The United States Since the Civil War

by Charles Ramsdell Lingley

For a time the interpretation of the Court remained that given by the majority in this decision. When western state legislatures passed laws regulating the rates which railroads and certain other corporations might legally charge for their services, the Court at first showed an inclination to allow the states a free hand. Regulation of this sort, it was held, did not deprive the citizen or the corporation of property without due process of law.

There were indications, nevertheless, that the opinion of the Court was undergoing a change as time elapsed. An interesting prelude to the change was an argument by Roscoe Conkling in San Mateo County v. Southern Pacific Railroad Company in 1882. Conkling was acting as attorney for the railroad and was attempting to show that the roads were protected, by the Fourteenth Amendment, from state laws which taxed their property unduly. Conkling argued that the Amendment had not been designed merely for the protection of the freedman, and in order to substantiate his contention, he produced a manuscript copy of the journal of the Congressional committee that had drawn up the proposals which later became the Fourteenth Amendment. He had himself been a member of the committee. The journal, it should be noticed, had never hitherto been utilized in public.

Conkling stated that at the time when the Amendment was being drafted, individuals and companies were appealing for congressional protection against state taxation laws, and that it had been the purpose of the committee to frame an amendment which should protect whites as well as blacks and operate in behalf of corporations as well as individuals. In other words, Conkling was making the interesting contention that his committee had had a far wider and deeper purpose in mind in phrasing the Amendment than had been commonly understood and that the demand for the protection of the negro from harsh southern legislation had been utilized to answer the request of business for federal assistance. The safety of the negro was put to the fore; the purpose of the committee to strengthen the legal position of the corporations was kept behind the doors of the committee-room; and the phrases of the Amendment had been designedly made general in order to accomplish both purposes. The sequel appeared four years later, in 1886, when the case Santa Clara County v. Southern Pacific Railroad brought the question before the Court. At this time Mr. Chief Justice Waite announced the opinion of himself and his colleagues that a corporation was a "person" within the meaning of the Amendment and thus entitled to its protection.

Later decisions, such as that of 1889 in Chicago, Milwaukee and St. Paul Railway Company v. Minnesota, left no doubt of the fact that the Court had come to look upon the Fourteenth Amendment as much more than a protective device for the negro. The full meaning of the change, however, did not appear until after 1890, and is a matter for later consideration. In brief, then, before 1890, the Supreme Court was content in the main to avoid the review of state legislation concerning the ownership and control of private property, a practice which lodged great powers in the state courts and legislatures. By that year, however, it was manifest that the Court had undergone a complete change and that it had adopted a theory which would greatly enlarge the functions of the federal courts, at the expense of the states. The medium through which the change came was the Fourteenth Amendment.

The demand on the part of business men for protection from state legislation, which Roscoe Conkling described in the San Mateo case, arose from their belief in the economic doctrine of laissez faire. Believers in this theory looked upon legislation which regulated business as a species of meddling or interference. The individual, they thought, should be allowed to do very much as he pleased, entering into whatever business he wished, and buying and selling where and how and at what prices suited his interests, stimulated and controlled by competition, but without direction or restriction by the government. It was believed that the amazing success of the American business pioneer was proof of the wisdom of the laissez faire philosophy. The economic giant and hero was the self-made man.

Economic abuses, according to the laissez faire philosophy, would normally be corrected by economic law, chiefly through competition. If, for illustration, any industry demanded greater returns for its products than proved to be just in the long run, unattached capital would be attracted into that line of production, competition would ensue, prices would be again lowered and justice would result. Every business man would exert himself to discover that employment which would bring greatest return for the capital which he had at his command. He would therefore choose such an industry and so direct it as to make his product of the greatest value possible. Hence although he sought his own interests, he would in fact promote the interest of the public.

Indeed the philosopher of laissez faire was sincerely convinced that his system ultimately benefited society as a whole. Andrew Carnegie, an iron and steel manufacturer, presented this thesis in an article in the North American Review in 1889. The reign of individualism, he held, was the order of the day, was inevitable and desirable. Under it the poorer classes were better off than they had ever been in the world's history. "We start then," he said, "with a condition of affairs under which the best interests of the race are promoted, but which inevitably gives wealth to the few. Thus far, accepting conditions as they exist, the situation can be surveyed and pronounced good." Let the man of ability, he advised, accumulate a large fortune and then discharge his duty to the public through philanthropic enterprises, such as the foundation of libraries. Society would be more highly benefited in this way than by allowing the millions to circulate in small sums through the hands of the masses. Statistical studies of the distribution of wealth seemed to justify Carnegie's judgment that the existing tendency was for wealth to settle into the hands of the few. In 1893 it was estimated that three one-hundredths of one per cent. of the people owned twenty per cent. of the nation's wealth.

Although the laissez faire theory was dominant later even than 1890, it was apparent before that time that its sway was being challenged. The adherents of laissez faire themselves did not desire to have the doctrine applied fully and evenly. They demanded government protection for their enterprises through the medium of high protective import tariffs, and they sought subsidies and grants of public land for the railroads. Naturally it was not long before the classes whose desires conflicted with the manufacturing and railroad interests began in their turn to seek aid from the government. The people of the Middle West, for example, were not content to allow the railroad companies to control their affairs and establish their rates without let or hindrance from the state legislatures. The factory system in the Northeast, likewise, raised questions which were directed toward the foundations of laissez faire. Under the factory regime employers found it advantageous to open their doors to women and children and to keep them at machines for long, hard days which unfitted the women for domestic duties and for raising families, and which stunted the children in body and mind. Out of these circumstances arose a demand for restrictions on the freedom of employers to fix the conditions under which their employees worked.

Opposition to an industrial system based upon laissez faire would have been even greater during the seventies and eighties if it had not been for two sources of national wealth—the public lands and the supplies of lumber, ore, coal and similar gifts of nature. When the supply of land in the West was substantially unlimited, a sufficient part of the population could relieve its economic distresses by migrating, as multitudes did. Such huge stores of natural wealth were being discovered that there seemed to be no end to them. But in the late eighties when the best public lands were nearly exhausted and the need of more careful husbanding of the national resources became apparent to far-sighted men, advanced thinkers began to question the validity of an economic theory which allowed quite so much freedom to individuals. For the time, however, such questions did not arise in the minds of the masses.

As the laissez faire doctrine underlay the problem of the relation between government and industry, so the quantity theory of money was fundamental in the monetary question. According to the quantity theory, money is like any other commodity in that its value rises and falls with variations in the supply and demand for it. Suppose, for example, that a given community is entirely isolated from the rest of the world. It possesses precisely enough pieces of money to satisfy the needs of its people. Suddenly the number of pieces is doubled. The supply is twice as great as business requires. If no new elements enter into the situation, the value of each piece becomes half as great as before, its purchasing power is cut in two and prices double.[2]