Clothed with a public interest

Granger Movement Promotional Poster, ca. 1873.
Library of Congress
Agriculture has been the backbone of Illinois’ economy from the very start. Whether it is farming itself, the manufacturing of farm equipment, or the transport, storage and sale of farm commodities, the agricultural sector has been a dominant part of Illinois’ economy for its entire history.

Just after the Civil War Illinois farmers were struggling. The farm economy had been hit with several challenges all at once. Soldiers returning from the war expected their jobs back, while new competition was coming from homesteaders arriving in the plains states west of the Mississippi. This all created new rivals for markets and eventually led to overproduction of corn and wheat. All the while, the post-war revolution in farm machinery compelled farmers to buy new equipment or risk falling behind.
Costs went up, farm product prices went down. Farms which had expanded during the war, helped along by financing from mortgages, were now in serious trouble. When the nation’s entire economy teetered on the brink of collapse in the Panic of 1873 farmers were especially hard hit.

Much anger was directed at the businessmen in Chicago who controlled so much of the farm economy. As early as 1866 complaints were being heard about a “livestock ring” operating out of the stockyards in Chicago which kept secret the prices they were paying for livestock. This drove speculation and led to wild fluctuations in farm prices. Meanwhile, a few firms maintained a monopoly on the grain storage warehouses in Chicago which held the more than 10 million bushels of wheat and corn produced by Midwestern farmers just after the war. Their monopoly allowed them to charge exorbitant rates for storage, while offering inadequate payments for grain purchases. Again, it was small farmers who suffered.

But most of the beleaguered farmers’ wrath was reserved for the railroads who charged to haul the freight. Initially the railroads had been welcomed by farmers in Illinois and elsewhere as helpful transportation resources for bringing crops to market. In the 1850s Illinois farmers had helped subsidize the construction of short lines from town to town. But over time these lines had merged with larger railroads or been mismanaged into bankruptcy. Farmers lost their investment in the smaller lines and more than a few lost their farms altogether while the big railroads overcharged them for transporting passengers and products.

Fed up, these angry farmers began to organize into a rural political and economic movement called the National Grange of the Order of Patrons of Husbandry, but it would come to be known simply as the Grange. It was formally established in Washington DC in 1867.

In Illinois the Grange achieved a number of early successes in the legislature, such as enactment of a law which dented the warehouse monopoly by opening railroads to independent grain elevators. They made legislative progress on railroad rates, but the law had no real enforcement mechanism, so it was difficult to see results. Grangers also worked to create farm co-ops, better mail delivery in rural areas and a system of loans for farmers, the forerunner of today’s Farm Credit System. But their most intense battle in the 1870s would be over the subject of transport and storage rates for farmers.

When Illinois revised its state Constitution in 1870, the voices of the Grangers were heard. The new Constitution declared certain warehouses and rail lines would be considered public and gave the legislature the right to use regulation to address the injustices to which small farmers had been subjected.

Other states had attempted to legislate on this issue, and they had failed. Transportation and 
Shelby Moore Cullom

storage interests fought them vigorously in the courts and prevailed time and again. But in Illinois those interests would run up against a Republican legislator from Springfield named Shelby Moore Cullom.

Cullom knew that any law regulating grain markets would have to have some flexibility in order to survive a court challenge. It was the rigidity in the previous efforts to set specific rates which had helped to doom the laws to failure. Legislation enacted in Illinois in 1871 had created a commission to rule on charges of discriminatory rates but the commission had been roundly ignored by the railroads and the warehouses. Warehouses continued to charge whatever storage fees they wanted and railroads continued to banish from their trains passengers who declined to pay their higher fares. One line even went so far as to uncouple a train car filled with farmers and leave it on a siding while the train departed.

As other states gave up and dropped their efforts to regulate the markets, Cullom sought to push Illinois into trying again, this time with a law that would survive in the courts and accomplish its goals. The legislation he proposed in 1873 had an important distinction from the unsuccessful bills in Illinois and neighboring states: it empowered the commission to outlaw discriminatory rate schedules but it gave the warehouses and railroads a chance to offer the commission some kind of justification for their rates. If they could prove the rates were warranted they could maintain them. Cullom’s legislation passed into law, carried by the belief that it would address the problem and also be flexible enough to be upheld by the courts.

The challenge came quickly. A Chicago warehouse operated by a company called Munn & Scott was charged and found guilty of violating the law. Munn challenged the law in court, citing violations of the Commerce Clause and the 14th amendment of the U.S. Constitution without due process of law. The case of Munn v. Illinois would go all the way to the U.S. Supreme Court.

Illinois Chief Justice Sidney Breese
Back in Illinois, Chief Justice Sidney Breese had upheld the convictions and the law’s constitutionality. He based his ruling on the new state Constitution’s Article 13, which began, “All elevators or storehouses where grain or other property is stored for a compensation, whether the property stored be kept separate or not, are declared to be public warehouses.”

Breese maintained that a business operating in the public interest, which the warehouses and railroads were, could therefore be regulated by the state.

The U.S. Supreme Court agreed, handing down its ruling on March 1, 1877.

“Property does become clothed with a public interest when used in a manner to make it of public consequence and affect the community at large,” Chief Justice Morrison Waite wrote in the ruling. “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.”

The ruling had established the principle that a state could in fact regulate a private industry if it was operating in the public interest. Railroads now moved to comply with the new Illinois law and the laws of other states which followed Illinois’ example. By 1881 railroads were enacting new rates which were fairer to farmers and other residents of rural areas.

In Illinois the popularity of the law had in 1876 helped Cullom win one of the closest races for governor in Illinois history. He moved to the U.S. Senate in 1883. Soon the familiar issue of railroad regulation was being fought out on the national stage after the Supreme Court rolled back part of the Munn ruling in the Wabash v. Illinois case of 1886. Cullom was able to apply his experience in enacting the landmark Illinois law to a new federal regulatory act creating the Interstate Commerce Commission in 1887.

The reach of the Munn ruling would be restrained by Wabash and later court decisions, but its spirit lived on. It would have a long impact in America, opening the door to the “progressive era” of reform and regulation over the next decades which included such legislation as the Pure Food and Drug Act, the eight-hour work day, prohibitions on child labor and President Theodore Roosevelt’s aggressive reforms and regulations of monopolies and trusts at the turn of the 20th century. All of these improvements to the quality of life of all Americans can trace their roots to the Court ruling on a law passed to help farmers here in Illinois.