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A Foot In The Door
Grain elevators had false bottoms; freight rates had no ceilings. The farmers raised the roof, and government regulation crossed industry’s threshold
February 1964 | Volume 15, Issue 2
During the seventies and eighties, the years when Waite and his majority sat on the Court, the public-interest doctrine, and the underlying assumption that legislative acts are valid unless completely arbitrary, led to further expansions of regulatory power. State railroad regulations were repeatedly upheld, as were laws limiting the rates charged by water companies, prohibiting lotteries, and scaling down the interest and principal owed to the holders of state bonds. Congress’ power to regulate federally chartered corporations was similarly upheld by a decision, in the Sinking Fund Cases of 1879, which infuriated corporation and financial leaders.
In later judicial periods, roughly between 1895 and 1937> judges far more committed to free enterprise than Waite, Bradley, and Miller often found reasons for invalidating economic regulations in the due-process clauses of the Fifth and Fourteenth amendments. Munn v. Illinois was never overruled, but its public-interest doctrine was radically reinterpreted in the 1920’s. The conservative Taft Court struck down a number of state regulatory laws as unconstitutional, declaring that only a narrow category of businesses—enterprises traditionally regulated and large monopolies—were affected with a public interest.
All this came to an end in the next decade. In the 1934 case of Nebbia v. New York , sustaining a comprehensive scheme of state milk-price regulation, the Supreme Court returned to a sweeping view of the public-interest doctrine. “A state,” it announced in words that Waite would have approved, “is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy by legislation adapted to its purpose.” Three years later in the case of NLRB v. Jones and Laughlin Steel Corporation , when the justices began the process of upholding the economic regulation of the New Deal, the permissive spirit of Waite’s Munn opinion again triumphed.
Munn v. Illinois , of course, also had a more contemporary impact. The proprietors of the city’s grain elevators, the Chicago Tribune reported a few days after the Supreme Court’s decision, “are thoroughly reconstructed. They bow to the inevitable.” They lowered their rates and began co-operating fully with the state’s Railroad and Warehouse Commission. Two decades of arrogance by the warehousemen had come to an end; not only were their opponents politically dominant, but the elevator men found their monopolistic power weakened. They faced strong competition from new grain centers at Milwaukee and Minneapolis, and in addition, improved rail connections now permitted farmers to ship grain through Chicago to the East without temporarily storing it.
The railroads also bowed, although many of the midwestern states, responding to powerful railroad lobbies, later repealed or drastically loosened their regulatory laws. Illinois, however, remained a leader in strong railroad regulation; the farmers’ influence prevented the repeal of the laws, which were sustained by both state and federal courts.
By 1877 the Patrons of Husbandry, who had provided much of the political support behind the regulatory laws, were but a shadow of their onetime strength. Internal dissensions and the financial collapse of its co-operative enterprises sharply reduced the organization’s membership and destroyed its political influence. In fact, the Grange gradually reverted to its original social purposes and is today a thriving fraternal order. As for the unsavory firm of Munn & Scott, it too was no longer a factor by 1877, for it had passed out of existence.
But ultimately more significant than the immediate results and the conflicting motives of the many participants was the constitutional residue left by the struggles of the seventies: the clear announcement that legislatures might regulate business on behalf of the public interest, a principle that received additional vitality from Chief Justice Waite’s assertion that the Court should be reluctant to upset regulatory laws passed by elected representatives. This was the meanine of Munn v. Illinois , and it provided a leading precedent for the day when American big business would find itself under continuing government regulation.