[My primary inspiration for these posts comes from the article “Property and Principle” from the Objective Standard, and Eric Daniels’ course “Property Rights in American History,” available from the Ayn Rand e-store.]

In the previous post in this series, I covered how rights, specifically property rights, were seen at the time of the founding of the United States.  In summary, property rights were seen as essential rights, without which no other rights were truly possible.

Without the right to acquire and use property, your unlikely to enjoy your right to life for very long.  Without the right to dispose of your property, money in this case, to contract with someone to publish your ideas, your freedom of speech is essentially useless.  After all, how useful and needful of protection is it to be free to stand in your own home and express your opinions?

Sadly, despite many of the founders recognizing the interrelationship of all rights, property rights were treated differently in the Constitution.  Most rights enumerated in the Bill of Rights were given absolute protection.  The first amendment for example reads “Congress shall make no law” in regards to religion, speech, the freedom of the press, assembly, and petition the government for redress.  In the second, “the right to bear arms shall not be infringed.”  In the fourth, the right of people to be secure in their persons, homes, and possessions against unreasonable searches “shall not be violated.”   Note that these are given as absolutes and, as noted in the previous post, not subject to vote.  Freedom of speech means that the government cannot pass any laws to limit your speech, no matter how many people want to vote for such a law.

Property rights, while listed in the fifth amendment, did not have this absolute protection.  In regards to property rights, the fifth amendment reads “nor shall private property be taken for public use, without just compensation.”  There is no indication on what constitutes either public use or just compensation.

For much of the nation’s history, while such takings were immoral, the government taking private property for such purposes as building roads, bridges, or government buildings was not controversial.  In the mid 19th century, things became a bit murkier when the government took private lands to give to private companies as part of the subsidies for the construction of the trans-continental railroads.  In spite of these takings, the Supreme Court ruled in 1896 that:

“The taking by a State of the private property of one person or a corporation, without the owner’s consent, for the private use of another, is not due process of law, and is a violation of the Fourteenth Article of Amendment of the Constitution.”

Early in the 20th century however, this view of “public use” began to change with the Court deferring more and more to the legislature in determining if a stated purpose was a valid “public use.”  In a 1906 decision (the same year as the Lochner decision mentioned in the previous post) the Court ruled:

“It is for the State, primarily and exclusively, to declare for what local public purposes private property, within its limits, may be taken upon compensation to the owner, as well as to prescribe a mode in which it may be condemned and taken.”

By the time of the New Deal, this trend in takings law would also come to be applied to economics as well.  The principles held in the Lochner decision were used by the Court to block many, but not all by any means, early New Deal programs, so it is no real surprise that it would be struck down.  In a 1934 case, Nebbia v New York, the ideas expressed in Lochner were replaced with language such as:

“A state is free to adopt whatever economic policy may be reasonably deemed to promote the public welfare, and to enforce that policy by legislation adapted to its purpose. The courts are without authority either to declare such policy, or, when it is declared by the legislature, to override it.”

A few years later, in a 1938 case made famous by its fourth footnote,  United States v Carolene Products, the justices went even further in weakening the protection of economic rights.

“the existence of facts supporting the legislative judgment is to be presumed, for regulatory legislation affecting ordinary commercial transactions is not to be pronounced unconstitutional,”

In the fourth footnote to this decision, United States v Carolene Products, the court formalized the idea that different levels of scrutiny could be applied to different types of rights.  For “personal” or political liberties such as freedom of speech, freedom from discrimination, the right to vote, and etc, the substantive due process would still apply as was described in the previous post.  For economic and property rights, a new and lower level of scrutiny would apply, the “rational basis.”  Under this lower level, the constitutionality of any legislation is assumed to be valid as long as the measure is “rationally related” to some “legitimate interest,” though neither of these terms were defined.

A hint of what they might mean was foreshadowed 30 years before in a dissent on the Lochner decision by Justice Oliver Wendell Holmes, who stated that it was not the place of a judge to overrule “the right of a majority to embody their opinions in law.”  With decisions in the 1930s such as Nibbia and Carolene Products, this philosophy came to be the guide when dealing with economic and property issues.  Moving forward, to a large degree your rights in your property, freedom of contract, ability to work in the occupation of your choice were no longer unalienable.  Rather, they were restricted by the whim of the majority at any given moment.

So within 150 years, economic and property rights completely transformed.  What began as unalienable rights which received protection in the courts equal to that of other rights;  meaning that the government needs a compelling interest before they could violate these rights, and then only to the extent absolutely necessary to achieve the interest – have become second class rights that are subject to the tyranny of the majority in that as long as the legislature has a “plan” showing how the proposed law is in the public interest, the courts will generally defer to them as to its constitutionality.

This change in how property and economic rights were protected as well as the basis that the new laws and regulations were devised will be covered in the third and final post.