If, upon the face of the statute, the court can see no possible relation to the public health or safety, or, possibly, general welfare, it will hold the law null in so far as it invades either property or liberty rights because not under the police power. If, on the other hand, they can see _some_ relation to the public health, safety, or general welfare, even though they do not think it the best method of bringing about the desired result, they will not presume to run counter to legislative opinion. Of the expediency of the statute, the legislature must be and is the final judge.

With us the police power is exercised largely for moral reasons. That is to say, the great instances of its extension have been connected with moral or sanitary reform. No doubt the police power may broaden with advancing civilization and more complex appliances and possibly greater medical knowledge and social solidarity. No doubt purposes which were once lawful may be unlawful, and property devoted to them thus be destroyed by a change in the law. Mr. Justice Brewer, of our Supreme Court, holding the contrary view, was overruled by the majority, and that decision is final.[1] Not only we, but a State, may not even make a contract which shall be immune from future extension of the police power, the Dartmouth College case notwithstanding. For instance, the State of Ma.s.sachusetts in 1827 granted a perpetual franchise to a corporation to make beer. It was allowed, forty years later, to pa.s.s a law that no corporation should make beer, and the brewery became valueless. The State of Minnesota granted a perpetual franchise to a railroad to fix its own fares. Twenty years later it took away that right, thereby, as claimed, making the railroad property valueless; the railroad had no remedy. A man in Connecticut had barrels of whiskey in a cellar for many years, but the State was allowed to pa.s.s a law prohibiting its sale; which, of course, had he been a teetotaler, would have deprived that property of all value, and in any case, of all exchange value. A man in Iowa owns one gla.s.s of whiskey for several years, and then a law is pa.s.sed forbidding him to sell it; the law is valid. A youth in Nebraska buys tobacco and paper and rolls a cigarette. The State afterward pa.s.ses a law forbidding smoking by minors. It is a crime if he light it. Sufficient has, perhaps, been said to show the extraordinary scope and elasticity of this, the widest, vaguest, and most dangerous domain of our modern legislation, though perhaps we should add one or two striking cases affecting personal liberty, as, for instance, a citizen of Pennsylvania marries his first cousin in Delaware and returns to Pennsylvania, where the marriage is void and he becomes guilty of a criminal offence; a white man in Ma.s.sachusetts who marries a negress or mulatto may be guilty of the crime of miscegenation in other States; a woman might work fifty-eight hours a week in Rhode Island, but if she work over fifty-six in Ma.s.sachusetts may involve her employer, as well as herself, in a penal offence.

[Footnote 1: Mugler _v_. Kansas, 123 U. S, 623.]

The most valuable of all police legislation is, of course, that to protect public health and safety; and prominent in the legislation of the last twenty years are the laws to secure pure and wholesome food and drugs. Possibly "wholesome" is saying too much, for our legislative intelligence has not yet arrived at an understanding of the danger from cold storage or imperfectly canned food, though Canada and other English colonies have already legislated on the subject, to say nothing of our tariff war with Germany on the point. One may guess that ninety-nine per cent. of the present food of the American people, leaving out the farmers themselves, is of meat of animals which have been dead many months, If not years, and from vegetables which date at least many months back. It is nonsense to suppose that such food is equally wholesome with fresh food, or that there is not considerable risk of acute poisoning or a permanent impairment of the digestive system. Senator Stewart, of Nevada, has shown that nearly fifty per cent. of the soldiers of the Spanish War had permanent digestive trouble, as against less than three per cent. in the Civil War, which took place before cold-storage food was known, or canned food largely in use. It was hopeless for the States to act until there was Federal legislation on the subject, as the health authorities had no const.i.tutional power over goods imported from other States; but the pa.s.sage, under Roosevelt, of a national food and drugs act has given a great impetus to the reform, and by this writing more than half the States have pa.s.sed pure-food laws, being usually, as they obviously should be, an exact copy of the Federal Act. Among the articles specially mentioned in such legislation we find candy, vinegar, meat, fertilizers, milk, b.u.t.ter, spices, sugar, cotton seed, formaldehyde, insecticide, and general provisions against adulteration, false coloring, the use of colors and preservatives, etc.

Going from matters merely unwholesome to actual poisons, the course of legislation on intoxicating liquors is too familiar to the reader to make it necessary to more than refer to it, with the general observation that in the North and East the tendency has been toward high licensing or careful regulation, always with local option; while in the West originally, and now in the South, the tendency is to absolute "State-wide" prohibition and even to express this principle in the const.i.tution. How much this extreme measure is based on the racial question, in the South at least, is a matter of some debate; and the working of such laws everywhere from Maine to Georgia, of considerably more. One may hazard the guess that the wealthier cla.s.ses have no difficulty in getting their liquor through interstate commerce, while the more disreputable cla.s.ses succeed in getting it surrept.i.tiously. Prohibition, therefore, if effective at all, is probably only effective among the respectable middle cla.s.s where, perhaps, of all it is least needed. In the older States, at least in Ma.s.sachusetts, there has been a decided tendency away from prohibition in the last twenty years, and even from local prohibition in the larger cities. Worcester, for instance, after being the largest prohibition city in the world, ceased to be so this year by the largest vote ever cast upon the question.

Whatever may be said of the strict prohibition of liquor dealing, no one can have any objection to such laws as applied to cocaine, opium, or other poisonous drugs, and we find statutes of this sort in increasing number; while the manufacture and sale of cigarettes to minors or even in some States, their consumption, is strictly prohibited, under criminal penalty. Laws of a similar sort were aimed at oleomargarine when invented, but this probably not so much to protect the health of the people as the prosperity of the dairymen.

The ma.s.s of such legislation has emerged from the scrutiny of the courts, State and Federal, with the general result that only such laws will be sustained as are aimed to prevent fraud; but the manufacture and sale of oleomargarine under that name cannot be prohibited.

Artificial coloring matter may be forbidden, but a New Hampshire law was not sustained which required all oleomargarine to be colored pink; so it may be guessed that the laws of those States which make criminal the sale or use of cigarettes to or by children "_apparently_" less than sixteen or eighteen, will hardly be sustained as a const.i.tutional police measure; yet such laws existed in 1890, while the State of Washington in 1893 made the sale even of cigarette paper criminal.

Another important line of modern legislation consists in the subjecting of trades to a license for the purpose of _examination_ (the tax feature has been discussed above). Such laws are const.i.tutional when applied to a trade really relating to the public health, but as we have found above, black-smithing is not such an one; when imposed merely for the purpose of raising revenue, such legislation is undoubtedly const.i.tutional under our written const.i.tutions, but opposed to historic English principles, which insisted for seven centuries of statute-making on the utmost liberty of trade. In a South American republic you have to get a concession before going into almost any business, even maintaining a shoe-shop, or a milk farm, which concession is, of course, often obtained by bribery or withheld for corrupt reasons. It is to be hoped that the citizens of our States will never find themselves in that predicament.

Still, certain State const.i.tutions, as that of South Carolina, provide absolutely that all trades may be made subject to a tax, and the tendency--particularly in the South--to raise revenue in this way is increasing by leaps and bounds. Among the trades already subjected to such licensing or taxing, we find doctors, of course, and properly, pharmacists, plumbers, pedlars, horse-sh.o.e.rs, osteopaths, dentists, veterinary surgeons, accountants, bakers, junk dealers, coal dealers, optometrists, architects, barbers, commission merchants, embalmers, and nurses. Of course it is a motive to novel or irregular trades to secure a licensing law from the State, for the slight tax insures them protection. This is the reason that we find common statutes allowing osteopaths, etc., to be licensed. So far as I have observed, there is no such statute as yet in any State applying to Christian Scientists.

Police regulation for the _safety_ of the public is found nearly entirely in the laws regulating labor, factories, mines, or machinery, and will be accordingly treated in that connection. Laws protecting the public against fraud, which from earliest times has been a branch of police legislation, have been of late years numerous, princ.i.p.ally in connection with the prohibition of dealing in futures or sales on margin, of sales of goods in bulk without due precautions and notice to creditors, of the issue of trading stamps or other device tending to mislead the public. Some States have prohibited department stores, but this legislation has been held unconst.i.tutional, though the early English labor statutes forbidding to any person more than one trade or mystery will by the historical student be borne in mind. Usury laws, of course, are still frequent, but decreasing in number with the increasing modern tendency to allow freedom of contract in this as in other matters, except only to such persons as, for instance, p.a.w.n-brokers, who peculiarly require police regulation.

Coming to statutes which merely facilitate business as it now exists, by far the most important movement has been the successful work of the State Commissioners on Uniformity of Law in getting their negotiable instrument act pa.s.sed in nearly all the States, and in several already their uniform law statute on sales, only recommended in 1907. Some progress has been made in getting a uniform standard of weights and measures, and there is an increasing tendency to prescribe specific weights and markings for packages--possibly unconst.i.tutional legislation. Still more important as a change in previously existing law has been the increasing tendency to make doc.u.ments other than bills and notes negotiable. Perhaps this is a matter which requires explanation to the lay reader.

The early Anglo-Saxon law could not conceive of ownership of property as distinct from possession, and to their simple minds, when ownership was once acquired it was impossible to divest the owner of his property by any symbolical delivery. Hence the very early statutes making fraudulent sales or conveyances of property without actual and visible change of possession. The notion of a symbol, a paper or writing, which should represent that property would probably have impressed them like a spell or charm in a child's fairy tale. Even theft with asportation could not alter property rights, even in favor of innocent purchasers, when the owner did not intend to part therewith. A moment's recollection of what is now perhaps the most familiar of Teutonic saga to the ordinary reader, the text of Wagner's "Ring of the Nibelung," will give ample evidence of that mental att.i.tude. But the Oriental mind was far more subtile. To the Jews or Lombards we owe the discovery of that _bill of exchange_--the first of negotiable instruments, and the first historically to bring into our law the legal concept of a symbol of ownership which might be instantly transferred with an absolute change of t.i.tle in the property thereby represented, and this either to a present transferee or to one far away. Thus, a simple bill of exchange might transfer the ownership in a pile of gold in a moment from a man in Venice to a man in London, thereby (if the law-merchant was respected) freeing the treasure itself from attack at the hands of the Venetian authorities. And not only was this change of ownership instantaneously effected by the transfer of some symbol or doc.u.ment representing it, but there also, and as a necessary part of the invention, grew up the doctrine that the transferee was relieved of any claims against the property at the hands of the previous owner. This is what we mean by negotiable; and it is essential that the precise meaning of the word should be understood if we are to understand the importance of this legislation.

Even most business men have a very vague understanding of the difference between _negotiable_ and _a.s.signable_. Substantially all property and choses in action are a.s.signable, except personal contracts; and in ordinary business many of them are a.s.sumed to be negotiable, such as bills of lading, warehouse receipts, trust receipts, or certificates of stock. Most brokers, or even bankers, a.s.sume that when they have a stock certificate duly endorsed to them by the owner mentioned on its face they have an absolute and unimpeachable t.i.tle to the stock therein represented. Such, of course, is not the case except for recent statutes in a few States. To take a familiar example, and I can think of none better to show exactly the difference between a personal contract non-a.s.signable, a doc.u.ment which is a.s.signable, and one which is negotiable--a Harvard-Yale foot-ball ticket. If the ticket is issued by the management to a person under his name, with a condition that it shall be used by no one else, it is a contract non-a.s.signable. If it is issued to him in the same manner, but with no provision against a.s.signment or the use by another person, it would ent.i.tle such other person to whom the ticket was given to use the seat, but only under the t.i.tle of the original holder; and if the a.s.signment was later forbidden, or for other reasons the right recalled by the management, the holder would have no greater t.i.tle to the seat; the contract is _a.s.signable_, but not negotiable. The a.s.signee takes it merely as standing in the place of the original holder and subject to all the equities between him and the management. If, for instance, the ticket were given him by fraud, the right to use it might be revoked and the transferee would have no greater right than the original holder. But if the ticket were _negotiable_, like a bank-note payable to bearer, the holder, not actually himself the thief, would have an absolute t.i.tle to the seat without regard to anything that happened prior to his getting possession of the ticket.

Now it is obvious that it is for the enormous convenience of business to have business doc.u.ments made negotiable. If a banker can loan on a bill of lading or a warehouse receipt, or a trader can buy the same, or if a man can give a trust receipt to his banker agreeing that all his general shipments or stock in trade shall be the property of that banker until his debt is paid, it makes enormously for the rapid turning over of capital, and the extension of credit. Of course, an enormous proportion of business in the United States is conducted upon credit, and without the invention of the negotiable instrument those credits could not be secured without an actual delivery of the commodities intended to secure them. And the custom of business is to consider most such doc.u.ments negotiable even when in fact they are not so. It is more than usual to loan money upon warehouse receipts, bills of lading, stock certificates or trust receipts of all descriptions, regardless of the question whether the law of the State makes them negotiable. Hence the very great tendency to make such instruments negotiable by statute; and I find many such laws, beginning in 1893 in North Carolina, as to warehouse receipts, while the Ma.s.sachusetts statute concerning stock dates from 1884.

A reaction to the English common law is the statute, common in recent years, prohibiting sales in bulk. It appears to have been a growing custom for merchants, particularly retail merchants, when in financial difficulties to sell their entire stock in trade to some professional purchaser by a simple bill of sale without physical delivery. Nearly all States have adopted statutes against this practice, although in several they have been held unconst.i.tutional. The feeling that they are dishonest is doubtless justified by the facts; but it may also be truly described as a reaction to the simpler English law as against Oriental innovations.

The descent of property throughout the United States is regulated by English common-law ideas. That is to say, there is no primogeniture, although in early colonial times the older son took a double portion; and there is, except in Louisiana, complete liberty of testamentary disposition, although in one or two other States there have been statutes forbidding a man to dispose of all his estate to a charity within a short time previous to his death, to the prejudice at least of his direct heirs. The Code Napoleon, of course, limits testamentary disposition in favor of these latter, so in Louisiana, only half of a man's estate can be given away from his children or widow, and not more than three-fourths of his estate can be bequeathed to strangers or to charity, to the prejudice even of collateral heirs.

In matters of general business the usual lines of legislation have been the ordinary ones found in English history. That is to say, statutes of frauds, usury or interest laws, and other familiar matters. The only tendency one can note is a broad range of legislation devised in the interest of the debtor--not only liberal insolvency laws now superseded by the national bankruptcy act, which is still more liberal than the laws of the States preceding it, but statutes restricting or delaying foreclosure of mortgages, statutes exempting a substantial amount of property, implements of trade, agricultural articles, goods, land, or even money, from the claims of his creditors. The exemption of tools or implements of trade goes back to Magna Charta, it will be remembered, but the exemption of other articles is modern and American. There is probably, however, no subject which is so apt to be let alone by our legislatures as that of business law. Upon that subject, at least, they are fairly modest and inclined to think that the laws of business are known better by business men. Imprisonment for debt is, of course, absolutely abolished everywhere, and in most States a woman is not subject to personal arrest in civil process. The statutes prevailing throughout the country, which give special preference to claims for wages or even for material furnished by "material men," have already been noted. It may be broadly stated that the presumption is that such claims are everywhere a preferred debt to be paid out of the estate of the insolvent, living or dead, in preference to all claims except taxes.

The security of mortgages is very generally impaired by legislation confining the creditor to only one remedy and delaying his possession under foreclosure. That is to say, in far Western States generally, he cannot take the land or other security, and at the same time sue the debtor in an action for debt for the amount due, or the deficiency.

This, of course, makes of a mortgage a simple pledge. Moreover, with the practice of delaying possession under foreclosure, appointing receivers in the interest of the debtor, etc., he is in many States so delayed in getting possession of his security that by the time he acquires it he will find it burdened with overdue taxes and in a state of general dilapidation. We have already alluded to the practice in California of compelling the executor of a mortgage to submit himself to the jurisdiction of the local public administrator, which practically results in a sequestration of a considerable portion of the property. For all these reasons, many conservative lawyers in the East, at least, would not permit their clients to invest their money in mortgages in California, Minnesota, Washington, or the other States indulging in such legislation, and partly for this reason the rate of interest prevailing in mortgages is very much higher in the far West than it is in States east of the Missouri River.

The greatest ma.s.s of legislation is, of course, that upon mechanic's liens, which are burdensome to a degree that is vexatious, besides being subject to amendment almost every year. In a general way, no land-owner is free from liability for the debt of any person who has performed labor or furnished materials on the buildings placed upon the land, even without the knowledge or consent of the land-owner in some States, though in one or two instances, notably in California, such legislation has been carried to such an extreme as to make it unconst.i.tutional.

The matter of nuisances has been already somewhat covered. Legislation extending the police power and declaring new forms or uses of property to be a nuisance is, of course, rapidly increasing in all States. The common-law nuisance was usually a nuisance to the sense of smell or a danger to life, as, for instance, an unsanitary building or drain.

Noise, that is to say, extreme noise, might also be a nuisance, and in England the interference with a man's right to light and air.

Legislation is now eagerly desired in many States of this country to make in certain cases that which is a nuisance to the sense of sight also a legal nuisance, as, for instance, the posting of offensive bills on the fences, or the erection of huge advertising signs in parks or public highways. Such a law was, however, held unconst.i.tutional in Ma.s.sachusetts. There is some legislation against the blowing of steam whistles by locomotives, although I believe none against the morning whistle of factories, and some against the emission of black smoke in specified durations or quant.i.ties.

But perhaps the most important legislation affecting simple matters of business other than the line of statutes already mentioned, making new negotiable instruments and controlling the t.i.tle of property by the possession of a bill of exchange, bill of lading, warehouse or trust receipt, are those statutes prohibiting the buying of "futures," or the enforcement of gambling contracts to buy or sell stocks or shares or other commodities without actual or intended change of possession, which we have necessarily referred to in our discussion of restraint of trade (chapter 4). There is a very decided tendency throughout the country, particularly in the South, to prohibit all buying or selling of futures, that is to say, of a crop not actually sold, or of any article where physical delivery is never intended, and it will be remembered we found plenty of precedent for such legislation in early English statutes. Gambling contracts may be forbidden only in specified places, such as stock exchanges; and the buying of futures may be specially permitted to favored persons, such as actual manufacturers intending to use the goods; and both such statutes will be held const.i.tutional and not an undue interference with the liberty of contract. These matters were largely covered by the statutes of forestalling in early times. Legislation more distinctly modern is that against sales in bulk, and against department stores; more striking still is the statute, already pa.s.sed in Wisconsin and Virginia, forbidding all tips, commissions, or private advantages secured by any servant or agent in carrying on the business of his princ.i.p.al, his master, or the person with whom he deals; the statute even forbids a gratuity intentionally given directly from the one to the other. It is hard to see how the last clause of the law can be held const.i.tutional, any more than the laws forbidding department stores, although such commissions may be forbidden to be given "unbeknownst."

Weights and measures are standardized by the Federal government, and to these standards the States in practice all conform, but the legal weight of a bushel or other measure of articles varies widely in the different States, and the State Commissioners on Uniformity of Law have tried in vain to get the matter generally regulated. At one time the weight of a barrel of potatoes in New York City was fourteen pounds more than it was in Hoboken, across the river. In Ma.s.sachusetts the weight of a barrel of onions was increased two pounds to conform with the uniform law recommended to all the States by the commissioners; but a representative in the State Legislature coming from a locality of onion farms lost his seat in consequence, which inspired such terror in other members of the State Legislature that the uniform law was promptly repealed, the weight of the barrel of onions put back at the former figure, and this over the veto of the governor. It is needless to say that the whole value and object of the whole movement for uniformity is to have actual uniformity. That is to say, unless the lawyer or citizen reading the statute can be sure that it is uniform with the laws of all other States without taking the trouble to consult them, the reform has no value. But it has proved almost hopeless to get this through the brain of the average legislator. The uniform law upon bills and notes, indeed, already mentioned, is treated with more respect; because, as has been said above, they regard that as a matter of business, and they have some respect for the expert knowledge of business affairs possessed by business men.

The licensing of trades might be made a very valuable line of legislation to prevent the fleecing of the ultimate consumer by the middleman. Our ancestors were of the opinion that the middleman, the regrator, was the source of all evils, and they were also of the opinion that any combination whatever to control the price of an article of food, or other human necessity, or to resell it elsewhere than at its actual market and at the proper time, was a conspiracy highly criminal and prejudicial to the English people; in both of which matters they were, in the writer's opinion, perfectly right, and far more wise than our modern delusion that "business"--that is to say, the making of a little more profit from the larger number of people--justifies everything. Now, at the time of the coal famine of 1903, Ma.s.sachusetts pa.s.sed a statute licensing dealers in coal; the law for the munic.i.p.al coal-yard having been declared unconst.i.tutional.

The object of this statute was not to derive revenue or to restrict trade, but to regulate profits; and in particular to prevent the retail coal-dealers from combining to fix the price of coal themselves. Yet in spite of this legislation, the ice-dealers of Ma.s.sachusetts only this year (1910) a.s.sembled in convention in Boston upon a call, widely advertised in the newspapers, that they were holding the a.s.sembly for that precise purpose, that is to say, to fix and control the price and the output of ice. They were, indeed, "malefactors of great wealth"; at least we may guess the latter, and the animus of a more intelligent precedent may some day hopefully be directed to such definite evils, of which our ancestors were well aware, rather than blindly running amuck at all. The coal-dealers in Boston, by the way, made the same argument that is always made, and was made at Athens in the grain combination of the third century B.C.--to wit, that they put up the prices in order to prevent other people buying all the coal and speculating in it; but notwithstanding that showing of their altruistic motives, the secretary of state revoked the license of the coal company in question. The statute also forbade the charging extortionate prices, which, again, was a perfectly proper subject of legislation under the common law; but, unfortunately, was carelessly drawn, so that it resulted in a somewhat cloudy court opinion.

For the matter of uniform legislation the reader must be referred in general to reports of the National Commission. Their greatest achievement has been the code of the law of bills and notes just mentioned. Besides this they have just adopted a code on the law of sales, and they have recommended brief and uniform formalities as well as forms for the execution and acknowledgment of deeds and wills, and have very considerably improved the procedure in matters of divorce.

The best modern legislation concerning trade and business is, of course, that of the pure-food laws. The Federal law has certainly proved effective, although it is in danger of being repealed or emasculated in the interest of the "special interests"; most of the State laws simply copy it. Undoubtedly the laws should be identical in interstate commerce and in all the States; and this can only be done by voluntary uniform action.

VIII

REGULATION OF RATES AND PRICES

This, the last method of infringing upon absolute rights of property, has a.s.sumed such importance of recent years as to deserve and require a chapter by itself. The reader will remember what precedents we found for the fixing of prices, wages, and rates or tolls in England. It may be convenient for our purposes to use these three definite words to mean the three definite things--prices in the sense of prices of goods or commodities; wages the reward of labor or personal services; and rates (the English word is tolls) for the charges of what we should now term public-service corporations, or in old English law, franchises, or what our Supreme Court has termed "avocations affected with a public interest." The reader will remember that the attempted regulation of prices began early and was short-lived, dating from the a.s.size of Bread and Beer in 1266, to the Statute of Victuals of 1362, hardly a century, and even these two precedents are not really such, for the first only fixed the price of bread and beer according to the cost of wheat or barley, just as to-day we might conceivably fix the price of bread at some reasonable relation to the price of flour in Minneapolis, and as it was fixed in ancient Greece by the wholesale price of wheat at Athens[1]--not as it now is, from three to four times the cost of bread in London, although made out of the same flour shipped there from Minneapolis; and the two latest statutes expressly say that they fix the price by reason of the great dearness of such articles on account of the Black Death or plague, and the consequent scarcity of labor. Then the Statute of Laborers of 1349 provided that victuals should be sold only at reasonable prices, which apparently were to be fixed by the mayor. With these statutes the effort to fix prices by general statute disappeared from English civilization save, of course, as prices may be indirectly affected by laws against monopoly, engrossing, and restraint of trade; and local ordinances in towns continued probably for some time longer.

[Footnote 1: For an actual report of an indictment and jury trial for forestalling and regrating wheat in the third century B.C., see Lysias's oration, translated by Dr. Frederic Earle Whitaker, in _Popular Science Monthly_, April, 1910.]

Legal regulation of _wages_ lasted much longer in England; and has reappeared in very recent years, at least in the Australasian colonies, with a beginning of such legislation in Great Britain and Ireland and the State of New York. The first Statute of Laborers merely provides that the old wages and no more shall be given. The next year, however, in 1350, the exact rate of wages was fixed; and this lasted for more than two centuries, to the reign of Elizabeth, the so-called "great" Statute of Laborers consolidating all the previous ones. It is apt to be the case that when a statutory system has reached its full development it falls into disuse; and that is certainly the case here. There is no later statute in England until 1909 fixing directly or indirectly the rate of wages; and it may be doubted whether the justices of the peace continued to fix them for many years under the Statute of Elizabeth. More than three centuries were to go by before this principle reappeared in legislation or attempted legislation; but in Australia,[1] New Zealand,[2] and England[3] there has been recent legislation for a legally fixed rate of wages to be determined for practically all trades by a board of referees, consisting, as such boards usually do consist, of one member to represent capital, one to represent labor, and the third to represent the public or the state. As such third representative almost invariably votes on the side of the greatest number of voters, this practically makes a commission hardly impartial. The working of the system in New Zealand will be found discussed in the _Westminster Review_ for January, 1910. There is an appeal to the courts from the rate of wages fixed by such commission; and it appears that out of four such appeals, in three the decision of the commission was confirmed, and in the fourth set aside; but the workingmen disregarded the judgment of the court and struck for a higher wage--contrary to the whole theory of such legislation, which is to _prevent_ strikes.

This strike succeeding, there has, therefore, been no case so far where the increasing rate of wages was checked by any appeal to the courts.

[Footnote 1: So. Australia, 1906, no. 915; 1900, no. 752; Victoria, 1903, no. 1,857; 1905, no. 2,008.]

[Footnote 2: See New Zealand Law of 1900, no. 51; frequently amended since.]

[Footnote 3: 60 and 61 Victoria, c. 37, 9 Edward VII.]

In the British Parliament last year (and the identical bill has been introduced in the State of New York under championship of the Consumers League, as applied to women and children), a bill was introduced,[1] not backed, however, by the government as such, although bearing the name of Lloyd-George, providing in effect that wages might be fixed in this manner in certain definite named trades, and also in such other trades as might be designated from time to time by the home secretary. The economic effect of such measures we are not to discuss. In the United States, except as to public work, they would be probably unconst.i.tutional.

[Footnote 1: Since enacted, see below in chap. XI.]

Coming, therefore, to public work, we use this phrase for all labor contributed directly to the State, to any county, city, town, village, or munic.i.p.ality thereof, to any munic.i.p.al-owned public-service corporation, gas, water, etc., company, or, finally, and most important, to or under any contractor for the same, or any of them.

Some years ago the State of New York adopted legislation to the effect that in all such public employment the wages paid should be the usual rate paid for similar work in the same locality at the same time. As a result of this legislation, many thousands of lawsuits were brought against the City of New York by persons who had done labor for that munic.i.p.ality in the past, complaining that they had not in fact been paid "the prevailing rate," although in fact the work had long since terminated, and they had been discharged, paid in full, and apparently satisfied. Shortly after, the law itself was declared unconst.i.tutional by New York courts. Thereupon the labor interests proposed a const.i.tutional amendment in 1905, to the effect that "the legislature may regulate and fix the wages or salaries, the hours of work or labor, and make provision for the protection, safety, and welfare of persons employed by the State or by any county, city, town, village, or other civil subdivision of the State, or by any contractor or subcontractor performing work, labor, or services for the State or for any city, county, town, village, or other civil division thereof." A very small proportion of the voters of New York took the trouble to vote upon this amendment, although it revolutionized the economic, if not the const.i.tutional, system of the State, so far as property and contract rights are concerned; and it was adopted by a substantial majority. In Indiana there was a statute at one time fixing the rate of wages in public employment at a minimum of not less than fifteen cents per hour, but it was held unconst.i.tutional. It is customary in New England villages to vote annually that the town shall pay its unskilled labor a prescribed rate for the following year, usually two dollars per day. The effect of this has been sometimes to cause the discharge of all but the very most skilful and able-bodied; of those who had, by working at less than full pay, been kept out of the poorhouse; and the selectmen of some towns, notably Plymouth, have refused to obey such a vote. The California Code of 1906 provides a minimum compensation of two dollars per day for public labor, except as to persons regularly employed in public inst.i.tutions. Delaware has copied the New York statute as to the prevailing rate. Hawaii, in public labor, provides a minimum wage of one dollar and twenty-five cents per day. Nebraska goes further, and provides not only for two dollars per day for public work, but that it must be done by union labor in cities of the first cla.s.s, while Nevada has a minimum wage of three dollars and an eight-hour day for unskilled labor in public work. On the other hand, the Const.i.tution of Louisiana prescribes that no law shall ever be pa.s.sed fixing the price of manual labor.[1]

[Footnote 1: This matter will be found further discussed in chap. XI.]

Coming lastly to _tolls_, or rates of persons or corporations enjoying a franchise, that is to say, a legalized monopoly, or exclusive legislation, or special privilege, such as eminent domain, or the right to occupy the streets; such are, in fact, identical with what we term public-service corporations, the older, the most universal, and certainly the most, if not the only, justifiable example of legal regulation of the returns for the use of property or personal services.

Whatever may be thought of the economic wisdom of attempting to regulate any rate or prices by law (and for a discussion of this subject as to railways, at least, the reader may well be referred to the valuable treatise of Mr. Hugo R. Meyer, "State Regulation of Railways"), such legislation was at least in England const.i.tutional; but in this country, owing to our specific adoption of the principle of property rights and freedom of labor and hence of freedom of contract in our Federal and State const.i.tutions, and as it has been repeatedly decided that to take away the income from property or a reasonable return for labor by legislation is to infringe on the property or liberty right itself, we have a universally recognized const.i.tutional objection which has, in fact, made impossible all regulation of prices and wages, except as above mentioned, and as we are now about to discuss. The first attempt to regulate rates (with the possible exception of some early colonial laws) was the so-called Granger legislation, as shown in the Illinois Const.i.tution of 1870, authorizing a warehouse commission to fix charges for elevating grain, the Act of Iowa of 1874 establishing reasonable maximum rates for railways, a similar act in Wisconsin of the same year relating to railroad, express, and telegraph companies, and in Minnesota; which legislation was all sustained by a divided opinion in the so-called Granger cases headed by Munn _v._ Illinois, 94 U.S. 113.

In the many years which have elapsed since this famous decision, the clouds have rolled away and the shape and basis of that apex of our jurisprudence been fairly surveyed. It will appear, I think, to any dispa.s.sionate jurist to have been rightly decided, at least as to the railroads, though the reasons given by Chief Justice Waite are unsatisfactory and have little logical basis. The true basis of regulation of rates at the common law and in English history was _monopoly_; either a franchise directly granted by the crown, such as a bridge, ferry, or dock, or one which was geographically, at least, exclusive, like a dock without a franchise. As Lord Ellenborough said in the decision quoted by the Chief Justice himself: "Every man may fix what price he pleases upon his own property, or the use of it; but if for a particular purpose the public have a right to resort to his premises and make use of them, and he have a monopoly in them for that purpose, if he will take the benefit of that monopoly, he must, as an equivalent, perform the duty attached to it on reasonable terms." "_If for a particular purpose the public have a right to resort to his premises_"--this important qualification from now on seems to have been lost sight of in the majority opinion. Quoting the early precedents such as that statute of William and Mary regulating the charges of common carriers--and our readers will remember many more--and the case of cabmen whose charges are regulated by city ordinances--but they are given stands or exclusive privileges in the streets--the chief justice concluded with the startling proposition that "if they do not wish to submit themselves to such interference, they should not have clothed the public with an interest in their concerns." But the public has an interest, as was afterward pointed out in dissenting opinions, in the price of shoes; yet it has never been supposed that that gave any power of legal regulation of factory prices. A still stronger case is that of inns or hotels, which have always been "a public avocation." They have had to take in all travellers without discrimination; yet there is not a vestige of legislation in the English statute-book regulating the prices to be charged by hotels. Indeed in early times most employments--millers, barbers, bakers--were public in the sense that the man could not refuse a job; yet their prices were never regulated. Yet it was upon this phrase, "_public employment_" or "_private property affected with a public interest_," taken from the opinion of Justice LeBlanc in the London Dock Company case, decided in 1810, without its context, that the chief justice built up the whole reason of his decision. The _decision_ in Munn _v._ Illinois, subject to court review as to whether the rate be confiscatory, remains good law, but the _opinion_ is still open to question; and indeed the most recent decisions of the Supreme Court show a desire to get away from it.

Some writers endeavor to justify, under our const.i.tutions, the regulation of rates by the principle of eminent domain; but this source seems far-fetched and unnecessary. It is, of course, done under the police power; but the precedent for that use of the police power is to be found in the history of English law and statutes. Thus we have noted in the Statute of Westminster I, A.D. 1275, that excessive toll contrary to the common custom of the realm was forbidden in market towns. The very phraseology of this statute indicates the antiquity of the doctrine that tolls must be reasonable; but "toll"

was always a technical term, not for ordinary prices of commodities, but for a use or service which was in some way dependent upon law or ordinance. In the very opinion of Chief Justice Waite, he quotes Lord Hale, saying that the king "has a right of franchise or privilege, that no man may set up a common ferry without a prescription time out of mind, or a charter from the king," and so later he quotes Lord Hale as saying that the same principle applies to a public wharf "because they are the wharves only licensed by the king." We also found legislation fixing rents and so on in staple towns, and consequently of the charges of property owners therein, such towns having grant of a special privilege. The early law books are full of cases showing that discrimination and extortion were unlawful, even criminal, offences. And finally, as Chief Justice Waite points out, we find the rates of carriers fixed by law in 1691. Ordinary carriers, not having the right of eminent domain such as express companies, might to-day be considered to have no legal monopoly, and indeed, possibly for that reason, the regulation of charges of express companies has not yet been attempted; but in King William's time it was doubtless considered that the carriers had special privileges on the highways, as indeed they did.

It seems to me, therefore, that the real reason, both logical and historical, for regulation of rates rests on the fact that the person or corporation so regulated is given a monopoly or franchise by some law or ordinance, or at least a special privilege from the State; or at least that he maintains a wharf, a bridge, or a ferry, or other avocation which (really for the same reason) has, from time immemorial, been subject to such regulation. This, indeed, has been the doctrine officially adopted by the Commonwealth of Ma.s.sachusetts in its legislation--"Where monopoly is permitted, State regulation is necessary." The new "Business" Corporation Act of 1903 makes the express distinction between public-service corporations and all other private corporations for gain: it applies to "all corporations ...

established for the purpose of carrying on business for profit ... but not to ... railroad or street railway company, telegraph or telephone company, gas or electric light, heat or power company, ca.n.a.l, aqueduct or water company, cemetery or crematory company, or to any other corporations which now have or may hereafter have the right to take or condemn land or to exercise franchises in public ways granted by the commonwealth or by any county, city, or town." The implication is that such other corporations are not given the entire freedom of action and contract conferred by this Business Corporation Act. Where the State creates a monopoly, it puts the public at the mercy of the grantee of that franchise. Therefore, it is logical and just that it should regulate the rates. The test, however, is not and cannot be, that the man is ready to serve all comers, or even that he is compelled so to do; hotel-keepers, barbers, restaurants, doctors, etc., have never had their charges regulated by law. In early days most tradesmen were compelled to serve any and all, at an equal price, under liability for damages.[1] Mills, indeed, have always been subject to have their tolls regulated; at least, a certain proportion of the grist had to go to the miller; but even if it be held they had no peculiar franchise, the exception is as old as the rule.

[Footnote 1: Holmes J., _ex banco_, in United States _v_. Standard Oil Co., March 14, 1910.]

It is further noteworthy that since the Granger cases themselves, there has been no extension of the doctrine of Chief Justice Waite to other trades or industries, while the extent of the doctrine, that is, the amount of regulation permissible under the Const.i.tution, has been very much limited. Waite's opinion gives no intimation of any const.i.tutional limit whatever, but dozens of the decisions of the Supreme Court since draw the limit this side of the point of confiscation; that is to say, at a "reasonable return," whatever that phrase may mean. It was, indeed, at first extended to semi-private grain elevators on the prairies, to elevators monopolizing the water front of Buffalo, New York, and to floating elevators in New York Harbor, the first and last of which show certainly no element of legal monopoly, while the Buffalo case at most only a geographical one.

Still, elevators were the subject of Munn _v_. Illinois itself.[1] And it has never been extended to a mere _de facto_ or "virtual" monopoly arising only from the accident of trade. Moreover, in matters of interstate commerce, although it might have been argued that such affairs were left absolutely to the plenary power of Congress, which might well, if it chose, pa.s.s laws preventing any railroad from engaging in interstate business, except at a certain rate per mile for pa.s.sengers or freight--or that no vessel should be allowed to carry pa.s.sengers or freight from foreign countries except at a certain price per head or per ton--yet the Supreme Court seems to have held that even this plenary power over commerce expressly given to Congress in the Const.i.tution, is limited by the ordinary property guarantees of that instrument; possibly because the Fifth Amendment is of later date than the body of the Const.i.tution.

[Footnote 1: We may divide monopolies into legal, geographical, and _de facto_, or "virtual" monopolies--phrases which sufficiently describe themselves.]