The beginnings of the regulatory state

• American states imposed few restrictions on businesses before the Civil War.  Food and product safety laws, workplace safety laws, limits on predatory business practices – all were unknown.  But the first glimmers of what would become the modern regulatory state arose shortly after the war.  

• Railroad commissions.  The Great Plains states had only a few miles of track before the Civil War.  After the war ended, railroads rapidly extended their lines throughout the region; at the same time, they began merging into powerful regional and national rail systems.  Shippers and passengers throughout the United States complained about high and often discriminatory charges. 

• By the early 1870s, the outcry was loud enough to prompt legislatures in several Midwestern states to enact “Granger laws” creating railroad regulatory commissions.  The commissions’ powers varied:  some were authorized to limit freight and passenger rates, others were merely allowed to collect statistics and report to the legislature.  Midwestern state courts upheld the laws and in Munn v. Illinois (1876) and a series of related “Granger Cases,” the U.S. Supreme Court upheld the states’ power to regulate railroads and other enterprises public in nature, such as public grain elevators.   Many of the Great Plains states incorporated Granger provisions in their constitutions and statutes from the beginning.

The rise of substantive due process

• The Granger Cases also opened the door to an ever-expanding body of laws and agencies designed to address the many problems that followed in the wake of industrialization.  After 1875, Great Plains legislatures began to enact pure-food and public health laws; laws regulating physicians, pharmacists and other professions; laws for conservation of fish, game and soil; and laws regulating labor-management relations, unfair business practices and workplace safety. 

• Great Plains settlers were vulnerable to natural forces – drought, hail, locusts – and market forces largely outside their control, and when those forces destroyed crops or drove prices ruinously low, they pushed their lawmakers to enact solutions, even if that meant trying radical and untested reforms.  The Populist movement gained control of governorships and legislatures in some Great Plains states during the 1890s, but holdover conservative opponents prevented Populists from enacting many of the reforms they advocated.  Nevertheless the stream of laws grew steadily, reaching its peak during the Progressive era (1900-1925).

• Great Plains businesses frequently challenged such laws as unconstitutional.  They usually argued that the laws violated one or more of the following legal doctrines, collectively known as “substantive due process”:
  

• Due process and freedom of contract, because the laws deprived them of their property and contract rights to conduct their business and make bargains with others on terms of their own choosing.

• Equal protection, because the laws unfairly singled out their businesses for regulation and thus discriminated against them.

• The delegation doctrine:  only legislatures could create regulations, and they could not let agencies do the job for them. 

• In the 1890s, the U.S. Supreme Court and many American state courts began examining regulatory laws critically.  The courts upheld most laws but struck down enough that reformers complained they were improperly interfering with necessary social change.  Some reformers even argued that courts should not be allowed to examine reform laws at all.  The debate was particularly active in the Great Plains states. 

Early battles:  Regulating the bank octopus

State ex rel. Goodsill v. Woodmanse – North Dakota, 1890 (46 N.W. 970); State v. Scougal – South Dakota, 1892 (51 N.W. 858); Blaker v. Hood – Kansas, 1894 (36 P. 1115)

• Great Plains legislatures of the late 19^th century, like the New York legislature in the 1820s and frontier Midwest legislatures at mid-century (see § ___), wanted to preserve banks and the vital credit they provided, but also wanted to ensure that banks did not use their power to control Great Plains politics and economies. 

• In the late 1880s and early 1890s, both of the Dakotas and Kansas enacted laws to limit outsider control of state banks:  banks could only be formed by local associations.  Banking interests challenged these laws as violating individuals’ right to engage in business as they choose.

• Great Plains courts divided on the issue.  In Woodmanse, North Dakota’s justices concluded without difficulty that the state had almost unlimited power to control the charter terms of banks that wanted to do business within its borders.  In Blaker, their colleagues in populist Kansas agreed, but  South Dakota’s justices were more receptive to bankers’ arguments that the laws limited freedom:  in Scougal, they concluded there was no good reason to limit banking to local associations.

Early battles:  workplace laws

Low v. Rees Printing Co. – Nebraska, 1894 (59 N.W. 362);  State v. Wilson – Kansas, 1899 (58 P. 981); State v. Haun – Kansas, 1899 (59 P. 340); Atchison, Topeka & Santa Fe Railroad Co. v. Campbell – Kansas, 1900 (59 P. 1051)

• From the 1880’s on, one of the American labor movement’s key goals was to reduce the number of hours in the standard work day.  Between 1890 and 1920 many states experimented with maximum-hours laws.  Some laws targeted working women and children on the theory that they needed special protection; some targeted public works projects on the theory that local governments had the right to set working conditions when they handed out work contracts.

• In Low, Nebraska’s supreme court dealt the movement an early setback in the Great Plains when it struck down an ____ law creating an 8-hour workday for all workers in the state except farmers and servants on the ground that it interfered with employers’ and employees’ freedom to contract as they saw fit.   That would not be the end of the issue in the region, however.

• Mining was an important part of the Great Plains economy.  Large coal deposits were discovered in Kansas and Oklahoma in the late 1800s and were quickly exploited.  Mining companies tried to control the lives of their workers in various ways, including paying them in the form of scrip which could only be redeemed at company-operated stores and paying only for coal that was “screened,” ostensibly to eliminate dirt and refuse but often, in reality, to evade paying workers for lower grades of coal. 

• In the 1880s and 1890s, Kansas enacted laws giving employees the right to insist on payment in cash rather than scrip and prohibiting payment based on screened coal rather than all coal they dug out.  Challenges to these laws elicited a mixed reaction from the Kansas supreme court.  The court struck down the state’s anti-scrip law in Haun, stating in strong terms that it viewed the law as an unwarranted interference with both employers’ and workers’ freedom to make contracts as they chose.  But in Wilson the court upheld the coal-screening law, reasoning that it did not interfere with freedom to negotiate wage rates:  employers could make up for their loss on unscreened coal by paying less for screened coal.

• The Campbell case involved a type of statute apparently unique to the Great Plains:  laws requiring railroads to furnish free transport to cattlemen who wanted to accompany their livestock to market.  The court struck down the law as depriving railroads of their property (namely the right to charge passenger fares) without due process.  But Justice Rousseau Burch, speaking for the court, affirmed that the legislature had broad power to regulate railroads and suggested ways in which the legislature might re-word the law to achieve its goal.