The Political Economy of the Arbitration Act of 1888

Abstract

The goal of this chapter was to identify who supported and who opposed the Arbitration Act of 1888. A probit model was estimated with explanatory variables to capture the role of constituent interest, and legislator private interest. The role of legislator private interests was ruled out as having any significant effect on the passage of the Arbitration Bill. None of the occupation variables or personal characteristic variables were statistically significant. The results support the belief that the external cost of strikes played a significant part in the passage of the legislation. Representatives in states with urban populations and high levels of strike activity were more likely to vote in favor of the Arbitration Act. This places an emphasis on the legislation’s potential benefits in reducing the external costs of strikes to society. How were the private or special interests served? Organized labor supported arbitration legislation, and the effect of union involvement in strikes was predicted to be positive. However, this variable had a negative effect on the passage of the legislation. The passage of the bill implies that one group was more successful in influencing the legislative outcome. The effect of manufacturing and railroad wealth was negative and statistically significant, however, the marginal effects of these variables were small. Did some other factor influence the passage of this legislation over the protests of both railroad and manufacturing capital? During this period the Federal government was developing a more acute awareness of the public welfare and its relationship to private business interests. There is no denying that the Arbitration Act was legislation passed to promote the public welfare by reducing railroad strike activity, but it was also part of the fundamental debate that revolved around the changing role of the Federal government in the late nineteenth century.