All Commentary
Friday, May 1, 1981

Book Review: The Birth of a Transfer Society by Terry L. Anderson and Peter J. Hill Foreword by James M. Buchanan

The Hoover Institution Press, Stanford University, Stanford, California)
114 pages • $6.95 paperback

When the framers of the Constitution set out to draft a document that would “secure the blessings of liberty to ourselves and our posterity,” they realized that government could easily become the chief threat to that liberty. Since two key requirements for liberty are the security of private property and the sanctity of contracts, specific provisions were included in the Constitution to protect property and contracts from government infringement. Today, these Constitutional provisions are almost meaningless, as government has become the vehicle for massive redistribution of wealth.

This book takes the reader on a journey through American history in search of the causes of the birth of the transfer society. The authors examine court decisions which eroded the constitutional barriers to government violations of economic freedom. The book is an informative, clearly written and documented account of how we went from a government of laws (which protected property and contracts) to a government of men. The authors undertake a case- by-case review, demonstrating that “two centuries of interpretation [by the courts] have eliminated whatever distinction” once existed between the protective function of the state and transfer activity. “Case after case came before the courts challenging the constitutionality of transfer activity. Not surprisingly, some courts were eventually convinced that this activity was appropriate for government.” Specifically, it was the case of Munn v. Illinois (1877) that opened the door.

The Munn case involved the power of the Illinois state legislature to set grain storage rates for elevators. Legislatures in midwestern states, influenced by the agrarian Granger movement, enacted laws aimed at regulating the rates of railroads and other “public” utilities. Legal counsel for the affected enterprises argued that such laws violated the Fourteenth Amendment’s due pro cess clause, the commerce and contract clauses, and property rights. “The court’s March 1, 1877, decision on Munn and other Granger Cases surprised those who were sure that such regulation would be found unconstitutional.” An excerpt from the majority opinion, written by Chief Justice Morrison Waite, illustrates the statist nature of this decision: “When, therefore, one devotes his property to a use in which the public has an interest, he in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created” (94 U.S. 126). The authors claim that “[w]ith the Munn decision . . . the door for transfer activity at the federal level was thrown open as the court legitimized governmental regulation of private property.”

In order to understand Munn v. Illinois, the majority decision must be viewed in the context of shifts in public opinion. Munn v. Illinois diverged from past court decisions and provided a precedent for future assaults on economic freedom because it was based on new political, eco nomic, and social theories that were gaining adherents. The authors cite several shifts in thinking which influenced the courts.

First, society underwent a transition from a predominantly agrarian to an industrial society. This, in turn, caused changes in the distribution of wealth. In the early years of the country, “increases in income were seen as a measure of one’s social contribution rather than as evidence of venality. However, the rising tide of egalitarianism during the Jacksonian era meant that, in the eyes of some, any gain by one person had to be at the expense of another.” Some individuals, especially farmers and those whose wealth or position were threatened, viewed government as an appropriate means to maintain or enhance their economic status.

Another shift which occurred was the expansion of the franchise. This “. . . increased [the] reliance on majority rule [and] was not conducive to a continuation of a society living under a government restricted by constitutional limits. The problem lay in the confusion between expan sion of the franchise to include a wider spectrum of society and the belief that a simple majority had the right to make all decisions . . . . But allowing majority rule to dictate any changes in the rules of the game desired by a majority opened the door for the tyranny so feared by [James] Madison.” This change, coupled with “[a]n explicit faith in the goodness of man and human progress made government seem much more a vehicle of social reform than a potential agent of oppression.” It presaged court decisions which would erode constitutional limitations on governmental power.

We are currently in the midst of a change in the political and economic thinking of our country’s leaders. Attempts are being made to slow the growth of government spending. However, the basic belief that the redistribution of wealth is a proper function of government remains intact. The support for current efforts to slow the growth of government is not based on a constitutional or ethical questioning of whether the state should properly be involved in transfer activities. Until these basic objections are raised, the infringement of both political and economic freedoms by government will continue.

This book makes a strong case for “the necessity of basic rules to limit wasteful transfer activity and the importance of ideas regarding limits on government. A formal agreement on the fundamental rights of the members of society is essential to an orderly, productive society . . . . [However, a] people’s concept of the appropriate role of the coercive powers of government is crucially important in determining the path society takes.”

This book can make a significant contribution to the shaping of a new “people’s concept” provided it gets the attention it deserves.

  • Roger Ream is president of The Fund for American Studies.