"It is under the protection of the decision in the Dartmouth College case," says Judge Cooley, "that the most enormous and threatening powers in our country have been created; some of the great and wealthy corporations actually having greater influence in the country at large, and upon the legislation of the country than the states to which they owe their corporate existence. Every privilege granted or right conferred—no matter by what means or on what pretence—being made inviolable by the Constitution, the government is frequently found stripped of its authority in very important particulars, by unwise, careless, or corrupt legislation; and a clause of the Federal Constitution, whose purpose was to preclude the repudiation of debts and just contracts, protects and perpetuates the evil."[186]
Any government framed and set up to guard and promote the interests of the people generally ought to have full power to modify or revoke all rights or privileges granted in disregard of the public welfare. But the Supreme Court, while permitting the creation or extension of property rights, has prevented the subsequent abridgment of such rights, even when the interests of the general public demanded it. The effect of this has been to make the corporations take an active part in corrupting state politics. Special legislation was not prohibited. In fact, it was a common way of creating property rights. If a bank, an insurance company, or a railway corporation was organized, it was necessary to obtain a charter from the legislature which defined its powers and privileges. The corporation came into existence by virtue of a special act of the legislature and could exercise only such powers and enjoy only such rights and privileges as that body saw fit to confer upon it. The legislature might refuse to grant a charter, but having granted it, it became a vested right which could not be revoked. The charter thus granted by the legislature was a special privilege. In many instances it was secured as a reward for political services by favorites of the party machine, or through the corrupt expenditure of money or the equally corrupt distribution of stock in the proposed corporation among those who controlled legislation. Not only did this system invite corruption in the granting of such charters, but it also created a motive for the further use of corrupt means to keep possible competitors from securing like privileges. It was worth the while to spend money to secure a valuable privilege if when once obtained the legislature could not revoke it. And it was also worth the while to spend more money to keep dangerous competitors out of the field if by so doing it could enjoy some of the benefits of monopoly. By thus holding that a privilege granted to an individual or a private corporation by special act of the legislature was a contract which could not be revoked by that body, the courts in their effort to protect property rights opened the door which allowed corporation funds to be brought into our state legislatures early in our history for purposes of corruption.
But little attention has been given as yet to this early species of corruption which in some of the states at least assumed the proportions of a serious political evil.
"During the first half century banking in New York," says Horace White, "was an integral part of the spoils of politics. Federalists would grant no charters to Republicans, and Republicans none to Federalists. After a few banks had been established they united, regardless of politics, to create a monopoly by preventing other persons from getting charters. When charters were applied for and refused, the applicants began business on the common-law plan. Then, at the instigation of the favored ones, the politicians passed a law to suppress all unchartered banks. The latter went to Albany and bribed the legislature. In short, politics, monopoly, and bribery constitute the key to banking in the early history of the state."[187]
The intervention of the courts which made the conditions above described possible, while ostensibly limiting the power of the state legislature, in reality enlarged and extended it in the interest of the capital-owning class. It gave to the state legislature a power which up to that time it had not possessed—the power to grant rights and privileges of which the grantees could not be deprived by subsequent legislation. Before the adoption of the Federal Constitution no act of the legislature could permanently override the will of the qualified voters. It was subject to modification or repeal at the hands of any succeeding legislature. The voters of the state thus had what was in effect an indirect veto on all legislative acts—a power which they might exercise through a subsequent legislature or constitutional convention. But with the adoption of the Constitution of the United States the Federal courts were able to deprive them of this power where it was most needed. This removed the only effective check on corruption and class legislation, thus placing the people at the mercy of their state legislatures and any private interests that might temporarily control them.
The power which the legislatures thus acquired to grant charters which could not be amended or repealed made it necessary for the people to devise some new method of protecting themselves against this abuse of legislative authority. The outcome of this movement to re-establish some effective popular check on the legislature has taken the form in a majority of the states of a constitutional amendment by which the right is reserved to amend or repeal all laws conferring corporate powers. Such constitutional changes provide no remedy, however, for the evils resulting from legislative grants made previous to their adoption. The granting of special charters is now also prohibited in many states, the constitution requiring that all corporations shall be formed under general laws. These constitutional changes may be regarded as in the interest of the capitalist class as a whole, whose demand was for a broader and more liberal policy—one which would extend the advantages of the corporate form of organization to all capitalists in every line of business. But even our general corporation laws have been enacted too largely in the interest of those who control our business undertakings and without due regard to the rights of the general public.
A study of our political history shows that the attitude of the courts has been responsible for much of our political immorality. By protecting the capitalist in the possession and enjoyment of privileges unwisely and even corruptly granted, they have greatly strengthened the motive for employing bribery and other corrupt means in securing the grant of special privileges. If the courts had all along held that any proof of fraud or corruption in obtaining a franchise or other legislative grant was sufficient to justify its revocation, the lobbyist, the bribe-giver, and the "innocent purchaser" of rights and privileges stolen from the people, would have found the traffic in legislative favors a precarious and much less profitable mode of acquiring wealth.