Justice Rufus W. Peckham

Our system of government is an oligarchy inside a democracy. The system is built on an unspoken bargain:

The rise of representative democracy involved a difficult and delicately executed trade-off of property security for the richest and historically most powerful actors in exchange for universal suffrage for the unpropertied masses.

Oligarchy in the United States?, 7 Perspectives on Politics 731 (2009) by Jeffrey A. Winters and Benjamin I. Page (abstract here, entire paper available from your library, and worth the time it takes to download and read.) Winters and Page point to several provisions of the Constitution that protect the economic power of oligarchs, and to the courts that enforce that protection.

1. Article I, § 10. This section prohibits states from issuing bills of credit, which are IOUs that can take the place of money. It prohibits laws “impairing the Obligation of Contracts”. This clause was intended to keep states from using their powers to relieve their citizens from oppressive terms of contracts.

2. Article 4 § 4 guarantees that each state will have a republican form of government. That should enable the federal government to quash any serious effort to rein in the oligarchs.

3. The Fifth Amendment, made applicable to the states by virtue of the 14th Amendment, prohibits the taking of property without “just compensation”. As the authors note, it isn’t easy to redistribute wealth in the face of this provision.

4. The Senate gives disproportionate votes to small states, including those that are easier for oligarchs to dominate.

5. The Senate controls the appointment of judges. Historically, the courts have been radically protective of property rights.

6. The Constitution intentionally set up a number of veto points. Courts and their endless appeals are additional tools for the oligarchs to stymie governmental action, even action crucial to the 99%.

[cont'd]

I’d add that the Constitution originally allowed slavery, primarily protecting the economic interests of the South. It even let the low-population slave-states count their slaves as 3/5 of a person for census purposes, so they got plenty of members of the House of Representatives. I also note that the oligarchy has historically trampled voting rights of the “unpropertied masses” through fear, poll taxes, voter caging, ID requirements, and many other tactics we see today.

Winters and Page examine several measures of the concentration of wealth in the US that suggest the oligarchy is operating just fine in the US. The trends they describe continue in more recent data. While these numbers strongly suggest the existence of a fusion of oligarchy and democracy, the authors say that the best evidence is case studies. Those case studies aren’t hard to find.

The 1905 Supreme Court case of Lochner v. New York, 198 U.S. 45 (1905), long since overruled, provides a good illustration of the interlocking powers of the Constitution and the Supreme Court to protect the property rights of the rich. New York passed a law that limited the hours of bakeries to force their employees to work more that 60 hours a week. The majority held this statute unconstitutional. It interfered with the constitutionally guaranteed liberty of a baker to contract for the sale of his time and effort, said Justice Peckham.

Dissenting in Lockner, Justice Oliver Wendell Holmes wrote:

But a Constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the state or of laissez faire.
…
I think that the word ‘liberty,’ in the 14th Amendment, is perverted when it is held to prevent the natural outcome of a dominant opinion, unless it can be said that a rational and fair man necessarily would admit that the statute proposed would infringe fundamental principles as they have been understood by the traditions of our people and our law.

Holmes argued that in economic matters states should be allowed to enact legislation enforcing the dominant opinion except in rare cases. Holmes’ view might be thought to have won the day. There are few defenders of Peckham’s almost unbridled “liberty to enter contract” theory. But Peckham has his defenders, including Professor James Ely of Vanderbilt University Law School. In one paper Ely writes

In short, the Holmes dissent in Lochner offers a misleading account of the relationship between the Constitution and the political economy. Even if the Constitution does not endorse particular theories, it assigns a high value to property and contractual rights.

In another, he says:

…so long as courts persist in a substantive reading of the due process guarantee — a propensity that shows no sign of abating — it is impossible to escape the legacy of Rufus W. Peckham.

To the extent Ely means that substantive due process applies to economic liberty, he agrees with the authors of the Oligarchy paper that the Constitution and the Supreme Court continue to enforce the bargain allowing an oligarchy to determine economic policy inside our putative democracy.