The courts should do more to defend economic freedom

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District of Columbia Circuit Court Judge Janice Rogers Brown raised eyebrows recently with a concurring opinion in an otherwise mundane economic-regulation case. Here is the passage that got keyboards tapping:

America’s cowboy capitalism was long ago disarmed by a democratic process increasingly dominated by powerful groups with economic interests antithetical to competitors and consumers. And the courts, from which the victims of burdensome regulation sought protection, have been negotiating the terms of surrender since the 1930s.

Judge Brown, of course, was referring to the series of Supreme Court cases that constitutionalized New Deal economic policy. Most of the resulting commentary has focused on the propriety of expressing such views in an official opinion instead of a speech or legal article. But the most beneficial corollary would be a national conversation on the substance: the role of courts in protecting individual economic liberty.

Liberals, viewing government as the slayer of social ills, applaud the modern regulatory state as good policy, and consider the enabling judicial decisions sacrosanct. Unfortunately, judicial conservatives have also acquiesced, lest they be seen as “activist.” Even Justice Clarence Thomas, who in so many areas has indicated a willingness to at least consider overturning wrong precedent, has endorsed a hands-off approach to economic regulations.

But while the two sides are in agreement, both are wrong.

The dirty little not-so-secret fact is that many economic regulations have little to do with protecting citizens’ health, safety and welfare, and instead are propagated by entrenched interests that use the force of government to squeeze out less powerful competitors.

The case involved in Judge Brown’s concurrence is a prime example. The proprietor of a dairy farm offered to sell milk to large-volume customers in California at a price 20 cents per gallon cheaper than his competitors. Powerful dairy interests were having none of it, and along came the Milk Regulatory Equity Act of 2005. How little has changed. The 1938 case of United States v. Carolene Products Co. — famous for its fourth footnote, which obliterated stringent judicial review of economic regulations — involved an enterprising Illinois company selling perfectly healthful “filled milk” at 7 cents per can compared to the industry’s whole milk that sold for 10 cents. The result after the dairy lobby went to Washington: the Filled Milk Act — and no more upstart competition.

Of course, government-sponsored economic protectionism was thriving well before the New Deal. Adam Smith, in 1776, wrote of those using government to limit imports and thereby decrease foreign competition:

In every country it always is, and must be, the interest of the great body of the people, to buy whatever they want of those who sell it cheapest. The proposition is so very manifest, that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question, had not the interested sophistry of merchants and manufacturers confounded the commonsense of mankind.

Smith’s “merchants and manufacturers” would have loved the New Deal, which gave bureaucrats the power to dictate how much wheat a farmer could grow on his own land and the price a grocer could sell his products for. One dry cleaner in New Jersey was jailed for three days for offering to press suits at 35 cents instead of the government-mandated 40. Those harmed were the businesses lacking the clout to have a seat at the government table and consumers forced to pay artificially high prices.

The Great Depression, which planted the seeds for our modern regulatory state, was truly horrific. And FDR’s policies were popular with Americans, as evidenced by his 1936 landslide re-election. It does not follow, however, that those policies were constitutional or, for that matter, that they actually worked.

The simple fact is that in the 1930s courts abandoned their constitutionally mandated roles as protectors of individual economic freedom and ceded our economic fortunes to the whims of the powerful and politically connected. As a result, “cowboy capitalism” has been replaced by crony capitalism, where government largess can be as important as succeeding in the marketplace. It will be impossible to rectify this situation until the courts start defending economic freedom. Judge Brown’s concurrence is a bold step forward in recognizing this reality.

Paul H. Jossey is a lawyer living in Alexandria, Virginia. His interests include environmental policy and First Amendment issues.