It was the jurist and Supreme Court Justice, Oliver Wendell Holmes, Jr., who stated in a historic dissenting opinion that "The Fourteenth Amendment does not enact Mr. Herbert Spencer's Social Statics," which is to say that free enterprise is not demanded by the provisions of the US Constitution. He added, 'the constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of citizen to the state or laissez faire' (Lochner v. New York, 198 U.S. 45, 75 (1905).
This judgment may have been a dissent but it became, in time, a ruling principle of constitutional law, unleashing a barrage of government regulation of the economy in the United States of America given that more and more legislators and justices came to believe that no constitutional barriers to top down business regimentation or regulation exist. Yet to this day, pace Justice Holmes, both a great many supporters and innumerable critics of the USA identify that country with the economic theory of laissez-faire capitalism. Why so, if such a prominent and influential jurist could issue such a categorical denial?
Among other reasons is the fact that in the preeminent political, as distinct from legal, founding document, the Declaration of Independence, a certain political idea is held to be self-evident, namely, 'that all men are created equal; that they are endowed, by their Creator, with certain unalienable rights; that among these rights are life, liberty, and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.'
Notice, the document states, 'We hold these truths to be self-evident,' not that 'they are self-evident,' and for good reason. The founders weren't ignorant of the need for philosophical support for these truths. But for purposes of a declaration, they did hold them to be so. As to why it is widely held that these truths the founders held to be self-evident implied a laissez-faire capitalist economic system, it is because the right to liberty means, among other things, the right to acquire resources, to hold and trade them and to give them away if one chooses to do so. That's why it has widely been believed that despite what Justice Holmes said and made legally quite palatable, the USA is, properly understood, a legal order the economic infrastructure of which is that of a largely free market economy.
It's worth noting that the reason Justice Holmes made his statement was paradoxically ideological: he was a thinker very much under the influence of pragmatism, a philosophical system that rejects the very idea of fundamental principles of ethics and politics in favor of rules of thumb or heuristic insights.
In addition to the Declaration, the U.S. Constitution, too, endorses to some measure the principles that would imply a free market, capitalist economic system. In the Fifth Amendment to this legal document we learn that one prohibition on government is that 'nor shall private property be taken for public use, without just compensation.' That is to say, private property may be taken for public use, and for public use alone, and even here only if such taking is justly compensated. On the other hand, Article 1, section 8 authorizes the federal government to regulate commerce quite extensively. While mentioning private property very favorably, they also made provisions for government to interfere with it, that is, they empowered Congress 'To regulate commerce with foreign nations, and among the several states.' They did this, in part, so as to facilitate the flow of commerce, to eliminate the far more intrusive regulations that had been routine when each state could regulate commerce within its borders. And, sure enough, for many decades Interstate commerce had not been heavily regulated-'that came later, in the 1940s, when the political atmosphere in America became positively interventionist.
It needs to be noted, as well, that the embrace of private property rights among the founders was somewhat ambivalent'-only Thomas Jefferson appears to have been unequivocally in support of the idea but Alexander Hamilton wasn't'-he favored a strong executive branch with near mercantilist powers.
In any case, the issue here is not so much the history of the relationship between the American political tradition, of individual rights, and how it has impacted commerce but, rather, the logic of that relationship. And that is not all that difficult to comprehend.
The crux of the idea is that what made the American system revolutionary is the transfer of sovereignty from the monarch to the citizen. Each individual citizen, in virtue of being a human being, has certain unalienable rights, ones no one, including the government, can take away, only violate. Instead of the government or nation or state having sovereignty-'which meant, in practice, instead of those who administer governments or nations or states having sovereignty-'every citizen has the right, namely, of self-government or self-rule. And that makes eminently good sense because, as Abraham Lincoln stated so clearly, 'No man is good enough to govern another man, without that other's consent.'
Yes, one might say, but there are some exceptions. Certainly parents are usually "good enough" to govern their children without explicit consent since this is their responsibility as parents. Even between adults there are cases in which one is good enough to govern another, as when that other is seriously incapacitated or has committed crimes such as to become unfit to be a self-ruling citizen any longer.
The point is that among normal adults human beings there is to be no masters and servants, no rulers and the ruled. And that is a major development in human political thought, the development that hasn't actually been fully realized, only reasonably coherently conceived, in any society.
If this idea is substantially correct-'which is something I am not able to fully develop here-'there is a vital corollary to it. This is that everyone must have a sphere of personal authority within which he or she is in charge and others must gain permission to enter. Common sense, of course, confirms this. If you are a free person, then you will have an area of the world within which you are boss. You will have your home, your clothing, your transport, your backyard, your shop, your shares in some large economic venture, or indeed a large economic venture of your very own. That is what it means to be self-governed'-as John Locke noted, your person and estate are under your jurisdiction and not subject to intrusiveness by others.
Why? Several reasons. As Former Secretary of State James Baker said to the newly liberated Central Europeans, because 'Freedom works.' But there is an even more important reason. That is that human beings are ethical agents, responsible in their lives to choose between acting rightly or wrongly, and only if they are free and in charge of some sphere do they get to exercise (or neglect) that responsibility. Private property rights, in other words, secure for us a realm of morally significant conduct. If others'-the king, the state, even the majority-'own things, the individual is constantly and unavoidably beholden to the owner, just as children are to their parents who own all the resources they need to live their lives.
Some will protest that such a view of private property leaves many with just a very small sphere of personal jurisdiction, while others with a much larger sphere and that is unfair. However, unfairness abounds in any case--some are much healthier than others, some much more aesthetically appealing, some more talented, some better liked, and so forth. Justice does not require the impossible task of evening all this up because, first, those doing the evening up would then be quite unevenly powerful over others compared to those subject to the evening up policy; and, second, no sooner would a policy of equalization commence than some would, through their own sovereign judgments and conduct undue the result. So, then, what does justice require? That any enjoyment of uneven advantages be peaceful, respectful of the rights of all, rather than intrusive or aggressive. Unlike in the rest of nature, where uneven advantages and disadvantages tend to be played out by means of brute force, the human approach to such a fact of nature ought to observe what might best be dubbed due process.
So, in conclusion, in a system of politics modeled on distinctively American ideals and ideas'-as articulated, mainly, in the Declaration of Independence and derived from the views of classical liberals such as John Locke-'the right to private property, and, therefore, a system of free market capitalism loom very large. Whatever abuses there may be in such a system, for example, malpractice and unlawfulness on the part of traders, owners, and so on, do not indict the system itself, anymore than quackery and charlatanism indict any other honorable profession in a free society. Thus, any such deeds need to be dealt with without undermining the system that is so vital to genuine human community life.
This is the text of a luncheon talk given by Machan to a meeting of DOCA (Defense Orientation Conference Association) at Newport Harbor Yacht Club, Newport Beach, CA.