§ 25. Conservative and radical views concerning the public

services.

While it is generally agreed that a change has come over the spirit of our time, that State regulation is the prevailing philosophy of the people at the beginning of the twentieth century; it must be borne in mind that this has been the result of a gradual progress of thought, and that this progress has not affected all men or all lawyers equally. Now, as at all times, there are conservative lawyers and radical lawyers, the former as far behind the prevailing spirit of the time as the latter go beyond it. In every change of popular thought there have been laggards, and in every such change there have been those who are unable justly to estimate the true meaning of the change, and work beyond it into eccentricities in which the people will never follow them. We have, therefore, three general types of thought at every time; the conservatives, the moderates, and the radicals. And this is as true of legal as of economic thought. We shall therefore find many lawyers still holding conservative views as to the application of the law of public callings to modern conditions. They believe that railroad rates should be unregulated, except by the desire and power of the corporation; that the conductors of every business, however necessary to public welfare, should do whatever seems good in their own eyes. Some economists still tell us that the only way to get efficient service for the public is to allow the public service companies the right of exacting such rewards as they are able to get. There are still some lawyers who assure us that the spirit at least of the constitution requires that all persons and corporations be left free to get what they can out of the world. But in spite of these now obsolescent views there can be no question that the tendency to-day is to restrain in the interests of society all business which has obtained undue power.

TOPIC D.-GROWTH OF THE PUBLIC EMPLOYMENTS.

26. Extension of the application of the principle in recent times.

As the prevalence of competitive conditions in business limits the application of the principles of public service law, so the prevalence of a condition of business combination extends their application. Such a condition is now prevailing. About a generation ago a change in commerical practice showed with remarkable distinctness the advantage of co-operation and combination. Great enterprises took the place of small ones, and great enterprises required co-operation and combination. As the people became accustomed to look upon combination as the price of success, they came more and more to regard it as a blessing rather than an evil; and public opinion has gradually turned away from the individualistic ideal until to-day it has been fairly discarded by the current philosophy. With the principle of combination as the spring of action has come a corresponding need of controlling the action of business combination itself for the good of the whole public. As the rights of the individual trader yield to the rights of the great corporation, so in the view of the man of this time, the rights of the corporation should in their turn yield to the rights of the whole people. The same spirit which fosters combination, fosters also control of the combination for the public benefit. The spirit of the present age, therefore, has come to be a spirit which demands that great business enterprises should be conducted in accordance with the requirements of society.

The positive law of the public calling is the only protection that the public have in a situation such as this, where there is no competition among the sellers to operate in its favor. So much has our law been permeated with the theory of laissez faire, which was but lately so prominent in the policy of our State, that the admission has been made with much hesitation

that State control is ever necessary. But the modern conclusion, after some bitter experience, is that freedom can be allowed only where conditions of virtual competition prevail, for in conditions of virtual monopoly, without stern restrictions, there is always great mischief. There is now fortunately almost general assent to State control of the public service companies, since it is recognized that the special situation requires a special law.

§ 27. Growth of the public service companies in late years.

As a result of changed business conditions and ideas, and of the great inventions which have constantly tended to increase the magnitude of business enterprises there has been in the last forty or fifty years a great growth of employments which have gained, if not a legal monopoly or at least some special legal privileges, at any rate, as a result of circumstances, a virtual monopoly in matters of public necessity. These public service companies are certainly the most considerable factor in modern commercial affairs.

A mere enumeration of some of the most important of the recognized public employments will demonstrate their overshadowing importance in modern business. The common carriers of passengers and goods by land and sea, ferries and bridges, warehouses and stockyards, the supply of gas and electricity for light, heat and power, telephone and telegraph, conduit and sewer, water supply and irrigation systems, pipe lines for oil and electrical transmission lines-one may judge from this incomplete list how large a proportion of the capital of the country is invested in the equipment to furnish these services, and how great are the annual payments which the public make to those who furnish them. As these public services are treated of as constituting a single class in the discussion which follows, it is thought well to discuss some test cases which show the basis upon which this class is made up.

§ 28. Grain elevators as an illustration.

Any discussion of the foundations of our industrial relations must begin and end with the case of Munn v. Illinois1 since it is recognized that this case has within its view all public duties and all private rights which are established under our system of government. Upon the right understanding of this distinction depends the true conception of our general theory of the function of State regulation.

The .

The facts of the case are worth careful examination. General Assembly of Illinois in 1871 had passed a statute which provided a maximum rate beyond which no person should charge for the storage of grain in public elevators. The firm of Munn & Scott refused to obey the act, and accordingly were fined. They appealed the case from court to court until the Supreme Court of the United States was reached. The Supreme Court confirmed all the decisions which had been given below and decided against the defendant. The points to be noted are four. The elevator of Munn & Scott stood upon land bought by them by private treaty; they had no privileges in the public streets; they had no aid from the public treasury; they were not even incorporated. Here, then, is a case that raises the question without complication.

As a general problem, Mr. Justice Waite discusses it: This brings us to inquire as to the principles upon which this power of regulation rests, in order that we may determine what is within and what without its operative effect. Looking, then, to the common law, from whence came the right which the constitution protects, we find that when private property is 'affected with a public interest, it ceases to be juris privati only.' This was said by Lord Chief Justice Hale more than two hundred years ago in his treatise De Portibus Maris, and has been accepted without objection as an essential element in the law of property ever since. Property does become clothed with a

194 U. S. 113, 24 L. Ed. 77, B. & W. 71 (1876).

public interest when used in a manner to make it of public consequence, and affect the community at large. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use; but so long as he maintains the use, he must submit to the control."

In this case of the grain elevator experience shows that in a given community there are not usually competitive conditions; monopolistic conditions generally prevail. Why? Not by accidental coincidence, but by natural limitation. The facts are that in any given community the plots of ground upon which this business may be conducted with convenience and efficiency are few and concentrated. In the case of the Chicago elevator those are the lots which both border upon the river and are adjacent to the terminals of the railroads entering the city. Thus grain elevators because of the nature of the traffic must be placed in or near a definitely fixed point; and thereby they have a virtual monopoly over their business; their number cannot be indefinitely multiplied, and competition cannot effectively regulate their business. Since their business is necessary to the public, it therefore follows that they must serve the whole public. There are elements of publicity in the business of elevating grain which peculiarly affect it with a public interest. They are found in the nature and extent of the business, its relation to the commerce of the State and country, and the practical monopoly enjoyed by those engaged in it. The underlying principle is that business of certain kinds holds such a peculiar relation to the public interests that there is superinduced upon it the right of public regulation.2

2 Munn v. Illinois, supra, is undoubtedly one of the leading cases in American constitutional law. It has been cited with approval hundreds of times, both in the federal and the State courts. See Rose's Notes on U. S. Sup. Ct. Rep. vol. 9, pp. 21-55.