Monopolies and the Constitution: a history of crony capitalism.

Author:Calabresi, Steven G.
Position:II. Monopolies in the United States C. The Fourteenth Amendment: A Ban on Class-Based Legislation through E. 'Private' Monopolies and Federal Antitrust Law, p. 1023-1067
 
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  1. The Fourteenth Amendment: A Ban on Class-Based Legislation

    Chief Justice Taney's concern with the creation of monopolies in the Charles River Bridge case was part of a movement beginning in the early nineteenth century to ban special or partial laws. (241) During this period, many states amended their constitutions to restrict the state's ability to grant special privileges or monopolies. (242) Prominent legal commentators, such as Chancellor Kent and later Thomas Cooley, argued that laws must be general and not class-based. (243) There was widespread opposition to class legislation, to the granting of exclusive privileges, and to government-conferred monopolies. (244) This Jacksonian concern, which was eventually adopted by Abolitionists and Republicans, helped lead to the adoption of the second sentence of Section One of the Fourteenth Amendment in 1868, which provides:

    No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws. (245) We think the Fourteenth Amendment has its roots in part in the Jacksonian fear of monopolies and grants of special privilege, and that the Amendment bans not only systems of caste but also all special or partial laws that single out certain persons or classes for special benefits or burdens. This is essentially the view that was taken by the four dissenters in the Slaughter-House Cases. (246)

    If there was one thing that all Jacksonians hated, it was government-conferred monopolies or special privileges, also known as "class legislation." Class legislation in this sense means any legislation that singles out groups, individuals, or classes of people and grants them special privileges or imposes on them special burdens that are not shared by the rest of society. (247) The Jacksonian aversion to class legislation is broader than an aversion to "caste," a term that refers only to hereditary class traits which may be immutable (such as race, or other physical features) or which are theoretically mutable but practically immutable because of social attitudes. A well-known example of theoretically mutable but practically immutable characteristics is the traditional Hindu caste system of the nineteenth century wherein a hereditary social order was created that distinguished Brahmins from Untouchables, with several other castes in between. (248) Notably, nineteenth-century dictionary definitions of caste described it as not only being based on physical or racial features but as also including a "tribe or class of the same profession" (249) or people with "fixed occupations" (250) or with "the same rank, profession, or occupation." (251) The view that class or caste legislation was reprehensible came to be widely held in the 1860s by the Framers of the Fourteenth Amendment. (252)

    Importantly, opposition to class legislation was not a new idea invented by the Jacksonians, but was instead deeply rooted in John Locke's belief that the role of government is to protect individuals' natural rights. (253) Locke believed that laws should have equal application to everyone in society and that the government should not use its power to create laws that favor or burden particular groups. (254) The opposition to special interest laws, however, was not due solely to Lockean philosophical ideas on the proper role of government. There were also important practical reasons to oppose class legislation: Favoritism and discrimination undermine the democratic process and encourage corruption. (255) The Framers of the original Constitution sometimes expressed this view; for example James Madison said that the state should be "neutral between different parts of the Society," (256) and that "equality ... ought to be the basis of every law." (257)

    There is ample support in the text of the original federal Constitution for the idea that there should be generality in lawmaking and equality before the law. As one of the Authors has pointed out in an article with Abe Salander, there are many instances where the Constitution requires that the laws be general and not class-based. (258) First, the preamble to the Constitution states that the purpose of the Constitution is to "provide for the common defence" and "promote the general Welfare." (259) Likewise, Article I, Section 8 empowers Congress "[t]o establish an [sic] uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States." (260) The Full Faith and Credit Clause allows Congress to pass only "general Laws." (261) The Constitution's ban on bills of attainder, (262) ex post facto laws, (263) and titles of nobility (264) may also be viewed as bans on various forms of class legislation.

    President Andrew Jackson's famous hatred for the Bank of the United States stemmed in part from the fact that the Bank was a private institution that enjoyed special privileges above and beyond those enjoyed by ordinary banks. In his message to Congress in 1832 vetoing a statute that would have renewed the Bank's corporate charter--a veto message which Roger B. Taney helped to draft (265)--President Jackson repeatedly referred to the bank as a monopoly because it was the only bank allowed to operate under a charter from the federal government and because it had significant control over the foreign and domestic exchange. (266) Pointing to the Patent and Copyrights Clause, which gives Congress the power to grant monopolies in the limited instances of patent and copyright, President Jackson wrote that any other grant of monopoly was the equivalent of a legislative amendment to the Constitution:

    Every act of Congress, therefore, which attempts by grants of monopolies or sale of exclusive privileges for a limited time, or a time without limit, to restrict or extinguish its own discretion in the choice of means to execute its delegated powers is equivalent to a legislative amendment of the Constitution, and palpably unconstitutional. (267) For Jackson, the Bank of the United States, as a monopoly, was contrary to the principle of the equal protection of the laws:

    Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress. By attempting to gratify their desires we have in the results of our legislation arrayed ... interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union.... If we can not at once, in justice to interests vested under improvident legislation, make our Government what it ought to be, we can at least take a stand against all new grants of monopolies and exclusive privileges, against any prostitution of our Government to the advancement of the few at the expense of the many.... (268) Rather than accede to the requests of rich men, the government should "confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor." (269) Jackson's hatred of banks was not unique, however; there were similar challenges brought to the special privileges granted to banks in some state courts during the nineteenth century, as well. For example, in 1813, the special debt recovery rules for a state bank in North Carolina were challenged as a violation of North Carolina's constitution, which provided that "no man, or set of men, are entitled to any exclusive or separate emoluments or privileges from the community, but in consideration of public services." (270) Similarly, in 1856 a state bank charter in Indiana was challenged under that state's privileges or immunities clause because it was exempt from certain forms of taxation. (271)

    The antimonopoly cause also influenced opposition to the federal government's postal monopoly. In 1844, Lysander Spooner, the famous political reformer and abolitionist, founded the American Letter Mail Company with the primary purpose of challenging the constitutionality of the Post Office. (272) Spooner argued that the federal postal monopoly exceeded the grant of power given to Congress in Article I, Section 8, Clause 7 "[t]o establish Post Offices and post Roads," (273) and alleged that the Post Office charged exorbitantly high postage rates due to its monopoly power. (274) Spooner's constitutional argument, with which Justice Joseph Story agreed, (275) was that the constitutional grant of power to establish post offices and post roads is narrower than the power given to Congress under the Articles of Confederation, which granted Congress the "sole and exclusive right [of] ... establishing and regulating post offices." (276) Like Sir Edward Coke, Spooner understood the creation of monopolies as a practice of arbitrary and despotic governments:

    The idea, that the business of carrying letters is, in its nature, a unit, or monopoly, is derived from the practice of arbitrary governments, who have either made the business a monopoly in the hands of the government, or granted it as a monopoly to individuals. There is nothing in the nature of the business itself, any more than in the business of transporting passengers and merchandise, that should make it a monopoly, either in the hands of the government or of individuals. Probably one great, if not the principal motive of despotic governments, for maintaining this monopoly in their own hands, is, that in case of necessity, they may use it as an engine of police, and in times of civil commotion, it is used in this manner. The adoption of the same system in this country shows how blindly and thoughtlessly we follow the precedents of other countries, without reference to the despotic purposes in which they had their origin. (277) Spooner concluded that:

    the only absolute constitutional guaranty...

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