Late 19th Century Legal Order

• The class is moving into the later 19th century, setting the stage for 20th-century progressivism and World War I.
• Focus on major highlights to establish patterns.

Transition to Modern Legal Order

• The aim is to prepare for the constitutional law changes of the 1930s.
• The 14th Amendment has already initiated changes, establishing federally enforceable rights.
• Federal government's responsibility for rights is limited.
• Robust federal protection for economic rights is evident, with active state and federal governments.
• Transition will be discussed, and context set for future discussions.

Overview of Presentation

• This presentation includes just two slides.
• The presentation sets up discussion of economic regulation during the progressive period.
• The period covered is from the 1870s to about 1905.

Victorian Moralism, Classical Legal Thought, and Modern Organization

• The 19th century involves a lot of moral and racial regulations.
• The regulation is mainly moral legislation.
• State governments aim to protect their citizens' character and limit harmful practices.
• They are pushing back or limiting practices considered harmful.
• Regulations involve locating people in nuclear families, assigning land to heads of households.
• The attempt is to put men in charge of Native American households, and make wives dependent on them, with children protected by the nuclear family.

Economic Regulation

• There is also a lot of economic regulation on the economic front.
• There is a counter current of political theorists looking back.
• The federal government in the 19th century was doing less than in the mid-20th century.
• Some argue that there was minimal governance and a laissez-faire economy, but this is inaccurate.
• The United States never had a truly unregulated market.
• Intellectuals advocated for laissez-faire and viewed the past as closer to it than the present.
• Be cautious of the idea of an unregulated market.
• Gaps exist, with state regulation possible in some areas.
• Difficulty in federal regulation due to constitutional understandings of congressional powers and federal-state power balance.
• Details will be explained through specific regulations and court decisions.
• The focus will shift towards the courts as they become more involved in striking down legislation.
• Strategies involve using the courts and pushing in legislatures.
• The rules of the game change in the late 19th and early 20th centuries.

Classical Legal Thought

• Classical legal thought is the consolidation of legal thinking in the 19th century.
• In the early 19th century, American law underwent significant transformation.
• American law changed to enforce a capitalist order and benefit industrialists and merchants.
• Benefits went to dynamic forms of production, while burdens fell on less dynamic forms, especially workers.
• American jurists updated common law from the colonial period to suit American conditions, synthesizing and eliminating irrelevant aspects.
• Bodies of law that form the major law school curriculum, such as property, contracts, and torts were created.
• Torts are remedial wrongs like negligence, handled when there is no contract.
• Contract law handles issues with agreements. Property law addresses relationships to things.
• Professional lawyers are emerging, with credentialing through law school.
• Professional schools like Harvard, Yale, and Columbia teach that law is a science.
• Christopher Columbus Langdell of Harvard Law School argued that law is logic and the working out of interpersonal natural laws.
• According to Langdell, the law as applied to the facts is all that matters.
• Langdell developed the casebook method, using exemplary cases to teach general principles of law.
• Students analyze the logic behind opinions and apply them scientifically.
• Social change and societal feelings should not be considered.
• Classical legal thought emphasizes the sanctity of property and contracts.
• The state should not redistribute property or interfere with contracts.
• Contract is seen as the way free people govern themselves.
• Denying people the right to contract is a major problem with slavery.

Challenges to Classical Legal Thought

• Oliver Wendell Holmes challenges classical legal thought.
• Oliver Wendell Holmes knew John Quincy Adams and Alger Hiss.
• Oliver Wendell Holmes was a legal intellectual who served on the Massachusetts Supreme Court.
• He also served on the Supreme Court until the early 1930s.
• Holmes argued that the life of the law is experience, not logic.
• Law changes due to human interaction with rule systems and changing circumstances.
• Legislatures should be free to govern as necessary.
• Laws should be reinterpreted to accommodate change.
• Holmes exemplifies elements of classical legal thought.

Modern Organization

• There was and is a big change during the 19th century.
• There is a great deal of organization.
• The main developments include the emergence of new organizations in business, professions, and reform movements.
• Reform organizations push for change (e.g., American Temperance Society).
• Lawyers are organizing into a profession with law schools and credentialing.
• The American Bar Association sets credentials.
• Chemists (American Chemistry Society), businesses (Chamber of Commerce), and doctors (American Medical Association) are organizing.
• Academics organize in their professional situations.
• Businesses are forming massive corporations.
• Organizations are becoming national and international in scope, which is a new development.
• Many reform movements are developing within these organizations.

Limits to Organization

• Labor movement faces trouble in organizing.
• Populism is a political movement pushing against new businesses and business domination of the American political system.
• Populism was a movement of poor rural people against economic and political interests.
• Populist movements emerged from farmers alliances, which aimed to help farmers compete in the market.
• Farmers alliances organized to buy supplies and sell crops collectively, to gain market power.
• Banks often refused to deal with them, limiting their success.
• They broke the jute trust in the South.
• They began going into politics, with black and white farmers teaming up in the South.
• Populists in the West opposed the Republican Party.
• They pushed for railroad regulation, trust-busting, and fair farm prices.
• William Jennings Bryan, a populist-aligned Democrat, lost the 1896 election to William McKinley.
• Labor organizations and agricultural organizations faced real limits, but their pressure forced reform.
• Energy from these movements was channeled into other reform movements.
• Populist and labor activists forced issues to the forefront.

Commerce, Production, and Regulation

• Modern corporations emerged due to a very competitive economy.
• Businesses consolidated to cut prices amid downward pressure and deflation.
• Successful businesses cut prices, bought up competitors, and used economies of scale.
• Vertically integrated companies took control of the entire production process like Carnegie Steel who owned iron and coal mines, transportation, and factories.
• Horizontally integrated companies took over similar businesses (e.g., JD Rockefeller and oil).
• The American Sugar Company controlled 90-98% of sugar production in the US by the 1890s.

Monopoly Problems

• Monopoly raises the problems of whether businesses should be allowed to name prices.
• Monopoly power in the market is generally seen as wrong without good reason.

Commerce vs. Production Problem

• The federal government can regulate commerce (interstate commerce).
• It cannot regulate production, which is a state concern.
• The Supreme Court draws the line with the "package" analogy.
• Production ends when the product is put in the package, and commerce begins when the package ships.
• The challenge is regulating vertically integrated businesses that control the entire production process.
• Jurisdiction is discontinuous, with interstate commerce being federal and production being local.
• No single government can regulate the entire process.
• Regulation is possible if an area between these areas can be found to regulate.

Muncie v. Illinois Case

• Midwestern grain farmers shipped their grain to Chicago for storage, sale, and shipment.
• Grain elevator operators charged fees for holding the grain.
• Illinois regulated grain elevator rates in cities with over 500,000 people (Chicago).
• Grain elevator operators challenged this as a violation of the Interstate Commerce Clause.
• The Supreme Court upheld the regulation because, pouring grain into a silo is not commerce.
• Regulation is possible within that window and if unregulated, it is very difficult to do so.
• The federal government struggled to address these issues due to this constitutional problem.

The Interstate Commerce Commission, and the Sherman Antitrust Act

• The Interstate Commerce Commission (ICC) was established to review and regulate railroad rates.
• It was one of the first institutions of the administrative state and an independent agency.
• The Sherman Antitrust Act aimed to counter monopolies that restrain trade by setting prices.
• However, it faces production and commerce problems.

Other Court Cases and Problems

• United States v. EC Knight shows the commerce vs. production problem.
• American Sugar Company owned 98% of the sugar market, bought EC Knights.
• The federal government could not touch production, all done inside Pennsylvania. Thus they could not break the monopoly.

Pullman Strike

• Strike against Pullman Company (rail company making luxury cars) occurred.
• Pullman required all railroads to have a Pullman car.
• Pullman cars were made in a factory town outside Chicago.
• Pullman cut wages and increased rents/utility bills during an economic crisis.
• Workers went on strike, but the Pullman Company refused to negotiate.
• Railroad unions refused to move any train with a Pullman car.
• This restrained trade, triggering the Sherman Antitrust Act.
• Stopping trains also stopped the mail, bringing the strike under federal jurisdiction.
• The strike was broken using the Antitrust Act.
• It is difficult on the federal level to regulate these new industries.
• There is legislation at the state level, but efforts at the federal level do not quite work yet.

Substantive Due Process

• Substantive due process is an interpretation of the due process clause in the 14th Amendment.
• The due process clause says the government cannot take away life, liberty, or property without due process of law.
• Due process was generally procedural, ensuring fair legal processes.
• Substantive due process argues that some rights are so fundamental that no legal process can take them away.
• 20th-century examples include privacy rights and the right to abortion.
• Some rights are so basic that no government action can infringe upon them.
• Justice Stephen Field advocated for extreme protections for individual liberties.
• Protections extend to both physical and artificial persons (corporations).

Santa Clara Railroad Case

• It was an innovation that corporations get citizenship, and get its protection under the 14th Amendment’s clause.
• Corporations didn't argue this, and the courts did not.

Lochner v. New York

• A classic substantive due process case from 1905.
• New York regulated hazardous industries, including baking.
• Baking was considered hazardous due to poor ventilation and flour inhalation.
• The government limited bakery work to 60 hours per week.
• Businesses challenged this as interfering with the right to contract.
• The Supreme Court ruled it unconstitutional, protecting the right to contract under the 14th Amendment.
• Oliver Wendell Holmes argued that it legislated from the bench and incorporated laissez-faire economics into the Constitution.
• increasingly substantive due process works to push back against federal and state legislation because its pro-business.
• Substantive due process restrains legislation and represents what is a fair constitutionalism.