In the late 1800s, a growing chorus of complaint about the size and power of businesses drove many states to consider economic regulations. Yet, even as states considered often-parochial regulations intended to protect the interests of local farmers and businessmen, national corporations were expanding their economic power far beyond any state border. Railroads, steel companies, food conglomerates and oil empires all grew to become powerful, national corporations.3 Some state efforts to regulate those businesses, such as the Grainger laws regulating the rates for storing and shipping of grain that “affected the public interest,” were initially found to be constitutional.
But the emergence of a new judicial philosophy that protected the rights of property by classifying them as substantive rights entitled to due process, and the principles of laissez-faire, which became the dominant philosophy on the nation’s highest court, soon reoriented the debate. By 1890, laissez-faire constitutionalism created substantial impediments to national and state regulation of the rights of property owners, including those dealing in the marketing of securities.4 National corporations adopted the language of protected rights to counteract local attempts to enforce state regulations on their business operations. The success of that strategy employed by national corporations created major legal impediments to regulating the growing national economy, plaguing reformers for the next four decades.
(3) Brian Balogh, A Government Out of Sight (Cambridge University Press: New York, 2009).
(4) Munn v Illinois, 94 US 113 (1877); see Owen M. Fiss, Troubled Beginnings of the Modern State: 1888-1910 (MacMillan Publishing Co: New York, 1993), 103-106. In cases where the court found what it called “legalized thievery,” such as excessive railroad rates that seemed logically intended to fight the evil, it found the legislation constitutional.
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