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of canals and turnpikes. There was but one bank and two trading companies.
As business agencies corporations had no part either in life or thought, consequently they had no place in the constitution. The Supreme Court has held that they are not citizens within the meaning of the Fifth Amendment, and that each state may either wholly exclude them, or impose as conditions of their entering or remaining in the state such terms as local policy or interest may suggest. The result is that business which was intended to be free, has in fact become subject to local authority. The abuses of corporate organization and management have heretofore commended this exercise of local control. Ultimately, however, we shall become increasingly aware of its injustice and folly. Business cannot be conducted in this century except through the agency of corporations; but the very enlargement of that agency has caused industry, the same as commerce, to overleap the bounds of states, and thus become subject to governments whose only interest in them is that of the publican. "Federal,” "National," "Union," "United States," "International," 'American," these terms find a place in the names of the corporations that are carrying on our large business enterprises and are not mere high-sounding titles, but are truly indicative of the scope of the business conducted. They have taken national titles because their business is national and international. While engaged in the preparation of this paper I employed three young men in different libraries to examine and summarize state laws passed since 1890, directed against foreign corporations solely upon the ground of their alienage. My purpose was to institute a comparison between laws of that character now in force, and discriminatory statutes passed by the several states under the articles of confederation. But the mass of material turned in by these investigators was so great as to surpass any leisure at my command for its study and classification. The reports, however, leave no room for doubt that the laws now in force
are both more vicious in character and varied in form than were those of the earlier period. At that time discrimination was confined in the main to taxation by states having ports of entry against those who had them not. To-day they embrace not only double, and frequently manifold taxation, but the thousand forms of regulation which recent governmental activity in the field of business has developed. A condition which was then deemed sufficient to cause the framing and adoption of the constitution ought now to be adequate to compel the exercise of the power which the constitution vested in the federal government for the very purpose of controlling such conditions.
How far may the national government go in the control of those matters which have become in fact national? The situation fits exactly the terms of the resolution passed in the convention that framed the constitution, and which was the source of all the powers and restrictions embodied in that instrument. It presents a case "to which the separate states are incompetent and in which the harmony of the United States may be interrupted by the exercise of individual legislation." As to railroads there is no more reason why they should be subject to a divided authority than there is in the case of navigation. There will, of course, be in the one case as in the other, local matters that can be best dealt with by local authority. But as to all that affects them as commercial agencies, whether that commerce be local or interstate, the railroad is a unit; its activities are national, and it ought to be subject solely to national authority. Divided control is inefficient in protecting the public, and grossly unjust in the burdens which it places upon the carrier. During the last winter there were passed in the states west of the Mississippi River one hundred and seventy-eight statutes dealing directly with transportation and its instrumentalities. The number of such statutes now in force throughout the entire country extends well into the thousands. They are conflicting, oppressive, inefficient. They seldom represent intelligent investigation, but in the main have had their origin
in agitation, often in popular frenzy. State legislatures have not yet learned that due process of legislation, like due process of law, proceeds upon inquiry, and legislates only after hearing. Protection to the public and justice to the carrier alike unite in the demand for a single governmental control. The power under the commerce clause of the constitution is plain. The decisions of the Supreme Court have placed that subject beyond the realm of controversy. If the railroad as an instrument of commerce can only be dealt with justly and efficiently by a single authority the federal government may assert and maintain its exclusive jurisdiction. Regulation is now inefficient because divided. If the federal government shall take exclusive control, it will then be responsible alone for such a control as shall be both efficient and just. Public opinion will have a single point for its direction, and will not be dissipated among many conflicting authorities. The subject does not demand separate rules for the separate states. Their action refutes such a doctrine. By the legislation of the past winter Virginia and Ohio, Pennsylvania and Minnesota are combined in the same passenger rate, though they vary as five to one, in density of population and travel. The subject is national, and the federal government with its national outlook can by organized investigation and accumulated experience best acquire the skill and knowledge necessary for its just and efficient regulation.
Our great corporations are now national in their character and national and international in the scope of their operations. To regulate their formation is one of the most direct and efficient means of regulating their activities. For fortyfive states to create corporations and the national government to regulate their most important business cannot fail to result in inefficiency and conflict. Hitherto interests to be regulated have found advantage in the dual form of authority. It has enabled them to assert whenever either authority attempted their regulation that the power properly belonged to the other authority. We have now arrived at a state of
knowledge and publicity which makes this kind of shuffling impossible. The nature of the subject to be regulated and not the shifting desires of the interests concerned must determine the place of authority.
Our first great conflict between the states and the nation was waged over the subject of banking and finance. No sooner were we started under the constitution than the need of a national agency in that field was discovered. But the local jealousy of the states prevented its establishment for more than seventy-five years. During that period we were subject to all the injury and confusion of wild-cat banking under state authority. Banking and finance, however, were not more national at that time than commerce and industry have now become, and the same conflict is again presented in this new field. We can get along with divided authority to-day on these subjects just as we got along with state bank notes. This nation can stand almost anything. But it is the duty of government in the exercise of its power to create conditions which are not simply tolerable, but those which are most conducive to the general welfare. A uniform authority in the field of interstate commerce and industry will be found as beneficent to-day as it was discovered to be in the field of finance and banking as the result of our first economic conflict. The problem of regulating these affairs has attained its present magnitude largely because the federal government has neglected to exercise its constitutional power over the subject in the course of its development. Until the interstate commerce act was passed in 1887 the negative power of the courts was the only federal control. Even by them till 1886 the states were sustained in their authority over interstate as well as domestic rates of carriers. The truth is that the national government has so long neglected its powers under the commerce clause of the constitution that now, when it tardily takes up its duties, it is charged by the states with usurpation.
18. THE STATES AND THE FEDERAL GOVERNMENT.
Another view of the relation between the States and the Federal Government and a possible solution of the difficulty is suggested by President Woodrow Wilson. Speaking of the problem of States Rights, he says:
And now the question has come upon us anew. It is no longer sectional, but it is all the more subtle and intricate, all the less obvious and tangible in its elements, on that account. It involves, first or last, the whole economic movement of the age, and necessitates an analysis which has not yet been even seriously attempted. Which parts of the manysided processes of the nation's economic development shall be left to the regulation of the States, which parts shall be given over to the regulation of the federal government? I do not propound this as a mere question of choice, a mere question of statesmanship, but also as a question, a very fundamental question, of constitutional law. What, reading our Constitution in its true spirit, neither sticking in its letter nor yet forcing it arbitrarily to mean what we wish it to mean, shall be the answer of our generation, pressed upon by gigantic economic problems the solution of which may involve not only the prosperity but also the very integrity of the nation, to the old question of the distribution of powers between Congress and the States? For us, as for previous generations, it is a deeply critical question. The very stuff of all our political principles, of all our political experience, is involved in it. In this all too indistinctly marked field of right choice our statesmanship shall achieve new triumphs or come to calamitous shipwreck.
The old theory of the sovereignty of the States, which used so to engage our passions, has lost its vitality. The war between the States established at least this principle, that the federal government is, through its courts, the final judge of its own powers. Since that stern arbitrament it would be idle, in any practical argument, to ask by what law of abstract principle the federal government is bound and restrained. Its