of the cornering syndicate, Lyon kept buying, but he was running out of cash. Lyon turned to Chicago’s banks, seeking a large, short-term capital infusion to support the corner until the futures contracts came due at the end of the month. All through business hours on August 19, Lyon bought wheat, spending the very last of his money. Then at five o’clock, he got devastating news. Chicago’s bankers denied him credit, citing provisions in their corporate charters that prohibited lending more than 10 percent of their capital to one borrower. With no more money to buy up wheat supplies, the corner collapsed.44 The men were ruined. Diamond skipped town with his account books. Chisholm drowned himself in Lake Michigan.45 Munn and Scott sold their holdings to grain magnate George Armour in a transaction that netted Munn only ten dollars. The low price reflected the fact that Armour had to honor the receipts issued by Munn and Scott for hundreds of thousands of bushels of grain not contained in the elevators. On October 29, 1872, a court forced Munn and Scott into bankruptcy, and in December they were expelled from the Board of Trade.46 Disgraced, the men faded from public view. Munn last surfaced in Denver, Colorado, where he signed an affidavit just six months before the United States Supreme Court issued its landmark ruling in the case that bears his name, but in which he had no stake.47
Public Space and the Making of a Free Market
In Munn v. Illinois, the Supreme Court confronted the reality of an increasingly complex, interconnected economy. The private property of the few—particularly if located at a transportation bottleneck like the Chicago waterfront—could threaten that of the many. Those few—Chicago’s warehouse owners—brought the case before the courts.
In 1872, Munn and Scott appealed their conviction for violating the Warehouse Act by refusing to acquire an operating license. In 1874, the Illinois Supreme Court rejected their appeal, upholding the constitutionality of the Warehouse Act. By that time, Munn and Scott had gone bankrupt, but Chicago’s remaining warehousemen appealed the state’s ruling to the United States Supreme Court. The elevator operators were particularly interested in overturning the provision of the act limiting maximum charges for grain storage.48 The rate limits, they protested, reduced the value of their private property. Yet those very limits aimed to protect the private property of the traders, farmers, and merchants who, by necessity of economic geography, had to store their grain in Chicago’s elevators.
There was no escaping the fact that the private property rights of the elevator owners and of grain traders, merchants, and farmers were mutually exclusive. The conservative Chicago Tribune cringed at the prospect of state intervention in the economy, but saw no alternative. When the Illinois Supreme Court upheld the Warehouse Act in 1874, the paper lamented: “we have to contemplate a novel and in some respects dangerous decision [upholding statutory economic regulation] on the one hand or we have to face an omnipresent and hitherto invulnerable monopoly on the other.”49
The Tribune’s lament over having to choose between dependence on a monopoly or state meddling in the economy reflected a broader crisis of liberalism. The liberal economic dogmas of the first half of the nineteenth century no longer seemed to apply. In antebellum America, monopolies were widely considered to be products not of private property, but of state grants of special privileges. Antimonopolists during the ages of Jefferson and Jackson therefore embraced laissez faire as a radical, democratic doctrine that protected common people from elites otherwise capable of using their political capital to secure economic favor. Following the logic of classical liberal political economists like Adam Smith, American political leaders such as Jefferson and Jackson believed that private property would serve as a means of self-sufficiency and political independence. By the 1860s, however, it was becoming clear that, as the Tribune noted of Chicago’s grain elevator operators, laissez faire, and even some forms of private property ownership, could be means not of independence, but of dependence.50 The conflict over private property on the Chicago waterfront that led to Munn therefore invited the Supreme Court to weigh the merits of laissez faire against a new liberalism, rooted in a pragmatic understanding of economic space, where the state wielded its power to prevent some private property owners from using their geographic advantages to exploit others.
The warehousemen of Chicago advanced a classical liberal, laissez faire defense of private property rights in Munn, claiming that strict constitutional protections for private property would foster investment in business. To argue their case, the elevator owners hired the esteemed attorney John N. Jewett.51 A native New Englander with a serious demeanor, Jewett became a pillar of the Chicago legal community, cofounding the Chicago Bar Association in 1873, serving as the organization’s president in 1877, and holding the position of dean of the John Marshall Law School from 1899 until his death in 1904.52 In Munn, the attorney insisted that by setting maximum storage rates the state was depriving warehousemen of income, or taking their property without due process. If the Supreme Court upheld that precedent, Jewett worried, it would set “the government … on … the highway to the plundering of individual wealth, and the destruction of private enterprise.” Jewett wondered what incentive anyone would have to invest in business.53
If Jewett’s more philosophical argument about the sanctity of property rights swayed the justices, his second, jurisdictional claim only underscored the practical reality his clients wished to deny. Namely, the public had an interest in Chicago’s waterfront grain elevators. Jewett argued that Chicago’s elevators were so critical to the flow of grain across the continent that their use constituted a form of interstate commerce, even though all the warehouses were located in the state. Thus, Jewett suggested the elevators could not be regulated by the Illinois legislature, only Congress.54 Jewett seemed to have gambled on the fact that he could not realistically deny the economic centrality of the waterfront elevators. His strategy backfired. The court rejected Jewett’s jurisdictional argument and readily accepted his point about the geographic centrality of Chicago’s grain warehouses, which played into the hand of Illinois Attorney General James Edsall. Edsall claimed that location was the very thing that made the grain elevators a form of public, not private, property. Chicago’s warehousemen, Edsall noted, “can impose such rates upon shippers and producers of grain as they see fit,” because they are “in the possession of the very ‘gateway to commerce.’” Without regulation, elevator operators could extort the whole nation. Edsall insisted that setting grain storage rates, like those of draymen, hackmen, or ferry operators, would facilitate the flow of an essential commodity through Chicago’s waterfront, thereby safeguarding the grain market.55
The Supreme Court concurred with Edsall’s view that economic geography had transformed Chicago’s elevators from a private business to one “affected with a public interest.” With that phrase the author of the seven to two majority opinion, Chief Justice Morrison Waite, established a precedent for state legislatures to respond to the new economic realities of the Industrial Age with statutory regulations. His ruling in Munn was among the most significant events of his career. Waite grew up in Connecticut where his father practiced law and earned a seat on the state’s Supreme Court. Morrison Waite attended Yale before settling in Toledo, Ohio, practicing law, and serving one term in the Ohio Senate from 1849 to 1850. The Whig-turned-Republican lawyer was little known on the national political stage until President Ulysses S. Grant nominated him to the nation’s highest court in 1874. Grant had already attempted to appoint four other men to the post; two had declined and two had faltered in their attempts at congressional confirmation. By nominating Waite, Grant satisfied many Ohio Republicans, including his distant relative and Secretary of the Interior Columbus Delano. Waite served on the bench from 1874 to 1888, distinguishing himself with good humor and able management.56 He showed his pragmatism in his ruling in Munn.
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