The New Nation

by Frederic L. Paxson

Such a movement as the Grange, revealing a common purpose over a wide area and in a great number of citizens, could not but affect party allegiance and the conduct of party leaders. Simultaneously with its development the legislatures of the Northwest—Illinois, Wisconsin, and Iowa—became restive under existing conditions, and assumed an attitude which became characteristic of the Grange,—one of hostility to railroads and their management. With the approval of the people, these States passed, between 1871 and 1874, a series of regulative acts respecting the railways, which were known at the start as the "Granger Laws," and which became a permanent contribution to American government.

To Eastern opinion the Greenback movement had been barefaced repudiation; the Granger movement seemed to be confiscation; for every law provided a means by which public authority should fix the charge imposed by the railroad upon its customer. Both movements need to be studied in their local environment, which at least explains the Western zeal in clamoring for the greenbacks, and shows that in the Granger movement the West saw farther than it knew.

The Civil War period marks a new era in the history of American railways. Prior to the panic of 1837, the few lines that were built were local. Few could foresee that the railway would ever be more than an adjunct to the turnpike and canal in bringing the city centers closer to their environs. In the revival of industry after the panic of 1837, the mileage increased progressively, and before the next panic checked business in 1857 the tidewater region was well provided, and the Alleghanies had been crossed by several trunk lines whose heads extended to the Lakes and to the Mississippi. But in these years the change was of degree rather than of kind. The lines were built to supplement existing routes, like the Erie Canal, the Lakes, the Ohio River, or the Mississippi. They connected communities already well developed and prosperous, and in undertaking new enterprises promoters had figured upon capturing the profits of existing trade.

In the new epoch of the sixties there were only new fields to conquer. The great enterprises were forced to speculate upon the development of the public domain and to find their profits in the business of communities to which they themselves gave birth. Natural waterways and roads extended little west of Chicago. The new fields were entered by the railroads without prospect of any competition but that of other railroads. The resulting communities, born and developed between 1857 and 1873, were peculiarly the creatures of, and dependent on, the railway lines.

This inevitable dependence on railways colored the history of Wisconsin, Iowa, and Minnesota, and, to a lesser degree, of all the West. While men were yet prosperous and sanguine and without adequate railway service, they offered high inducements to promoters of railways. Once the roads were built and the communities began to pay for them and to maintain them, the dependence was realized and anti-railway agitation began. The fact that they were commonly built on money borrowed from the East threw debtors and creditors into sectional classes injurious to both.

The antagonism to railways was increased because these yet regarded their trade as private, to be conducted in secrecy, with transportation to be sold at the best rates that could be got from the individual customer. The big shipper got the wholesale rate; the small shipper paid the maximum. Favoritism, discrimination, rebates, were the life of railway trade, and railway managers objected to them only because they endangered profits, not because they felt any obligation to maintain uniformity in charges.

In a community as dependent on the railways as the Northwest was, the iniquity of discriminatory or extortionate rates was soon seen. The East, with rival routes and less dependence on staple interests, saw it less clearly. The charges were paid grumblingly in good times; in bad times, when the rising greenbacks squeezed the debtor West and the panic of 1873 stopped business everywhere, the farmers soon made common cause. They seized upon the skeleton organization of the grange and gave it life. In 1874 their organized discontent compelled attention.

The Granger Laws were an attempt to establish a new legal doctrine that railways are quasi-public because of the nature of the service which they render and the privileges they enjoy. This principle was overlaid in many cases by the human desire to punish the railroads as the cause of economic distress, but it was visible in all the laws. It is an old rule of the common law that the ferryman, the baker, and the innkeeper are subject to public control, and railways were now classified with these. In Wisconsin, the "Potter" Law established a schedule with classified rates, superseding all rate-cards of railroads in that State. Illinois created a railroad and warehouse commission with power to fix rates and annul warehouse charters. In Iowa the maximum rates were fixed by law.

The railroads failed to realize at once what the new laws meant. They denounced them as confiscatory, and attacked them in court as wrong in theory and bad in application. Even admitting the principle of regulation, the laws were so crudely shaped as to be nearly unworkable. Farmer legislators, chosen on the issue of opposition to railways, were not likely to show either fairness or scientific knowledge. Coming at the same time with the panic of 1873, it is impossible to measure the precise effect of any of these laws, and all were modified before many years. But the railroads' objection lay beneath the detail, and the fundamental fight turned on two points—the right of public authority to regulate a rate at all, and whether state regulation was compatible with the power of Congress over interstate commerce.

By 1876 the appeals of the railroads against the constitutionality of these Granger Laws had gone through the highest state courts to the Supreme Court of the United States. In the spring of 1877 that body handed down a definitive decision in the case of Munn vs. the State of Illinois in which it recognized that the "controlling fact is the power to regulate at all." It held that when the institutions in question (in this case warehouses) established themselves, they did so "from the beginning subject to the power of the body politic to require them to conform to such regulations as might be established by the proper authorities for the common good." It upheld the rate laws, declared that they were not an infringement upon the powers of Congress, and thus gave formal sanction to a new doctrine in American law.