Supreme Court Protects Big Business in the Gilded Age

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With the start of the Hayes administration and the ending of Reconstruction in 1877, profound changes were transforming America from a predominantly rural society to one that was urban. By 1900, fifty percent of all Americans lived in cities, a significant rise from the sixteen percent recorded in 1860. Much of this was due to Industrialization, a process enhanced by the Civil War years, creating a strong relationship between corporations and politics. The final piece of the puzzle confirming the laissez faire policies of American business came, however, with the transformation of the federal courts and their interpretation of the Fourteen Amendment’s due process clause.

State Legislatures Pass Statutes Regulating Private Businesses

One result of the growth of American manufacturing and business enterprises was the attempt by various state legislatures, notably in the mid-west where farmers suffered economically, to pass statutes regulating business practices. In Munn v Illinois (1877), for example, the Supreme Court upheld the legislature’s right to regulate under the notion of state policing powers.

In the earlier 1873 Slaughterhouse cases, arising out of Louisiana, the same court revived the idea of dual citizenship, enunciated by earlier courts as in Chief Justice Taney’s opinion in the 1857 Dred Scott decision. In both the Munn and the Slaughterhouse cases, the appellants sought relief under the due process clause as found in Section 1 of the Fourteenth Amendment.

The high court, however, seeking to determine the intent of the writers of the amendment, concluded that the due process clause as well as the equal protection clause was written to benefit Southern blacks in their struggle to realize political equality. Within a few years, however, the Supreme Court reversed itself, linking the due process clause to the doctrine of vested rights.

Response to State Regulation of Private Industry

Business leaders in the Gilded Age reacted swiftly to the regulations passed by state legislatures, often because special interest groups like the farmer’s Grange movement had elected their own to state assemblies. With the exception of Grover Cleveland, post-Reconstruction presidents were Republicans. The Republican Party was deeply tied to the interests of big business.

Republican presidents began to appoint pro-business judges, many with backgrounds as corporate attorneys. But even Cleveland was not immune from the practice of appointing men with pro-business leanings. These new judges realigned the Court’s position on state regulation of businesses.

Under Cleveland, the Interstate Commerce Commission was created in order to control railroad rates, partially in response to the Grange movement. But the commission board members were tied to the railroad industry while the ICC itself had no enforcement power.

Business also increased lobbying efforts on the state level, in some cases resorting to bribery as in Pennsylvania. Pro-business newspapers like the New York Times portrayed movements like the Grange and later Populism as socialism with the intent of wealth redistribution. Such propaganda confirmed what many Americans already feared: a paternalistic government intent on interfering in the lives of its citizens.

The Supreme Court Reverses Itself on State Regulation of Business

By the 1880s, a new Supreme Court with different faces that were decidedly pro-business and defenders of laissez faire, reversed former court opinions, asserting that state legislatures were limited in regulating business practices. States that deprived enterprises through regulations violated the due process clause of the Fourteenth Amendment.

The court applied the due process clause to vested rights. This transition to “substantive due process” ultimately freed business from onerous statutes that could, to some degree, interfere with the most basic rights of an industry to reap profits. In effect, corporations were treated as people, a significant deviation from the intent of the writers crafting the amendment.

Response of the American People to the Court’s Support of Big Business

Most Americans supported the politics of the Gilded Age as well as the implementation of pro-business policies. Thus, many Americans supported the Supreme Court’s decisions. There were several reasons for this. Middle class Americans accepted the propaganda that populists were a danger to the democracy and the prosperity of the nation.

By 1900, the United States was producing more iron and steel annually than Great Britain and Germany combined. The Industrial Revolution, while creating a class of “new money” millionaires, also benefited the rising middle class. This included greater varieties of fresh meats and produce, clothing, household labor-saving devices, and leisure time recreation. The problems of the western farmers or the Southern sharecroppers were simply not substantial or effective enough to warrant changes.

Substantive Due Process and the Gilded Age Supreme Court

Substantive due process prevented unreasonable state interference with private property. This included corporations, namely railroads and other utility businesses. On one level, the judiciary was responding to the lightening changes in American society, interpreting the Constitution through the prism of an industrialized society.

On another level, the courts gave the “green light” to business, freeing industry from unreasonable oversight and regulatory measures. It would not be until the Progressive Era that government attempted to seek a balance.

Sources:

Alfred H. Kelly and Winfred A. Harbison, The American Constitution: Its Origins & Development, Fifth Edition (W.W. Norton & Company, 1976)
Frederick Merk, History of the Westward Movement (Alfred A. Knopf, 1978)
Page Smith, The Rise of Industrial America: A People’s History of the Post-Reconstruction Era (Penguin Books, 1990)
Howard Zinn, A People’s History of the United States (Harper Perennial, 2010)