Constitutional Aspects of Federal Regulation of Business. By The Regulation of Railway Rates under the Fourteenth Amend- ment. By J. F. Swayze. Quarterly Journal of Economics, Power of Congress over Manufacture and Production. By VIII. EXCERPTS FROM TESTIMONY GIVEN AT THE HEARINGS BEFORE THE COMMITTEE ON INTERSTATE COMMERCE OF UNITED STATES SENATE, INVESTIGATING THE DESIRABILITY OF CHANGING THE LAWS REGULATING AND CONTROLLING CORPORATIONS, PERSONS AND FIRMS ENGAGED IN INTERSTATE COMMERCE, 1912 I THE CHANGING CONCEPTIONS OF PROPERTY AND THE FUNCTIONS OF GOVERNMENT THE CONSTITUTIONAL POSITION OF PROPERTY IN AMERICA BY ARTHUR TWINING HADLEY, PRESIDENT OF YALE UNIVERSITY (From the Independent, April 16, 1908) The basis of the expansion of governmental functions in relation to industry and property is the changing opinion regarding property obligations and vested rights. The statement by President Hadley may well be called the classic pronouncement upon this subject. EDITOR'S NOTE. European observers who study either the specific industrial questions which have come before the American people for their solution, or the general relation between the industrial activity of the Government and that of private individuals, are surprised at a certain weakness of public action in all these matters. Our legislatures are often ready to pass drastic measures of regulation; they are rarely willing to pursue a consistent and carefully developed policy for the attainment of an industrial end. The people often declaim against the extent of the powers of private capital; they are seldom willing to put that capital under the direct management of the government itself. The man who talks loudest of the abuses of private railroad management shrinks from the alternative of putting railroads into the direct control and ownership of the State. The fact is, that private property in the United States, in spite of all the dangers of unintelligent legislation, is constitutionally in a stronger position, as against the Government and the Government authority, than is the case in any country of Europe. However much public feeling may at times move in the direction of socialistic measures, there is no nation which by its constitution is so far removed from I socialism or from a socialistic order. This is partly because the governmental means provided for the control or limitation of private property are weaker in America than elsewhere, but chiefly because the rights of private property are more formally established in the Constitution itself. This may seem a startling proposition; but I think a very brief glance at the known facts of history will be sufficient to support and sustain it. For property in the modern sense was a comparatively recent development in the public law of European communities. In the United States, on the contrary, property in the modern sense represents the basis on which the whole social order was established and built up. Down to about the thirteenth century the system of land tenure in every country of Europe was a feudal one. It was based upon military service. A man held a larger or smaller amount of land on account of his larger or smaller amount of fighting efficiency. There were many rival claimants for the land. The majority of those who wanted to cultivate the soil were unable to protect themselves against the dangers of war. In the absence of an efficient protector or overlord no amount of industry was effective and no large accumulation of capital was possible. The services of the military chief were indispensable as a basis for the toil of the laborer or the forethought of the capitalist. It was the military chief, therefore, who enjoyed not only the largest measure of respect, but the strongest position under the law. As the conditions of public security grew better these things changed. From the fourteenth century to the nineteenth Europe has witnessed the gradual substitution of industrial tenures for military tenures, the gradual development of a system of property law intended to encourage the activities of the laborers and the capitalists, rather than to reward the services of the successful military chieftain. But down to the end of the eighteenth century this new sort of private property represented a superadded element rather than an integral basis of the constitution of society. And even the developments of the last hundred years in constitutional law and industrial activity have not been able to obliterate a certain sense of newness when we contrast the position of the aristocracy of wealth with that of the aristocracy of military rank. In the American colonies, on the other hand, where the public law of the United States first took its rise, conditions were wholly different. People wanted no military chieftain to protect them, no overlord to rule them. Each man was familiar with the use of a gun - how familiar, the overwhelming losses of the British troops in the Revolutionary War, when brought face to face with untrained farmers, testify very clearly and was ready to take his share in protecting the community against the attacks of the Indians or their French leaders. There was plenty of land for all - plenty of opportunity for the exercise of labor and the use of capital. That man did the most for society who worked hardest and saved most. Under such circumstances the laws were so framed and interpreted as to give the maximum stimulus to labor and the maximum rights to capital. There was no military aristocracy which stood in the way. Governors were at times sent over from England who tried their best to assert Crown rights for themselves and their subordinates. But the net effect of the activity of these governors was probably to weaken rather than to strengthen the claims of feudal authority, because they made themselves so unpopular that they united the spirit of the colonists in their resistance to all such claims and pretensions. At the time, therefore, when the United States separated from England, respect for industrial property right was a fundamental prin- / ciple in the law and public opinion of the land. It was natural enough that this should be so at a period when every man either held property or hoped to do so. The strange thing is that this principle should have survived with so little change down to the present day. But there were certain circumstances connected with the adoption of the Constitution of the United States which provided for the perpetuation of this state of things which made it difficult for public opinion in another and later age, when property holding was less widely distributed, to alter the legal conditions of the earlier period. During the War of the Revolution, from 1775 to 1782, and in the years immediately thereafter, the American Union had been a league. of independent States, and a very loose one. They had formed an organization for mutual protection in carrying on the war. But this organization, even while the war lasted, was very weak indeed. The imminence of a common danger, which threatened to involve all, and the personality of a few leaders, of whom George Washington was the most conspicuous, were the only things that enabled the different colonies to act together. When independence was conceded by England in 1782, and the restraints of common danger were removed, the hopeless weakness of the central government became obvious. From 1783 to 1789 the United States had no means of securing concert of action at home or respect and consideration abroad. Clear-headed men felt the absolute necessity of centralization. The Constitution of 1788 was the result of a set of contracts, agreements, and compromises between two pretty evenly balanced parties a States rights party, which wished to limit the powers of the Federal Government, and a national party, which was anxious to set some practical control on the autonomy of the State government. The delegates to the convention of 1787 were concerned with questions of constitutional law in the narrower sense. They were not thinking of the legal position of private proverty. But it so happened that in making mutual limitations upon the powers of the Federal and the State government they unwittingly incorporated into the Constitution itself certain very extraordinary immunities to the property holders as a body. It was in the first place provided that there should be no taking of private property without due process of law. The States Rights men feared that the Federal Government might, under the stress of military necessity, pursue an arbitrary policy of confiscation. The Federalists, or national party, feared that under the influence of sectional jealousy one or more of the States might pursue the same policy. This constitutional provision prevented the legislature or executive, either of the nation or of the individual States from taking property without judicial inquiry as to the necessity, and without making full compensation even in case the result of such inquiry was favorable to the government. No man foresaw the subsequent effect of this provision in preventing a majority of voters, acting in the legislature or through the executive, from disturbing existing arrangements with regard to railroad building or factory operation until the railroad stockholders or factory owners had had the opportunity to have their case tried in the courts. There was another equally important clause in the Constitution providing that no State should pass a law impairing the obligation of contracts. In this case also a provision which was at first intended to prevent sectional strife and to protect the people of one locality against arbitrary legislation in another became a means of strengthening vested rights as a whole against the possibility of legislative or executive interference. Nor was the direct effect of these two clauses in preventing specific acts on the part of the legislature the most important result of their existence. They were a powerful means of establishing the American courts in that position of supremacy which they enjoy under the Constitution. For whenever an act of the legislature or the executive violated, or even seemed to violate, one of these clauses, it came before the courts for review. If the Federal courts said that the act of a legislature violated one of these provisions it was blocked rendered powerless by a dictum of the judges. I do not mean that these two clauses in the Constitution were the chief source of judicial power. That power has been due primarily to the traditional respect for the judicial office exsting in the United States, which has rendered it almost impossible for any but men of learning and character to aspire to it, and, secondarily, to the very great ability that certain of the early American judges notably Marshall, Story and Kent showed in expounding the law in such manner as to command universal approval. But if these provisions did not lie at the foundation of the positive authority of the judges, they were unquestionably a most powerful instrument in practically limiting the |