Cornerstone of Liberty: Property Rights in 21st Century America

Aside from being the title of a book, this is an excellent 1.5 hour symposium on property rights and the consequences of progressivism hosted by the CATO Institute.

Part of the discussion centers on the little known and hardly remembered case of Nebbia v. New York where Mr. Nebbia was jailed for daring to sell milk for less than nine cents a quart to poor mothers during the depression, in disobedience to the “Milk Control Board.” He sold two quarts of milk and a 5-cent loaf of bread for 18 cents. The price-fixing, then as now, was a direct result of progressive meddling in the free market resulting in violent strikes, heavy property damage and two deaths, not to mention punishing those who could ill afford it.

In his defense, Mr. Nebbia said, “I sell a bottle of milk at what the law says. At that price I make a good profit–so good, that to my best customers . . . I give a loaf of bread free and still make money.”

Not good enough for the Milk Control Board. In one of the low points in American history, the case went to the state supreme court where Nebbia was found guilty.

The Nebbia case focused primarily on the question of due process. In a long line of decisions extending back into the nineteenth century, the United States Supreme Court had severely restricted the power of state governments to regulate wages, hours, and prices on the grounds that such action deprived citizens of their property without the due process of law required by the Fourteenth Amendment. Although the Court admitted the right of states to control businesses “affected with a public interest,” it had narrowly interpreted this phrase so that, according to a 1932 decision, “the production or sale of food or clothing cannot be subjected to legislative regulation on the basis of a public use.” 55 This statement seemed to preclude government control of Nebbia’s retail milk prices, but lawyers for the state argued that the importance of milk in the human diet made the general welfare dependent on its production. Thus the fixing of prices to ensure a steady flow of milk constituted a valid exercise of the state’s police power, especially when limited to an emergency period of one year. 56

On July 11, 1933, the New York Court of Appeals upheld the conviction of Nebbia by a vote of five to one. Speaking for the majority, Chief Judge Cuthbert W. Pound noted that an earlier generation probably would have condemned the milk control law

as a temerarious interference with the rights of property and contract . . . [and] with the natural law of supply and demand. But we must not fall to consider that the police power is the least limitable of the powers of government and that it extends to all the great public needs; that constitutional law is a progressive science; that statutes aiming to establish a standard of social justice, to conform the law to the accepted standards of the community, to stimulate the production of a vital food product by fixing living standards of prices for the producer, are to be interpreted with that degree of liberality which is essential to the attainment of the end in view . . . and that mere novelty Is no objection to legislation.

Despite recognized limitations on legislative authority to abridge property rights, Pound concluded, “we do not feel compelled to hold that the ‘due process’ clause of the Constitution has left milk producers unprotected from oppression.” The lone dissenter on the Court of Appeals cited recent Supreme Court interpretations of the due process clause which, he argued, made price-fixing in the dairy industry unconstitutional.

The nation’s highest tribunal chose to ignore these precedents when reviewing the Nebbia case. By the slimmest of margins, the Supreme Court broke with recent tradition and sustained New York’s milk control act in March 1934. 59 The majority decision, written by Justice Owen J. Roberts, avoided consideration of the emergency situation and asserted:

there is no closed class or category of businesses affected with a public interest. The phrase “affected with a public interest” can, in the nature of things, mean no more than that an industry, for adequate reason, is subject to control for the public good.

Relying partially on an 1877 ruling ( Munn v. Illinois), the Court declared that states held the power to regulate the prices set by private companies even if the businesses were neither monopolies nor government franchises. In the issue at hand, Roberts considered New York’s setting of milk prices “not to be unreasonable or arbitrary, or without relation to the purpose to prevent ruthless competition from destroying the wholesale price structure on which the farmer depends for his livelihood and the community for an assured supply of milk.” The four dissenting judges questioned the foundation for the majority’s concept of public interest and due process. “The Legislature,” Justice James C. McReynolds maintained, “cannot lawfully destroy guaranteed rights of one man with the prime purpose of enriching another, even if for the moment, this may seem advantageous to the public.”

(Robert P. Ingalls, Herbert H. Lehman and New York’s Little New Deal (New York: New York University Press, 1975) 158)

Nebbia would be joined, during the New Deal, by people like Jacob Maged, an immigrant tailor in Jersey city. Maged would be prosecuted and sent to jail for three months, leaving a wife and four daughters to struggle with the business and pay his $100 fine (no trifling sum in 1934). And his crime? Knowingly, deliberately, Maged had charged 35 cents to press a suit for a customer, even though the code of the National Recovery Act (NRA) had pegged the price at 40 cents. The stories of Jacob Maged and others lie muted in the record of the New Deal precisely because they did not excite the concern of the American Civil Liberties Union, or of liberal historians.

The similarity in reasoning should be evident to those familiar with the Kelo v. New London case. The erosion of property rights seems to creep ever leftward, largely unabated.

For those of the so-called progressive persuasion, the format is point-counter point, with spokesmen for both sides.

By | 2010-01-02T16:11:17+00:00 January 3rd, 2010|Eminent Domain, Government, Legal issues, Property Rights|Comments Off on Cornerstone of Liberty: Property Rights in 21st Century America

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