Industrial liberty

Front matter

GIFT OF SEELEY W. MUDD

and

JAMES R. MARTIN MRS. JOSEPH F. SARTORI

I. Pack

Necessity for examination of principles in economic discussions, 1-2. — History of the development of the idea of liberty in England and America, 2-16. — The framing of the Constitution of the United States and its interpretation by the Supreme Court, 16-21. — The essential conditions of industrial liberty and their foundation in natural right, 21-27. — The definition of industrial liberty, 28. — How far the idea of individual sovereignty is recognized in the Constitution, 29-31. — How far contemplated by its framers, 32. — A full recognition of individual right necessary to political and industrial liberty, 33-40.

II. The Influence of the Discovery of Steam and the

Mechanical Inventions upon Industry . 41-72

The struggle in England between the industrial and landed interests, 41-45. — The influence of the steam factor upon social and industrial conditions, 45-49. — The fallacy of inferring political and industrial well-being from statistics of material growth, 50-53. — The disposition in economic investigations to mistake results for causes, 54-56. — The responsibility for the condition of the laboring classes, 57-60. — The influence of the steam factor upon the law of population, 60-64, 68, 69. — Its tendencies, under the control of the industrial corporation, adverse to the growth of liberty, 65-67, 70.

vi TABLE OF CONTENTS

III. Page

Analysis of the quasi-public corporation and its methods, Ti-T]. — The necessity for recognizing a relation of trust between the holders of a corporate franchise and the public, 77-84. — The distinction between the lesser trust for the benefit of the stockholder, and the larger trust for the benefit of the public, 84-86. — The history of the development of the law governing private trust, 87-91. — The same law properly applicable to the corporation in its relations with the public and its stockholders, 91-94. — The results of the failure to make this application, 93-94. — Fundamental propositions, 94, 95.

IV. The Relation of the Railway and the "Trust" to

The idea of public trust involved in the exercise of a corporate franchise, 96—100. — The appearance and growth of the parasite in railway management, and illustrations of its methods, 100-116. — The development of the " Standard Oil Trust " and its combinations with the railway managers, 116-128.

V

The Influence of the " Trusts " and Other Parasites upon Industrial Liberty . . 129-158

Extended operation of the parasite and the " Trust," 129, 130, 138-141. — The development and methods of the " Gas Trust," 130-138. — The " Trust " and the tariff, 141, 142, — Its growth the logical result of corporate aggression, 142-149. — Reform to be found only in a limitation of corporate power and public scrutiny of corporate methods, 149-153. — The necessity for treating porporate managers as trustees for the jhiIjHc, 153-158.

VI

The Inter-State Commerce Commission and its inadequacy to deal with corporate abuses, 159-163. — Discriminations in favor of the

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PAGE

" Standard Oil Trust " disclosed through its investigations, 164- 172. — Privacy not a right of the quasi-public corporation, 173-175. — Discussion of the reforms suggested by the railway managers and their inadequacy, 176-190. — The influence of the railway statesman and the corporate attorney, 190-195.

VII. Obstacles in the Way of Reform — Concluded . 196-221

Opposition of the vested interests, 196-199. — The influence of public opinion, 199-207. — Limitation of the courts and the necessity for an amendment to the Constitution, 209-212. — The historical progress of the Anglo-Saxon and his method of righting his wrongs, 212-217. — The Town Meeting an inheritance of his race, and the Corporation a gift from Rome. His probable persistence until the ultimate of industrial liberty is attained, 218-221.

VIII

Its plausibility as an expedient, 223, 224. — Historical account of its growth as a system, 225-229. — A theorj' and not a principle, 229-232. — The eff'orts of the protectionists to limit production by means of " trusts," 232-234. — Its violation of natural law, 234- 239. — The necessity for discussing principles rather than statistics, 239-241, 249-251. — Its responsibility for the system of indirect taxation and the surplus, 242-245. — Its effect on the agricultural and laboring classes, 246-249.

IX

What constitutes paternalism, 254-256. — Nature's law of diversity of faculty and diversity of resources, 255. — The grades in the industries shown by the United States census, 257, 258. — The generalizations of Quetelet, 258-260. — Man's efforts to interfere with natural laws, 260-264. — The distinction between political equality and the assumed equality of faculty, 266-270. — The distribution of nature's resources, 270-273. — The idea of divine right, 276-278. — The survival of this idea in the legislation of modern times, 279-285.

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X. Pack

Paternal Government — Continued . . 286-326 Definition of paternalism, 286-289. — The common-school system, 289-326. — Origin of the system and the results to civilization promised by its advocates, 296-301, 316. — The results after fifty years of trial, 309-315, 317-321. — Its antagonism to the principles of industrial liberty, 298-306.

XI

Paternal Government — Continued . . 327-365 The interference by courts and legislatures with the equality and sanctity of contract, 327. — The constituent elements of contract, 327, 328. — Why corporate charters are not contracts, 330-336. — The Dartmouth College case, 335. — Its responsibility for corporate aggression and violation of industrial right, 332-336. — The Legal-tender decision, 337. — The mistaken conception of sovereignty upon which it is based, 339-341. — Its effect in impairing the obligation of contract and its influence upon private morals, 341-344, 350-352. — Usury laws and their influence in restricting the freedom of contract, 344-347. — Mistaken policy upon which they proceed, 348, 349. — Lien laws and their tendency to mar self-dependence, 352. — Acts of government that are not paternal, 354- 357. — Entire absence of benevolence and generosity in a free government, 35S-362. — Police functions and what they include, 362-365.

XII. England and America ; the Relation of Each to

The rise of the Whig party and its influence, 366. — Paternalism in England from the reign of Queen Anne to the repeal of the Corn Laws, 366-36S. — The conditions in America after the Revolution, 368. — The steam factor and the changes effected by it, 368, 369. — The English system of land tenure ; its restraints upon alienation and the effect upon industrial progress, 369-372. — Efforts of the statical class to preserve ils power through paternal legislation, and its effect, 372-378. — The continued progress of industry in its

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contest with the statical class, 379-381. — The problem of industrial liberty in America ; her advantages and disadvantages in comparison with England, 381-385. — Private ownership in land, and its importance in preserving industrial incentive, 386-389. — The failure of analogy between the democracies of Greece and Rome and the democracy of America, 393-397. — The teachings of evolution in regard to industrial liberty, and the ultimate supremacy ■of intellectual over dynamic forces, 397-400.

Chapter I

Any one who attempts a study of economic questions in the light of modern research cannot fail to be imjDressed, upon the threshold of his inquiry, by the multiplicity and apparent complexity of the data involved in these questions, by the variety and conflicting character of many of the propositions which are suggested for reform, and still more strongly by the absence of any one central and clearly defined principle upon which there can be a substantial agreement. The statisticians and political economists keep too near their facts and figures, and regard their subjects mainly, if not exclusively, as of commercial quality ; as related only to the values of labor and production, to capital and wages ; as simply involving dollars and cents and the conveniences of trade. The politician approaches them diplomatically, and offers to compromise all difficulties with palliative and merely expedient measures. Many of the "^vi'iters on economic reform are occupied in confusing causes mtli effects, and in tlie endeavor to niatcli one result with another. Meanwhile an impression is more or less prevalent among the people that economic laws have lost their sanction and their character.

Under these cu'cumstances a rational course of examination would seem to lie, first, in an effort to indicate precisely and simply the primary qualities of industrial liberty, particularly as related to the American citizen; then to marshal existing social and industrial conditions, in order to measure them by this definition, to discover, if possible, how far they have deviated from it ; and thereafter to test, by the same standard, some of the more prominent propositions for reform.

Lord Bacon says that it is the "multiplicity of single facts ^vhich presents nothing but confusion. The middle principles alone are solid, orderly, and fruitful." By studying these "middle principles" we learn their essential relation to each other, and may also illustrate the degree of cougruity or incongruity with these principles which exists in present political and industrial conditions. Following this course, I will first briefly sketch the early progress of the English people towards liberty.

Magna Charta has been rather commonly and vaguely regarded as a great charter of liberty. It was, in point of fact, a very imperfect beginning. It came into being as the result of a conflict between

FUNDAMENTAL IDEAS J

governing classes. AVilliani Mareschal, Earl of Pembroke, and bis associate knights and barons, had scarcely any more perception of the principles of political liberty, in their modern significance, than had King John, from whom the Charter was wrested, and the Charter itself secured but little to the mass of the people. The instrument deserves its prominence in English history, not as the delineation but as the foretokening of liberty. A distinguished writer has said of Mao;na Charta that " in substance it is the first effort of a corporate life that has reached full consciousness, resolved to act for itself, and able to carry out the resolution." ^ Even this seems an overstatement. The Charter had but slight effect upon the prevailing law of tenure, and as little upon hereditary establishment. There was thereafter, it is true, a division of the mastership, which had for some time before been tending to^vards unity in the person of the absolute king. In consequence of this division, feudal oppression began to be somewhat relaxed ; but for all that the vassal was the vassal still. Of all the seventy-nine clauses of the Charter, only one is intended to j^rotect the working people, and this merely secured to them, from unjust seizure, their " wainage," or farming implements.

During the succeeding reign, Simon de Montfort, Earl of Leicester, called into being the House of Commons. This was really a far more important ad-

' Stubbs' "Constitutional History of England," N. Y., l88o, vol. I.,, p. 6io.

vance towards popular liberty tbau the securing of the Charter, because through it the people first gained some voice in the general government. Nevertheless, we must not conclude that in this act De Montfort Avas impelled by a spirit of liberty in its modern signification. As Mr. Stubbs says of him:

" He was greater as an opponent of tyranny than as a deviser of liberties. The fetters imposed on royal autocracy, cumbrous and entangled as they were, seem to have been an integral part of his policy. The means he took for admitting the nation to self-government wear very much the form of an occasional or party expedient, which a longer tenure of undivided power might have led him either to develop or discard." '

Moreover, the germ of the parliament lay in the primitive institutions of the Saxon race, and while De Montfort has the merit of having been the first to see the immediate uses to which a parliament might be put, in curtailing the absolute power of the king, it cannot be supposed that he conceived the ultimate tendency of that representative government toward the abolition, not only of the king, but of his own class ; since indeed the foremost Englishmen of to-day are not altogether ready to admit this result as the final outcome.

The Bill of Rights is another acquisition the influence of which lias been largely exaggerated. It was really a bill of particulars. It set forth human

'Stubbs' "Constitutional History of England," vol. II., p. lo8.

rights of the more obvious kind and commanded them to be observed thenceforth. But while the items thus inventoried belong to the category of freedom, they by no means comprehend the whole principle. They were but its adumbrations, since they did not even remotely indicate any rule where- \>Y political rights generally are to be ascertained.

To retui'n to the historical order. During the wars between the houses of York and Lancaster, the rights of the people were to some extent furthered ; but with the advent of the Tudors came a reaction towards absolutism, which culminated during the reign of Henry VIII., when the parliament became little more than the registrar of the royal will. The advance of political freedom, which took place in the reign of Elizabeth, was caused largely by the general awakening which accompanied the Kef onnation, and which expressed itself in England in a reaction from the tyranny of Henry VIII. and the bigotry of Mary.

With the incoming of the Stuarts, however, the absolute idea again received forcible expression. James I., even before his accession, formulated, in his work on the " True Law of Free Monarchy," the theory of an absolute royalty, and announced that, " although a good king will frame his actions to be according to law, yet he is not bound thereto, but of his own will and for example-giving to his subjects." This was a step l^eyond the absolutism of the Tudors, for, as Mr. Green has pointed out :

" 'An absolute king,' or ' an absolute monarchy,' meants, with the Tudor statesmen who used the phrase, a sovereign or rule complete in themselves, and independent of all foreign or Papal interference. James chose to regard the words as implying the monarch's freedom from all control by law, or from all responsibility to any thing but his own royal will. The king's blunder, however, became a system of government, a doctrine which bishops preached from the pulpit, and for which brave men laid their heads on the block." '

Mr. Grreen speaks of this notion as if it were wholly a new one ; but while it had never been so definitely expressed before, it is a dogma which has been acted upon by monarchs in one degree or another from the beginning of histoiy. It is, in fact, but a modificar tion of theocracy, which is the oldest form of government. From the passionate adherence mth which James and his successor clung to this theory, the Commonwealth came into being. Then followed in order of time the Kestoration, the Abdication, the Act of Settlement, through which the crown was conferred by the people, and the gradual development of the Constitution of England. Through all these processes there were lapses and advances of the liberties of the people, but in the main these liberties were enlarged and better guarded.

The English writers of the seventeenth and eighteenth centuries, but particularly the eighteenth, made marked progress in the definition of social and economic principles; l)iit they were not so successful

' " A Short History of the English People," by J. R. (Iroen, p. 472.

in ascertaining and determining the ultimate logical bounds of political liberty. John Locke, in 1G90, published two Treatises on Civil Government, in defence of the principles of the revolution against the Tories. This work has been extensive in its influence, and singular in the diversity of that influence upon three peoples, each of whom it helped to an entirely different interpretation of freedom. Thus it confirmed the English peoj)le in the Act of Settlement and made the subject contented, under the reign of William, with the new order of things inaugurated by that settlement ; it had an important influence in urging the French nation, a century later, to revolution and anarchy ; while in America it became one of the chief sources of inspiration for the foundation of the republic. The highest purpose of its author, as he himself says, was " to establish the throne of our great restorer, or present King William ; to make good his title in the consent of the people, which, being the only one of all lawful governments, he has more fully and clearly than any prince in Christendom." ' But the surroundings of Locke forbade him to pursue his reasons to their legitimate conclusion. While in all his discussion he saw the necessity of government to suj^port the individual, the necessity of justice in government, and the right of the people to overthrow unjust governments, he believed unqualifiedly that the government which could best accomplish the ends

' " Locke on Government," Preface.

O INDUSTRIAL LIBERTY.

of freedom was one wMcli had a kino' and an order of nobles, a constitutional monarchy. When Ave come to analyze his definition, we see that his typical idea of political liberty cannot convey the idea of individual freedom of self-government ; for self-government and government founded on hereditary right are not, and cannot be, identical.

Blackstone similarly makes a definition which lacks essential completeness. In his description of civil liberty he says : " That constitution or form of government, that system of law, is alone calculated to maintain civil liberty which leaves the subject entire master of his own conduct, except in those points in which the public good requires some direction or restraint." ' In considering this definition we must take into account the intention of the definer, especially as to that which constitutes the public good. Most persons would cordially agree that the public good is the great end to be desired, but Avould differ very widely as to those things which constituted this public good, and particularly as to the kind of government best suited to secure it. It is this point that Blackstone's definition leaves undetermined. He tells us in effect that a political structure is best calculated to maintain civil liberty, without defining that structure ; and when we measure his definition by the context, we have every reason to infer that what he re2:ards as a realization of the greatest public good exists in, and is secured by,

' " Blackstone's Commentaries," Book I., p. 126.

a constitutional monarchy, just as we have reason to believe that to the Czar of the Russias this greatest public good seems to be in an absolute monarchy, and to an American citizen it seems to be in a republican form of government. When Blackstone, comparing all forms of government with each other, became a panegyrist of the constitutional monarchy of Great Britain,^ it could not be expected that he meant to comprehend in his definition that larger idea of political liberty " which cannot brook a king." And indeed to any citizen of a monarchy, who is content with his government, such larger idea of political liberty, instead of seeming to have any quality of liberty in it, must appear to be a species of treason.

William Penn's definition, which conspicuously adorns the walls of Independence Hall at Philadelphia, has been held up as a classical definition of a free government. He says : " Any government is free to the people under it (whatever its frame) where the laws rule and the people are a party to those laws ; and more than this is tyranny, oligarchy and confusion." "" This definition contains self-contradictions. Besides, when, in the text which prefaces it, the definer establishes to his own satisfaction the doctrine of tlie divine right of kings, he thereby entirely disqualifies himself for realizing the qualities of political liberty, and his definition

' " Blackstone's Commentaries," Book I., p. 51. * Preface to " Frame of Government," Colonial Records, vol. I., p. 31.

lO INDUSTRIAL LIBERTY

cannot therefore be regarded as containing such a conception of political liberty as that of which I am H0^7 treating. Penn was a E-oyalist, and he could not entertain any idea of forming a govei^nment which involved absolute independence of the monarch from whom he received his charter of Pennsylvania. His very acceptance of that charter implied a pledge of fealty to the hereditary monarch who claimed title to the vast domain of America by the accident of his birth. Penn received the province as a fief under the condition of feudal allegiance, the direct considerations of the grant being the military service of the father of the grantee, the rendering of tribute by the payment of two beaA^er skins yearly, the fifth part of all the gold and silver to be found in the domain, the continued faith and allegiance of the people of the province to the monarch, and the transmitting of all the laws enacted within the province to the privy council of Great Britain, for the rejection of all such as might be deemed inconsistent with the royal prerogative. Under such circumstances as these Penn could not have adequately conceived that idea of liberty whereby each one of the citizens of the commonwealth which he established was to be a freeman, a guardian of himself, of his rights, and of the associated rights of others — a sovereign in his OA\ai capacity, hostile to any notion of domination by birth.

Montesquieu's " Esprit des Lois " held a high place among the framers of the Constitution. It

FUNDAMENTAL IDEAS II

was a source of inspiration to them. Washington wdtli his own hands copied an abstract of it made by Madison. ' Montesquieu was of the lawyer nobility, and held his judicial position as an hereditary possession. He was thoughtful and scholarly, and his work is characterized by a great love of system ; but, measured by the standards of to-day, it must be admitted that parts of it are very defective. AVhile he is broad, profound, and brilliant, he does not attempt to grapple Avith despotism in order to overthrow it. His chief service was that he set men thinking ; he did not resolve their problems. As with the other "\mters whom I have named, his environments precluded the possibility of his forming a definition of political liberty which could stand the test of concrete illustration. In the multitude of the suggestions "which he does give, taken one with another, there is great variety and contradiction. Many of them point in diametrically opposite directions. While some of these suggestions have been beneficially used in the construction of modern political liberty, others have been made the basis of the Avildest political theories. Thus, for instance, Montesquieu is doubtless the originator of the idea by which we have made co-ordinate the legislative, the executive, and the judicial branches of our government. ^ Yet his dictum, that in commercial countries it is the duty of the government to exercise a

' Bancroft's "History of the Constitution," vol. II., p. g. New York, 1885. ^ "Spirit of the I^aws," Book XL, ch. 6.

paternal care in furnisliing work to every man, has become one of the fundamental claims of that branch of socialism which was lately led by Louis Blanc. '

As Madison says of him : " He appears to have viewed the Constitution of England as the standard, or, to use his o\\ti expression, as the mirror of political liberty." ^

While Jeremy Bentham, in his " Constitutional Code," fixes the sovereignty in the whole people and says " it is best to give the sovereign power to the largest possible portion of those w^hose greatest happiness is the proper and chosen object," ^ he assumes for this sovereignty something more than human power. Government, according to him, fulfils its function " by creating rights which it confers upon individuals," '^ instead of confining itself to declaring and enforcing rights which grow out of custom and usage, in accordance with natural law. Thus, while he seats the power in the majority, and so far indicates democracy, his assumption is, that the power so conferred, unlike a power derived from agree-

' " Spirit of the Laws," Book XXIII., ch. 29.

Nothing could be more grotesque than some of the reasons set forth by Montesquieu in support of slavery : such, for instance, as that " sugar would be too dear if the plants which produced it were cultivated by any other than slaves"; that "these creatures are all over black, and with such a flat nose that they can scarcely be pitied" ; that "the negroes prefer a glass necklace to that gold which polite nations so highly value — can there be a greater proof of their wanting common-sense? " ; and that " itis hardly to be believed that God, who is a wise Being, should place a soul, especially a good soul, in such a black, ugly body." — " Spirit of the Laws," vol. XV., ch. 5.

"^ Federalist, No. 47.

' Bentham 's Works, Bowering's edition, vol. IX., p. 97. "* Id., vol. I., p. 301.

ment, unlike any human power, is possessed of a supernatural quality. As Herbert Spencer says, commenting upon this process of reasoning :

" The sovereign people jointly appoint representatives and so create a government ; the government thus created creates rights ; and then, having created rights, it confers them on the separate members of the sovereign people by which it was itself created. Here is a marvellous piece of political legerdermain ! . . . Surely, among metaphysical phantoms the most shadowy is this, which supposes a thing to be obtained by creating an agent, which creates the thing, and then confers the thing upon its creator ! " *

Bentbam, often, in treating of liberty, combines the polemical "with the philosophical, the practical with the theoretical, and not unfrequently confounds them. His doctrines, in the translation of M. Dumont, were propagated through Europe, and became more popular abroad than at home. This was partly due to the circumstance that, in the process of translation, many of the vagaries of terminology were eliminated ; but more to the fact that there was so much in Bentham's writings that afforded support to the wildest theories of the wildest theorists. It was for this that they received their greatest favor in France. '^

' " The Man versus \\\^ State," New York, p. 38.

• Jeremy Bentham doubtless did a large service to the world in challenging a great number of words that had been masquerading in the language under false meanings, lie did this especially in his " Book on Fallacies," in which he has a chapter on " Impostor Terms." Unfortunately, however, he sometimes fell under his own ban ; and Herbert Spencer furnishes several trenchant illustrations of this in Bentham's efforts at the treatment of ultimate human rights.

I have mentioned only a few of the more important of the political writers of the eighteenth century, but it may be fairly said of all of them, that they made definitions of liberty for M^hich, by reason of their environment, they could not furnish clear illustrations ; since behind all their illustrations lay their acceptance of the ideas and governments under which they lived. Under the laws of these governments there existed these essential postulates— a ruling class and a ruled class, — a ruling class by assumed hereditary right, and a ruled class by assumed hereditary necessity ; and where these are postulates, any definition of human liberty must be inadequate. It is for this reason that whilst the English Constitution marks the early development of liberty, it does not exhibit its grow^th and stature. Where the existence of a Idng is assumed to be an essential of government, there cannot be any complete realization of that quality of liberty which is comprehended in the political equality of all men before the law — of that kind of government which is maintained only through the delegated servants of the people.

We have to acknowledge, indeed, that we owe a great debt to England. From her Ave received an inestimable boon in the body of the great Common Law, that firm foundation of occidental civilization. But in accepting the Common Law from England, we did not take all that belonged to it. Its primogeniture and entailments, its class distinctions and class-government, were largely discarded. What we did bring with us to America was the sturdy Anglican spirit of the people, which gradually appropriated and established the fundamental law in support of fuller individual liberty. In the new country, unencumbered by traditionary restraints, this instinct had larger scope ; and it is to it, therefore, that we owe all of the true qualities of this larger sense of liberty which we have. Indeed, it is by this instinct that liberty made whatever progress exists in any of the countries of Western civilization ; for, although restrained and hindered in Europe, when we look for its genesis, we find that it has come from the demands of the people, and not from the freewill of the rulers — not from the graciousness of the rulers, but from their failings, and through the resistance of this popular instinct against tyranny. Thus it was King John's weakness, and not his good-will, that enabled the knights and barons to secure the Charter. It was the bigotry and obstinacy of Charles which called the Commonwealth into being. The English parliament enlarged its power by the flight of James II.; the Act of Settlement was born of his abdication, and nothing was more favorable to the continued growth of that parliament than the weakness of the first two Georo-es in absentins; themselves in their beloved Hanover and neglecting their English subjects. But in America, largely by reason of the absence of clogging traditions and tenures which belonged to the Common Law, political liberty received a more practical and a broader interpretation than it ever had before. Here, for the first time in the history of the world, it was set forth, not with instances merely, but as an almost universal principle ' ; and thus set forth, it was crystallized into the fundamental declaration and law of the people. Samuel Adams, the father of the Town-meeting, and Thomas Jefferson, the author of the Declaration of Independence, were of the leaders during the Revolution and for some time after. If we contrast the representative men of each period, we may readily realize the difference existing betw^een those very limited conceptions of liberty which prevailed in the reign of King John, and the comprehensive idea of it which marked the American revolutionary period.