Experiments in Economics

No person shall be . . . deprived of life, liberty or property without due process of law--5th Amendment.

. . . nor shall any State deprive any person of life, liberty or property without due process of law--14th Amendment.

The Supreme Court's economic power over all U. S. citizens is derived in large measure from these "due process" provisions of the Constitution. They give it the final decision in Government's ceaseless struggle to control and regulate Business & Industry. They are the legal refuge of every corporation (a "person" under the law) which feels itself misused by a Federal or State board, the great rocks on which many a visionary attempt at social reform legally founders.

The first "due process" amendment was originally intended to give the individual citizen protection against political tyranny by the Federal Government. Because it dealt in abstractions, the Supreme Court, by interpretations, had wide latitude in defining such relative terms as "reasonable," "arbitrary" and "legitimate." Thus a century of evolution transformed the 5th Amendment into a weapon with which the Court could suppress any regulatory experiments by Congress of which it disapproved. In the hands of the Supreme Court the 5th Amendment wrecked an effort to establish a minimum wage law for women in the District of Columbia, on the ground that such a law violated "liberty of contract." Likewise zoning laws were annulled because they unconstitutionally deprived owners of the free use of their property. To circumvent this "due process" clause Congress, whose attempt to stamp out child labor by taxation was invalidated by the Supreme Court, submitted to the States the Child Labor Amendment to the Constitution.* Many have been the cases of railroads and utilities which have convinced a majority of the Supreme Court that rates fixed by Federal commissions were too low to earn a fair return on their property, were thus "confiscatory" and hence constitutionally void under the 5th Amendment.

The 14th Amendment was originally adopted in behalf of the Negro, just freed by the Civil War. It was primarily aimed at Southern States anxious to put Blacks on a lower legal level than Whites. Economic evolutions gradually obscured this purpose from judicial sight until today the 14th Amendment constitutes the Federal Government's major control over most State legislation. By it the Supreme Court becomes the censor of all important economic and social experiments within the States. Does Kansas want to set up a compulsory Labor Court to fix wages and outlaw strikes? The Supreme Court, under the second "due process" clause, says it may not. Does Wisconsin want to penalize Pullman Co. for letting down empty upper berths? The Supreme Court says Wisconsin would unconstitutionally deprive the company of its "liberty." May Florida fix certain below-cost freight rates on special commodities to build up a local industry? No, says the Supreme Court. Does North Dakota want to establish a freight tariff so unreasonably low that the Northern Pacific cries "Robbery!"? The Supreme Court agrees with Northern Pacific. Laws compelling school attendance, vaccination, burials within city limits, junk dealing, theatre-ticket scalping, regulated rents--for all such questions of State experimentation the 14th Amendment is a judicial catchall. Only hairline distinctions divide the constitutional from the unconstitutional activities of States in ordering local society. Issues stand or fall before the Supreme Court in accordance with the liberal or conservative views of its members. A State may not limit bakers to ten hours per day but is free to decree such working hours for all factory employes.

Last Week in the Supreme Court the 14th Amendment wrecked another State experiment in economics--and brought forth what may become a historic dissent. In an attempt to control competition, the Oklahoma Legislature provided that the manufacture of ice was a public utility and that ice producers must obtain certificates of public convenience and necessity from the State Corporation Commission. New State Ice Co. of Oklahoma City complied with this statute. When one Ernest A. Liebeman started to put up an ice plant without a certificate, New State Ice Co. went into Federal Court for relief. On appeal, six justices of the Supreme Court ruled that the Oklahoma statute violated the "due process" clause because it attempted arbitrarily to deprive Iceman Liebeman of his constitutional "liberty" of carrying on what is commonly considered a private business. The majority opinion held that the State's right to economic experimentation did not transcend the U. S. Constitution.

Vigorous and vehement dissenter from this view was Justice Louis Dembitz Brandeis, since Oliver Wendell Holmes's retirement the Court's greatest liberal. His views were subscribed to by Justice Harlan Fiske Stone. Justice Brandeis' dissent was more than a minority opinion. It was a profound social thesis arguing the advisability of allowing the States to try to work out their own reforms of business regulation in their own way. Pointing to the facts of the Depression, he developed the idea that unrestrained competitive production is an economic curse from which the nation is now suffering. As he read 25 printed pages which embodied the fundamentals of his own economic and judicial philosophy, his voice rose and fell with deep emotion, his black-robed arms waved back & forth in emphatic gestures. Excerpts from his "inaugural" address as No. i Liberal of the Supreme bench:

"The people of the United States are now confronted with an emergency more serious than war. Misery is widespread in a time not of scarcity but of overabundance. The long-continued depression has brought unprecedented unemployment, a catastrophic fall in commodity prices and a volume of economic losses which threatens our financial institutions. . . .

''Economists are searching for the causes of this disorder and are re-examining the bases of our industrial structure. Business men are seeking possible remedies. Most of them realize that failure to distribute widely the profits of industry has been a prime cause of our present plight. But rightly or wrongly, many persons think that one of the major contributing causes has been unbridled competition.

"Increasingly doubt is expressed whether it is economically wise, or morally right, that men should be permitted to add to the producing facilities of an industry which is already suffering from overcapacity. . . .

"Some thoughtful men of wide business experience insist that all projects for stabilization and proration must prove futile unless, in some way, the equivalent of the certificate of public convenience and necessity is made a prerequisite to embarking new capital in an industry in which the capacity already exceeds the production schedules.

". . . The discoveries in the physical sciences, the triumphs in invention, attest the value of the process of trial and error. These advances have been due, in large measure, to experimentation--which for two centuries has been not only free but encouraged.

"Some say that our present plight is due, in large measure, to the discouragement to which social and economic invention has been subjected. I cannot believe that the framers of the 14th Amendment, or the States which ratified it, intended to leave us helpless to correct the evils of technological unemployment and excess productive capacity which the march of invention and discovery have entailed. There must be power in the States and the nation to remold through experimentation our economic practices and institutions to meet changing social and economic needs.

"To stay experimentation within the law in things social and economic is a grave responsibility. Denial of the right to such experimentation may be fraught with serious consequences to the nation. It is one of the happy incidents of the Federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country. This court has the power to stay such experimentation. We may strike down the statute embodying it on the ground that, in our opinion, it is arbitrary, capricious or unreasonable; for the due process clause has been held applicable to matters of substantive law as well as to matters of procedure. But in the exercise of this power we should ever be on guard, lest we erect our prejudices into legal principles. If we would guide by the light of reason, we must let our minds be bold."

*It failed of ratification, being rejected by both Houses of 24 State legislatures.

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