Private Property and the American Way

Consider some of the issues that faced the new American nation in the last decades of the eighteenth century. Decisions on these issues were not made in a vacuum; they were made in the context of material and intellectual developments in Britain in the previous centuries, as well as the immediate and urgent problems that faced a new nation. If the philosophical thought of Locke and Hobbes as embodied in the Declaration of Independence and the Constitution set the intellectual currents, the immediate issues of the 1780s specified many of the immediate problems and proposed solutions. The new nation emerged from the Revolutionary War deeply in debt, both to foreigners such as the French who helped with finances, munitions, and equipment, and to American citizens who had lent funds to the Continental Congress. These debts were of such magnitude that the question was raised—could they be paid? A second problem facing the economy was the promises given to soldiers of the Revolutionary War that they would receive substantial veterans benefits. Again, the ability to pay was in doubt. Should these contractual obligations simply be canceled? A third urgent demand for tax moneys after the war arose because pirates were preying on our shipping. The economic and political system that emerged from the Constitution and the subsequent interpretations of that document reflected the underlying currents. More than any other two men, John Marshall and James Madison expressed the issues that were to set the tone for nineteenth century America. John Marshall, as Chief Justice of the U.S. Supreme Court, was concerned with the problems that had threatened the rights of private property before the Constitution, when “a course of legislation had prevailed in many if not in all of the states which weakened the confidence of man in man and embarrassed all transactions between individuals by dispensing with faithful performance of engagements.” The strengthening of the institutions of private property consisted to a very important degree in legally limiting the power of government. The objective was to embody a set of comprehensive rules in an impersonal legal structure, rules that would not be subject to political whim and change by legislative bodies. Thus, the contract clause of the Constitution as interpreted by the Marshall Court was designed to rectify the insecurities of private property that had stemmed particularly from the behavior of the individual states that made up the confederacy.

If Marshall was primarily concerned with devising a formal structure of law that would make a market economy based on contract productive, Madison was concerned with devising a political structure that would prevent factions from dominating the system. It is worth quoting Madison’s Federalist Paper No. 10 at some length to get the flavor of his intentions.

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Douglass C. North

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Consider some of the issues that faced the new American nation in the last decades of the eighteenth century. Decisions on these issues were not made in a vacuum; they were made in the context of material and intellectual developments in Britain in the previous centuries, as well as the immediate and urgent problems that faced a new nation. If the philosophical thought of Locke and Hobbes as embodied in the Declaration of Independence and the Constitution set the intellectual currents, the immediate issues of the 1780s specified many of the immediate problems and proposed solutions. The new nation emerged from the Revolutionary War deeply in debt, both to foreigners such as the French who helped with finances, munitions, and equipment, and to American citizens who had lent funds to the Continental Congress. These debts were of such magnitude that the question was raised—could they be paid? A second problem facing the economy was the promises given to soldiers of the Revolutionary War that they would receive substantial veterans benefits. Again, the ability to pay was in doubt. Should these contractual obligations simply be canceled? A third urgent demand for tax moneys after the war arose because pirates were preying on our shipping. The economic and political system that emerged from the Constitution and the subsequent interpretations of that document reflected the underlying currents. More than any other two men, John Marshall and James Madison expressed the issues that were to set the tone for nineteenth century America. John Marshall, as Chief Justice of the U.S. Supreme Court, was concerned with the problems that had threatened the rights of private property before the Constitution, when “a course of legislation had prevailed in many if not in all of the states which weakened the confidence of man in man and embarrassed all transactions between individuals by dispensing with faithful performance of engagements.” The strengthening of the institutions of private property consisted to a very important degree in legally limiting the power of government. The objective was to embody a set of comprehensive rules in an impersonal legal structure, rules that would not be subject to political whim and change by legislative bodies. Thus, the contract clause of the Constitution as interpreted by the Marshall Court was designed to rectify the insecurities of private property that had stemmed particularly from the behavior of the individual states that made up the confederacy.

If Marshall was primarily concerned with devising a formal structure of law that would make a market economy based on contract productive, Madison was concerned with devising a political structure that would prevent factions from dominating the system. It is worth quoting Madison’s Federalist Paper No. 10 at some length to get the flavor of his intentions.