The New Deal: the Decline of Government

Date01 September 1951
Published date01 September 1951
Subject MatterArticles
University of Chicago
HEN CHURCH and state were separated, the severance was
made against the will of the Church. The separation of industry
and the
state was carried out at the initiative of business. In these
severances, the Church had had much to lose because its identification
with governmental power had made its properties and privileges secure;
but industry had much to gain because the state had begun to choke its
progress and its profit-making. The state could not change rapidly enough
to accommodate itself to new goods and new methods; moreover, no
state could stand sponsor for-though it might permit-the means which
industry was to use. The only way the enterprisers of the eighteenth and
nineteenth centuries could have used them was to have brought about
complete separation and noninterference.
Laissez faire meant to &dquo;let alone.&dquo; What the rising industrialists
wanted to be let alone in doing were activities which would not stand
examination even then: the employment of women and children in place
of men, the payment of starvation wages, the maintenance of indefensible
working conditions, and so on. There was also the even more fundamental
matter of taking profit. Men and institutions once had got rich largely
through the taxing power. That, of course, was the way of the Church-
witness the &dquo;butter-and-egg cathedrals.&dquo; But business used a different
method. As goods had come more and more to be sold for money and
in wider markets, rather than produced for home use or exchanged locally
by barter, the opportunities to make and sell them had tempted the
adventurous. However, the guilds had first to be destroyed, since they
were practically agents of the government; and this was accomplished in
due course. The longest step had then been taken. After that, for a
century, money-making was a matter of exploiting not only labor, but
also consumers. That had been an early stage. A later one had been
entered on when the corporation came into wide industrial use. From
then on, it was the financiers-the underwriters and speculators-who
made the large profits; the manufacturers, as such, fitted into a subordinate
role. By this time the constitutional Forefathers had reached their graves.
Finance had not been important in any real sense until after the Civil War.
Along with machine tools, scientific management, telephones, and internal
combustion engines, it was a characteristic of the decades before 1929,

but an important characteristic. The financier had inherited from the
entrepreneur-capitalist what the entrepreneur-capitalist had taken away
from government. He was now the policy-maker, the designer, the
director-general of latter-day capitalism.
The corporation, a Roman concept (collegium), was recognized in
English common law long before its special uses in industry were thought
of. For industry however, it possessed certain unique and priceless attri-
butes. It could own, it could act, it could go on perpetually, quite apart
from the fortunes of any of its creators or possessors. It was not a person,
yet the law gave it a fictional individuality. It could be a tool, a screen,
a collector of powers, a dispenser of benefits. It could erect immunities
against disagreeable responsibilities. A corporation could own slum proper-
ties ; it could hire child labor; it could overcharge for goods or services;
it could corrupt governments. In other words, it could perform many acts
with which few individuals would care to be associated directly. Through
share ownership, personal responsibility seemed remote because diluted.
Many individuals shared in its gains who would have hesitated to do so
in their own names.
The possibility that these monsters might be created and might need
control was another matter overlooked in the making of the Constitution;
and, like all else having to do with industry, had fallen unmentioned
among the residual powers of the states. The making of corporations never
ceased to be formally a governmental matter. Corporations needed state
charters to be brought into being; but a charter in one American state was
good for operations in all; for, in the common law, corporations were
persons, and the persons or citizens of one state could not be restrained
from doing business in others. This delegation of governmental powers,
it will be seen, was something like the delegation to the guilds. Transfer
was made by charter and for the express purposes named in the document.
But because the power had been overlooked in the writing of the Consti-
tution, and so left to the states, there had been a number of such sources
of power instead of one. This operated eventually to set up a kind of
competition in granting charters so that the states with the least restric-
tions and the widest permissions could get the most fees. Some of the
resulting situations became scandalous, such as the one Wilson had cor-
rected as governor of New Jersey, though the only result of that had been
that New Jersey’s absentee owners moved on to Delaware.
It was suggested many times that this chartering power be pre-empted
by the Federal government. President Taft had a study made which,
later, would be the basis for another during President Roosevelt’s first
administration. But, at the outset, there were no limitations worth noting

in corporate charters. Permission was given for doing business of any ordi-
nary sort without thought of exacting the right of regulation or even of
serious scrutiny in return for granted powers.
Indeed, charters were not thought of by their beneficiaries as granted
powers, but rather as rights. That attitude was possible because of the
competition among the sources of power. What one state would not
grant, another would. It was unthinkable that anyone desiring to make
a profit in any lawful way should be limited in undertaking it. This
view could also have been taken by the national government, but it would
have been taken as a matter of explicit policy, and not because of com-
petition among governments which made the restriction impossible.
By Constitutional omission and by the mechanism of the charter,
rights belonging to the people and vested in their Government had been,
to all intents and purposes, stolen; and, what was apparent also, was that
this process had become a completely accepted one. A person who ad-
vanced objections based on governmental rights in the production of goods
and services would have had his argument dismissed without consideration.
Economic affairs were matters for individuals or corporations to carry on
and from which to make money. That was a simple proposition, never
seriously challanged; and it suddenly became, in the nineteenth century,
both right and good.
What followed from this-how this tolerance was presumed on-
was amazing. Through the mechanism of incorporation, social functions
of the most crucial sorts were appropriated to the uses of money-making.
Capital was allocated, production arranged, the places and terms of
people’s livings fixed-all with a primary view to probable profits-and
Government did not interfere. To suggest that these were matters too near
to social management for unco-ordinated profit-making would have been
to incur social stigma which only a few daring reformers dared to risk.

The riotous reception given the document adopted in Philadelphia in
1787 had not been without cause. Shrewd readers who had been neither
rich merchants nor landed gentry had seen what the intention was, and
how little they were likely to get out of it. They saw themselves being
taxed to pay for debt assumption; they saw power being taken away from
state legislatures hitherto responsive to &dquo;the mob,&dquo; especially in the matter
of staying debts and cheapening money. And, they asked, where were
the protections for their traditional liberties? When volunteer soldiers
had been needed, a good deal had been heard about these things; but they
had gone without mention in the draft Constitution which the states were

asked to ratify. There was deep disturbance and it really looked for a
time as though ratification might not be carried through. It was pointed
out that it was all illegal anyway, because the method which provided
for change in the Articles of Confederation had been ignored; what had
been done in Philadelphia was alleged to be a coup d’6tat of the ruling
oligarchy. Why, then, should the people’s representatives consent to it?
It was all this, going on for months, which called out the Federalist papers.
As political essays, these were significant; but, no matter to what length
they ran, they could not explain away the grievances of the people: the
most cherished results of the struggle in England against governmental
abuses had been completely ignored in Philadelphia.
There was never any good explanation for the omission of a Bill
of Rights except the obvious one that the authors had been looking after
their own interests-property interests-and had thought it unimportant
to mention any others. Brought up sharp by something like the threat
of popular uprising, they had made no great objection to accepting, as a
condition of ratification, the first ten Amendments. It would have sur-
prised the drafters, as it would also have surprised the rioters, to know that
the Bill of Rights would prove to be as important a protection for corporate
as for individual interests; that, in the years to come, the personal...

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