Adam Smith believed that the economic arrangements he prescribed would achieve the greatest amount of prosperity distributed to the widest population. He did not anticipate the periodic “boom-and-bust business cycles” that historically accompanied capitalist “progress” and eventually sparked heated, progressive calls for active government intervention. Prolonged economic crises struck the United States in 1792, 1819, 1837, 1857, 1873, 1893, 1907, and—worst of all—the Great Depression of the 1930s.

At the height of the Great Depression, Samuel Pettengill wrote: “When it is said that free enterprise has failed, my answer is that we have not permitted it to work.” The long succession of financial panics and market crashes were not caused by free market activities. Once we distinguish laissez faire capitalism from what can best be designated as crony capitalism (i.e., the corrupt use of public power to advance private, pecuniary interests) we then can learn what really caused these economic crises.

It was corporate welfare policies alone that precipitated the many panics and the alleged “need” for social welfare reform from the Progressive Era to the New Deal and beyond.

The patriotic project designed to spur economic growth and bind the nation together proved an unmitigated disaster for the country. It was the source of the corruption, hardship, acrimony and strife that is constantly attributed to capitalism’s recurring booms and busts. Had there been no Railway Act of 1862, so much trouble would have been avoided. In the end, it was “capitalism” that was unjustly blamed for the calamity. As in all earlier and later crises of capitalism, it was not free market activities, but easy money and credit and corporate welfare policies that alone engineered the dastardly Panic of 1873 and eventually created the “need” for “reform” from the Progressive Era, to the Fed, to the New Deal, to today.