7. Define the purpose of the Sherman Anti-trust Act of 1890. Discuss its strengths and
weaknesses. Explain how it was effectively used against labor until the Clayton Act of 1914,
Section 6.