Imagine a country in which the right to a welfare check is vigorously protected — but where the government can destroy legitimate businesses and professions with impunity.
Is it China? Russia? Cuba? A socialist utopia dreamed up by the likes of George Orwell?
No: It’s the United States, supposedly the beacon of enterprise for the entire world. Governments at every level — not to mention unelected regulatory agencies — regularly deny individuals the basic freedom of enterprise that is every American’s birthright. Often they do so not to protect public health or safety, but to protect established businesses from competition.
Our Constitution was meant to protect economic liberty, the right to earn a living free from arbitrary or excessive governmental restraint. Following the Civil War, southern states attempted to maintain a servile labor supply by negating the economic liberty of newly emancipated blacks. Congress responded by enacting the 14th Amendment, whose guarantee of citizens’ “privileges or immunities” was designed to protect economic liberty.
Yet when aggrieved entrepreneurs turn to the courts for protection, they almost always lose. Unlike when other constitutional rights such as freedom of speech are involved, courts apply to economic regulations the so-called “rational basis” test, a misnomer because in most instances it does not require the government to prove a basis for its actions, much less a rational one. Some courts even have recognized economic protectionism as a legitimate government objective.
How did this happen? The emergence of the regulatory state is well-chronicled, but the acquiescence to it by the judiciary (including many conservative judges) is decidedly less so.
In the Slaughter-House Cases, decided only a few years after the passage of the 14th Amendment, the U.S. Supreme Court, by a 5–4 vote, obliterated the privileges-or-immunities clause by upholding a bribery-procured slaughterhouse monopoly. A half-century later, the New Deal Supreme Court completed the deed by relegating economic liberty to the basement of the constitutional pantheon. Today, while the 14th Amendment’s equal-protection and due-process guarantees remain vibrant, the privileges-or-immunities guarantee is a dead letter.
Real-world consequences of this judicial abdication abound, nowhere more perniciously than at the bottom of the economic ladder. Occupational-licensing laws and government-imposed business monopolies (such as those that govern taxi service in most cities) prevent entry into trades and businesses that require little capital or formal training. In many instances, the barriers are imposed by boards comprising members of the regulated industry, who have an incentive to limit competition.
One victim is Cindy Vong, who fled Communist oppression in Vietnam as a young girl to make a better life in America. The owner of a licensed nail salon, Vong discovered an exciting new enterprise popular in Asia called Spa Fish, in which tiny, toothless carp nibble dead skin from patrons’ feet. The practice poses no health or safety risks and reportedly provides a relaxing experience.
Vong invested thousands of dollars in the new venture and attracted customers from several states. But the Arizona Board of Cosmetology, ever fearful of new forms of competition, ordered Vong to shut down her business. Vong had to lay off employees and lost her entire investment. The Goldwater Institute filed a lawsuit challenging the board’s actions. After the state trial court dismissed the lawsuit, the Court of Appeals overturned that decision, holding that Cindy Vong is entitled to her day in court.
In recent years, some courts have struck down arbitrary barriers to enterprise, such as cosmetology-licensing laws that restricted African hair-braiding and the funeral cartel’s monopoly over casket sales. But until the U.S. Supreme Court reconsiders and overturns the Slaughter-House Cases, government will continue to run roughshod over the American Dream.
— Clint Bolick is research fellow with the Hoover Institution and litigation director at the Goldwater Institute. This article is based on his new book, Death Grip: Loosening the Law’s Stranglehold over Economic Liberty.