By the early twentieth century, this more structural critique of private economic power, together with reform proposals for new public economic regulations, were synthesized and extended in the progressive call for the social control of industry, business, and the market. Unscrupulous businessmen or politicians were not even on the radar screen, and the concentration of economic power was even seen as a potentially beneficent inevitability.
From corruption and monopoly, these theorists moved to a more systemic investigation of some of the structural weaknesses of business, markets, and capitalism itself. Looking beyond litigation and even police power regulation, these lawyers and economists proposed much more involved and complicated remedies for economic problems seen as systemic rather than aberrational, remedies including public ownership, overt price controls, and the founding of new permanent institutions for investigating and controlling American economic life.
Well before the economic catastrophe known as the Great Depression, these legal and economic thinkers had formulated an ambitious plan for the public social control of the American economy through ongoing administrative governance and economic planning.
- The importance of observing the political environment.
- Political Landscapes: Forests, Conservation, and Community in Mexico;
- Regulation as state activity.
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They envisioned the state not as an economic policeman or even as a countervailing force to private economic power, but as a full, interactive partner in a legal-economic vision of modern state capitalism. The progressive movement for the social control of business built directly on the influential sociological work on general social control of Charles Horton Cooley and E. For a broad survey of the potential impact of the idea of social control on social and cultural policing in the early twentieth century, see Mabel A.
Merrill, Social Disorganization 3d ed. The language of socialization that permeated so much progressive reform owed more to these theories of modern social change than to the political agenda of socialism. In this massively dislocating process, older mechanisms of control and order were rapidly being rendered obsolete with potentially dire consequences. Loomis ed. Economic and technological changes were crucial harbingers of this transformation. A particularly acute sense of crisis, uncertainty, and fear surrounded thinking about the economic consequences of this revolution.
But if it comes, it will be due to the thrust of new, blind, economic forces we have not learned to regulate. From this perspective, corruption and the problem of monopoly were primarily indicators of a much larger socioeconomic crisis. And the central question was what new forms of control would arise to contain and regulate the new concentrations and organizations of economic power.
The legal-economic movement for the social control of business had many particular solutions to particular problems, but what they all had in common was an increased willingness to use the state—to turn to law and government—as the most effective tool of economic control. Though space here does not allow a thorough exploration of the important programmatic details with which reformers successfully made the case for the state control of the market, Clark provided an excellent overview of the vision as well as the accomplishments of the movement circa This period of fifty years has seen the growth of effective control of railroads and of public utilities; while electricity and the telephone have developed, first, into recognized public utilities, and, second, into businesses which transcend state boundaries and thus become essentially national problems.
Irrigation, land reclamation and flood prevention also belong properly in the class of interstate public interests, while radio and aerial navigation have but recently been added to the list. The trust movement and anti-trust laws, conservation, the Federal Reserve system, vast developments in labor legislation, social insurance, minimum-wage laws.
This many-sided movement toward control cannot be disregarded. It may be guided and directed, its movements made more informed and enlightened, but it cannot be stopped, and no one group can dictate its course. Rather, it involved a broad legal and political strategy for expanding state and federal police power, the overruling power of the state to regulate persons, organizations, liberty, property, and contract in the general interest of the public health, safety, and welfare.
And despite a secondary literature that continues to emphasize the constitutional limitations of a handful of state supreme court and U. Supreme Court cases, the overwhelming story of the police power from to is one of insistent expansion. Measuring the incidence of something as categorically amorphous as police power regulation is notoriously difficult. Still, by the end of this period but before the New Deal , Congress was passing roughly 1, new statutes per session, and states like New York and South Carolina over 1, Louis L.
By even the most conservative estimates, one-third of these new statutes were regulatory in nature. Warren famously concluded that the vast bulk of state regulatory legislation passed between and was upheld by the courts, including anti-lottery laws; anti-trust and corporate monopoly laws; liquor laws; food, game, oleomargarine and other inspection laws; regulation of banks, telegraph and insurance companies; cattle, health and quarantine laws; regulation of business and property of water, gas, electric light, railroad other than interstate trains and other public service corporations.
Warren, Bulwark , supra , at Constantin, U. Now these are nothing more than illustrations, and a convincing counterargument to the four interpretations of law and political economy outlined at the start of this Essay requires a much more sustained and systematic presentation of ideas, statutes, and cases than is possible here.
But perhaps one final concrete example of legal-economic policy making can suggest some of the interpretive possibilities in reexamining economic regulation in the Progressive Era with an eye toward the active state-building project outlined here. One of the most important developments in the regulation of economic activity in the late nineteenth and early twentieth centuries, and a perfect example of the creative force of law in the construction of the American regulatory state, was the legal invention of the idea of the public utility.
Today the concept of public utility has lost quite a bit of luster and most of its political aspirations—a product of contemporary privatization as well as a tendency to take utilities for granted. While today most would restrict the idea of public utility to a couple of closely circumscribed industries water, electricity, gas , in the early twentieth century, the utility idea encompassed urban transportation, railroads, motor bus and truck, telecommunications, radio, pipelines, warehouses, stockyards, ice plants, banking, insurance, milk, fuel, and packing.
For progressive legal and economic reformers, the legal concept of public utility was capable of justifying state economic controls ranging from statutory police regulation to administrative rate setting to outright public ownership of the means of production. Indeed, the public utility idea was so capable of further growth as to ultimately produce one of the most ambitious administrative and regional planning initiatives of the New Deal—the Tennessee Valley Authority. The roots of a law of public utilities, of course, extended well back into the early republic.
Early American common law recognized a clear category of economic activities including innkeepers and ferry, cart, and coach companies as distinctly public in nature—common callings or common carriers subject to special restrictions and regulations in the public interest. The idea received additional support from the wide variety of mixed public-private enterprises—turnpikes, canals, railroads—that fueled the antebellum transportation revolution.
But the legal history of public utilities only really exploded after the influential United States Supreme Court decision in Munn v. Illinois in In that well-known case dealing with the constitutional legitimacy of so-called Granger laws, the Court upheld an Illinois statute regulating the rates for the storage of grain in the warehouses and elevators operating around the mouth of the Chicago River. Chief Justice Morrison R. Waite sustained the rate regulation as a legitimate exercise of the state police power—the power of Illinois to legislate in the interest of public health, safety, morals, and welfare.
The Munn decision has been the subject of extensive historical commentary, which need not be rehearsed here. See also Selvin, supra note This narrow reading of Munn together with a relative neglect of the role of public utility law in progressive reform very much conforms to a historiography that privileges laissez-faire, capture, and an uneasy state. And the ramifications went beyond economic matters alone.
The doctrines of Munn v. Illinois have never been modified by this court, and I am justified, upon the authority of that case, in saying that places of public amusement, conducted under the authority of the law, are clothed with a public interest, because used in a manner to make them of public consequence and to affect the community at large. The law may therefore regulate, to some extent, the mode in which they shall be conducted, and, consequently, the public have rights in respect of such places, which may be vindicated by the law.
It is consequently not a matter purely of private concern.
State appellate courts used Munn to even greater regulatory effect. New York , U. Brewer to protest in dissent that by this interpretation of Munn , all businesses could be subject to extensive regulation: There is scarcely any property in whose use the public has no interest. Everything, the manner and extent of whose use affects the well-being of others, is property in whose use the public has an interest.
Functional Analysis of Law and Soc Control - The University of Sydney
Moreover, the Court made perfectly clear that the fact that a business or industry was not deemed to be legally affected with a public interest did not insulate that activity from ordinary police power regulations. In Schmidinger v. City of Chicago and Holden v. City of Chicago, U.
Hardy, U. Contrary to some well-established interpretations regarding the relationship of law and economic regulation in the late nineteenth and early twentieth centuries, Munn v. Illinois did not mark the beginnings of an era of constitutional limitations or classical legal thought or a state capitulating to business. On the contrary, Munn inaugurated an extraordinary era of innovation in the social control of business, industry, and the market. It set in motion a panoply of new ideas like public utilities, rate regulation, price discrimination, fair rate of return, valuation, just price, and economic planning that dominated the legal and economic treatises of the era.
It propelled an agenda of economic regulation and controls that culminated in some of the more far-reaching experiments in public and government ownership of economic enterprises in United States history. Felix Frankfurter, from his perspective as one of the central legal advocates for the increased social control of business in the early twentieth century, understood exactly the implications of Munn and early public utilities law for the economic state-building project of progressivism. In an extraordinary essay on rate regulation that he wrote with Henry Hart for the original Encyclopaedia of the Social Sciences , Frankfurter summed up the accomplishment:.
But it has built itself into the structure of American thought and law; and while the line of division is a shifting one and incapable of withstanding the stress of economic dislocation, its existence in the last half century made possible, within a selected field, a degree of experimentation in governmental direction of economic activity of vast import and beyond any historical parallel. Hart, Jr. The public interest doctrine of Munn did not insulate private business from regulation.
Rather, it created a new legal field of important economic activity that could be subjected to unprecedented state control from direct price regulation to outright public ownership. The main feature of that exceptionalism is a continued reliance on some relatively anachronistic ideas through which to tell the story of the emergence of modern America—ideas like individualism, self-interest, localism, classical liberalism, laissez-faire, the free market, the common law, statelessness, and voluntarism.
This interpretive tendency has kept scholars from fully reckoning with the power of the American state and the role of government in all aspects of modern social and economic life. This tendency is certainly present in economic thought and some economic history.
But the problem is particularly acute in history and legal history. The continued emphasis in legal history on judges, the common law, and the main categories of nineteenth-century private law, and the relative neglect of statutes, legislation, administrative law, executive rule making, and public regulation has left a substantial and important portion of modern American governmental history in the dark.
Eskridge, Jr. Not a single aspect of American economic or social life has remained untouched by the legal output of the modern administrative and regulatory state, yet the historical emergence of that state remains relatively unaccounted for. The origins of the modern American regulatory and administrative state were firmly planted in legal and constitutional developments of the late nineteenth and early twentieth centuries.
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- I. Interpretations of Law, Economics, and Regulation.
- Regulation and free-market interactions.
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With respect to economic policy, those developments had little to do with ideas like laissez-faire constitutionalism. They owed far more to broad-based movement in law and political economy for the state control of American capitalism.
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