As we saw in yesterday's posting, the immediate effect of the Slaughterhouse Cases of 1873 was to undermine the institution of private property. This, from the position of America's Founders, was a disaster — but it was not the worst part of the situation. That was reserved for the cementing of the evident assumption of the Court, seen at its previous worst in Scott v. Sandford in 1857, that all rights come from the State, and that nothing, whether liberty (Scott), property (Slaughterhouse), or, eventually, life itself in Roe v. Wade, could truly be said to be an inalienable, natural (absolute) right if the Supreme Court of the United States chose to deny it.
Orestes Brownson had seen what was coming. In The American Republic (1865) he had foretold barely eight years before the Court's decision in the Slaughterhouse Cases that the basis of the conflict — the "culture war," if you will — would shift. Before the Civil War, as well as the war itself, the conflict had been between the industrial and commercial capitalism of the North, and the agrarian capitalism of the South (the former relying on wage slavery, the latter on chattel slavery). It now shifted to being between capitalism — whether industrial, commercial or agrarian — and socialism . . . the former relying on turning almost everyone into a wage slave, the latter on making everyone a welfare slave.
The Homestead Act of 1862 forestalled the total victory of either capitalism or socialism. By fostering widespread ownership of agricultural capital, and, even more, by preserving the idea of widespread ownership, a counter was set up to the concentration of industrial and commercial capital in fewer and fewer hands as the 19th century progressed. The momentum provided by the dynamic pre-war democratic culture, chronicled by Alexis de Tocqueville in Democracy in America (1835, 1840), also helped.
As ownership of commercial and industrial capital became increasingly concentrated and society consequently increasingly complex, however, and the opportunities for "ordinary" people to acquire capital in land faded as the "free" land under the Homestead Act was taken — the "closing of the American frontier" described by Frederick Jackson Turner in 1893 — capitalism and socialism came into direct conflict.
From the standpoint of political economy, especially binary economics, the basic problem was the fixed belief that new capital could only be financed out of existing accumulations of savings. This — and an unhealthy admixture of personality conflicts, especially between Andrew Jackson and Nicholas Biddle — had led to the "War Against the Bank" in the 1830s. Proponents of the banking principle and the currency principle, mirroring the struggle going on in England at the same time, fought to see which idea of money and credit (and, ultimately, of private property, even liberty and life) would prevail.
The currency principle, the idea that "money" is a peculiar creation of the State, won. The banking principle, that "money" is anything that can be accepted in settlement of a debt, lost. In Great Britain the new conception of money was embedded into public policy in the Bank Charter Act of 1844, while in the United States the National Bank Act of 1863 achieved the same end.
Evidently unrealized at the time was the fact that the understanding of money found in the currency principle restricted the direct benefits of economic development to those who controlled existing accumulations of savings (the rich under capitalism), or who were believed to have the exclusive power to create money, and thus redistribute wealth through inflation or deflation (the State under socialism). The wage or chattel slavery of capitalism, and the welfare slavery of socialism were natural, even necessary adjuncts to the perceived reliance on past savings to supply the financing for new capital formation.
Ironically, the entire conflict — and many of the problems that accompanied the rapid economic development that followed the Civil War — could have been avoided had people realized how that same development was really being financed. The problem was that money and credit for small agricultural, commercial, and industrial development was virtually unobtainable, thanks to the policy of deflation to restore parity of the paper currency and gold after the inflation during the war. Ownership for the non-rich was systemically linked to existing accumulations of savings, that which had been withheld from consumption in the past . . . and the non-rich, by definition, do not have savings!
Large development, however (especially the railroads), could obtain all the money and credit desired. This was by subsidy, grant, or — more usually — by drawing and discounting bills of exchange at the new National Banks or state banks, which, at the same time they served as banks of deposit for the non-rich, functioned as banks of issue (commercial banks) for the rich and for the federal government. Ownership for the rich was systemically linked to future savings, what the new capital could produce in the future, not what had been withheld from consumption in the past.
Consequently, the people best able to cut consumption and save for investment in new capital were those who didn't need to use past savings because they had access to future savings. This gave the rich a virtually unbreakable monopoly on the means of acquiring and possessing private property in capital. There were only two ways for those without access to either existing savings or "pure credit" (credit not dependent on existing savings) to become capital owners.
The first was to come up with some new product or service that was somehow self-financing — immediately and highly profitable — to a degree sufficient to make it financially feasible almost from the start, or to enable the entrepreneur to buy out those who provided the start-up financing, and still have sufficient profits left over for consumption purposes and future financing. The second was simply to take what already belonged to someone else, or which was there for the taking.
The Homestead Act was a combination of taking the land by force, but making it freely available to those who met certain conditions. Keynesian "forced savings" is a modern theory of how capitalists force the presumably necessary cuts in consumption by raising prices, and taking the benefits of saving for new investment.
The Court's decision in the Slaughterhouse Cases laid the groundwork for the socialist principle that all rights come from the State. Had not the economy already become oriented toward the presumed dependence on existing accumulations of savings to finance new capital investment, however, it is likely that the Supreme Court's power grab would have been ineffectual.
Unfortunately, coming at a time when capitalism and socialism were coming into conflict — and with the decision so vaguely worded as to mean anything anyone wanted to read into it — both the capitalists and the socialists were able to use the new conception of property to their advantage. Based on the implicit assumption in the decision in Slaughterhouse that all rights come from the State, and could thus no longer be construed as inalienable or inherent (absolute) in the human person, the capitalists were able to assert absolute exercise of private property, while the socialists could — consistently with the same line of reasoning! — claim that private property did not even exist.
The Slaughterhouse Cases, even more than Scott v. Sandford, were a watershed. The decision asserted the rights of the State over the individual, and the virtual negation or nullification of much of the Constitution. Development of this idea has been carried to the point where some Constitutional scholars could (as we have already seen) claim that the idea of the Constitution derived from the ideals expressed in the Declaration of Independence is a written document is a legal fiction!
Individual rights — the very thing the Constitution was expressly written and adopted to protect — were transformed from something inherent in each human being, to whatever the Court wanted them to mean. As Crosskey noted, the decision in Slaughterhouse was "written so as to enable the Court, with a good face, in future cases, to jump either way: to observe the intended meaning of the Privileges and Immunities Clause if that seemed unavoidable, or, in the alternative, to destroy the clause utterly if this seemed safe."
The way was thus paved for an entirely new conception of the role of the State, one directly at odds with the orientation of the Founders of the American republic, and the western tradition of humanity's status as a special creation of a deity with the unique character of a "political animal."