Читать книгу Liquid Capital - Joshua A. T. Salzmann - Страница 9

CHAPTER 2

The Legal Construction of Free Marketplaces

Situated at the nexus of critical water and rail arteries, Chicago grew with astonishing speed, from a frontier crossroads of 350 in 1833 to a metropolis of 300,000 by 1870. When fire scorched and leveled much of the city in October of 1871, Chicagoans rebuilt, bigger and faster, and the population soared past one million by 1890.¹ The city’s waterways and railroads stretched into the countryside like tentacles, greedily sucking nature’s bounties—the fruits of fertile farmlands and tall pine forests—into the city, where they were either consumed by the city’s exploding population or shipped out along the same waterways and railroads, supplying the nation’s expanding economy and population with raw materials and finished products.

Chicago’s vitality would not have been possible without its vast network of commercial arteries, but the rise of Chicago as the preeminent commercial hub of the North American interior involved more than digging canals and fashioning structures of timber, brick, iron, and steel. Chicago’s rise was a product, too, of political cataclysm. The Civil War deprived Chicago’s chief rivals, Saint Louis and Cincinnati, of their lucrative trade with the South. As its challengers withered, Chicago profited from the bloodshed. In 1862 alone, the Union Army spent more than $4.7 in the city on supplies of clothing, meat, lumber, and, most critically, grain.² By war’s end, Chicago had become the nation’s preeminent east-west commercial hub, and the city’s harbor was the busiest in the nation by far. More boats arrived in Chicago during 1871, for instance, than in the ports of New York, San Francisco, Philadelphia, Baltimore, Charleston, and Mobile combined.³

The ships that called at those great seaports tended to be larger than the canal and lake boats that frequented Chicago, but the fact remained: the waterfront of the nation’s great inland metropolis had become a fulcrum on which significant parts of the American economy turned. The Chicago River’s banks had, for example, become the site of leading world markets for lumber and grain. On the South Branch of the Chicago River, lake ships deposited cargoes of timber from the great stands of Wisconsin and Michigan in massive lumber yards clustered around river slips south of Twenty-Second and west of Halsted Street. By 1879, the stock in Chicago’s lumber yards exceeded four hundred million board feet, or over one-fifth of all the milled timber in the region stretching from Cleveland to Minneapolis. Much of this lumber from Chicago would, in turn, be shipped to farmers and merchants on the treeless prairie.⁴

The main branch of the Chicago River, meanwhile, formed the geographic center of the city’s rapidly growing trade in grain. In 1850, Chicago handled half as much wheat and flour as passed through St. Louis, but within just four years, Chicago handled three million bushels of wheat to its rival’s 2.1 million.⁵ Midwestern farmers sent even more wheat to Chicago during the years leading up to and during the Civil War. Using mechanical reapers forged in Cyrus McCormick’s factory beside the Chicago River, farmers harvested enough wheat to feed the Union Army. “Without McCormick’s invention,” noted Secretary of War Edwin Stanton, “the North could not win and … the Union would be dismembered.”⁶ In the first two years of the conflict, grain exports from Chicago soared from thirty-one million to sixty-five million bushels.⁷ These levels of production continued after the war, with global economic ramifications. In 1873, for instance, the city handled over sixty-eight million bushels of grain, and Chicago wheat flooded markets as far away as Central Europe and Russia.⁸

These great commodity flows were made possible through feats of engineering—the dredging of the river and the construction of the Illinois and Michigan Canal, for example—as well as the development of new technologies, like steam-powered grain storage elevators and railroads, which linked the nation’s watercourses to a rapidly growing transportation network centered largely on Chicago.⁹

No less important than these, though, were feats of legal and political engineering undertaken by Illinois lawmakers, some business leaders, and state and federal judges. Methodically and very intentionally, they created well-regulated, public waterfront spaces through which the Midwest’s bounty could freely flow.¹⁰ Their efforts culminated in two landmark Supreme Court cases, Munn v. Illinois (1877) and Illinois Central v. Illinois (1892), which declared public, state control over Chicago’s riverside grain elevators and its lakeshore harbor.¹¹ These rulings helped spur Chicago’s economic development by making the city’s waterfront accessible to those who wished to use it for profit. Illinois Central and Munn also shaped how jurists made the often-subjective distinctions between public and private sectors. Those distinctions defined late nineteenth- and early twentieth-century American law.

Monopolizing Space and Information at the Gateway of Commerce

In 1848, the Chicago waterfront became what Supreme Court Justice Morrison Waite would later call the “very gateway of commerce,” when the Illinois and Michigan Canal breached the continental divide, making it possible to ship grain and other goods from points on the Mississippi River watershed to Chicago.¹²

Just as the canal brought goods from the city’s hinterland to its busy waterfront, so too did railroads; Chicago’s waterfront thus became a critical junction between North America’s waterways and its growing web of railroads. In November 1848, Ogden’s new Galena and Chicago Union Railroad sent the first locomotive steaming out of the city, connecting its waterfront to a new agricultural hinterland. Starting at the railroad’s terminal near the Chicago River, the Pioneer pulled a single baggage car carrying a cadre of prominent Chicagoans to a point eight miles west of the city. On the outskirts of town, the train encountered a farmer bringing a wagon load of wheat and hides into Chicago. Two of the Pioneer’s passengers purchased the goods and transported them to the city aboard the train. By 1848, then, a new economic geography had been established. Grain traveled from the farms of the Midwest by rail and by canal to the banks of the Chicago River where it awaited transshipment to consumers.¹³

Businessmen such as Ira Munn and George Scott erected large warehouses—with rails flanking one side and the Chicago River on the other—to store the grain in route from the Midwest to consumers in the eastern United States and Europe. As grain sat in those elevators awaiting rail or water shipment, Munn and Scott not only charged farmers storage fees, they harbored immensely valuable information about the supply of a crucial global commodity. Their control of this market information owed to economic geographies, technologies, and business practices developed in the 1840s and 1850s—all of which had made the Chicago waterfront a critical bottleneck in the global grain trade.

Chicago’s grain elevator operators made their private riverfront property—and information—the subject of broad, public concern by using it to manipulate markets. The men came to epitomize the nineteenth-century “robber baron.” Though often associated with pitchfork-wielding populists, the term was actually coined by scions of two elite Boston families, Charles Francis Adams Jr. and Josiah Quincy Jr., who dubbed the businessmen who monopolized transportation corridors “robber barons,” recalling the medieval Germanic warlords who had allegedly strung iron chains across the Rhine River and taken toll from all who passed.¹⁴

The grain elevators built by men like Munn and Scott provided railroads with a critical, labor-saving technology that, for legal reasons, they could not directly harness themselves. When the Pioneer brought the first load of wheat to Chicago, it was most likely stored in sacks by the farmer who grew it. Sacked wheat required an enormous amount of labor to transport. Each sack had to be loaded onto a railcar or boat, transported to Chicago, offloaded for inspection and purchase, reloaded for shipment to the consumer, and, at its destination, unloaded again. These steps required human muscle, but this changed in the 1850s when Chicagoans adopted the steam-powered grain elevator introduced in 1842 by Buffalo warehouseman Joseph Dart. A conveyor belt with affixed buckets carried grain to the top of the multistory structure where an operator weighed it before dumping it into one of several great, vertical storage bins. When it came time to transport the grain again, the elevator operators simply opened a chute at the bottom of the bin and poured its contents into a waiting ship or railroad car below.¹⁵

Even though the railroads that handled grain required elevators, their corporate charters seldom permitted them to enter the storage business.¹⁶ Consequently, railroads often rented waterfront lands to elevator operators. In the early 1860s, for example, the massive Chicago and Northwestern Railroad, which had since subsumed the Galena and Chicago Union, leased a parcel of land on Chicago’s Water Street near the Kinzie Street Bridge to Munn and Scott. In 1862 Munn and Scott erected the Northwestern Railroad Elevator with fifty bins capable of holding up to six hundred thousand bushels of grain.¹⁷

The adoption by Munn, Scott, and other warehousemen of steam-powered elevators depended on organizational innovations that transformed the fruit of the prairie into a form of currency. As elevators became larger, it proved impractical to store just one individual’s grain in a single, voluminous bin. Warehouse owners therefore sought to mix the grains of various owners. This presented a problem. If different grains were mixed, how could property be returned to its rightful owner? This question was taken up by the Chicago Board of Trade. The board was founded in 1848 by eighty-two businessmen, from a wide-range of occupations, 38 percent of whom had served as members of the organizing committee for the 1847 River and Harbor Convention.¹⁸ In keeping with the members’ interest in transportation, the board became increasingly focused on the city’s growing grain trade during the 1850s and 1860s. Grain elevator operators, in turn, assumed positions of power in the Board of Trade; Munn, for instance, served as its president from 1860 to 1861. To help elevator operators maximize their storage space, in 1856 the board established categories and grades, or quality measures, for wheat. Thus, when a farmer deposited his crop into an elevator, it would not be segregated. Rather, the elevator operator would mix it with wheat of a like grade and category, “no. 2 winter wheat,” for example. This practice helped maximize storage space as well as facilitated transactions. The person who deposited grain into the warehouse received a receipt not for the very same grain but for a like amount of the same category and grade.¹⁹ The elevator receipt became a form of currency. Farmers sold them to grain merchants. Grain traders bought and sold receipts in the trading “pits” at the Board of Trade, and banks accepted them as collateral and for deposit.²⁰ In effect, a warehouseman who issued a grain receipt printed money.

Chicago elevator owners colluded to cheat farmers and grain traders alike. In 1862, the owners of the city’s north and west side elevators established a secret pool; they divided ownership of seven elevators into four hundred shares, bought interlocking portions, and distributed dividends. Munn and Scott, majority owners of four elevators, managed the warehouses on the city’s west side, keeping books and distributing dividends.²¹ Through the pool, Chicago’s warehousemen helped eliminate price competition and negotiated favorable shipping agreements with railroads. Farmers had virtually no control over which elevator received their grain or the cost of storage. This made them susceptible to even greater abuses. Elevator operators shortchanged farmers by rigging scales, arbitrarily downgrading wheat, and lying about crop spoilage.²² With their cunning and their control over a commercial gateway, grain elevator owners became extremely wealthy. In the 1860s, a typical elevator charge for receiving, twenty days storage, and shipping grain amounted to two cents per bushel, or approximately 5 percent of the total cost of transportation from a Midwestern farm to New York City. In 1864 The Prairie Farmer estimated that Chicago’s warehousemen reaped one million dollars in annual income or an average of eighty thousand dollars per elevator.²³ By the late 1860s, Munn’s dividends from the pooling agreement averaged one hundred thousand dollars per year, an income he sought to augment through market manipulation.²⁴

A Chicago grain elevator bestowed upon its owner the ability to control market information—a power warehousemen frequently abused. As the grain of the American Midwest passed through Chicago, elevator owners issued storage receipts. Those texts not only functioned as a claim check, they told a story about the quality and supply of a commodity. And, as that story changed, so too did prices. In the hands of a duplicitous elevator operator then, the storage receipt took on a literary form best described as market fiction. Sometimes an elevator owner issued bogus receipts. Other times, an owner simply neglected to retire a receipt after a client claimed a lot of grain.²⁵ In either case, the effect was the same. The elevator owner circulated receipts not backed by actual grain, thereby profiting from a lie.

That lie also created the impression of larger grain supplies, driving prices lower. An elevator owner could profit from buying low on his own reports of large supplies, leaking the truth about the actual amount of grain in store, and selling to hapless traders as the prices rose. If an elevator owner wanted to put upward pressure on prices, he could fabricate a story of scarcity. An elevator owner might falsely report that grain supplies in his care had spoiled—and sell high on the news.²⁶ Whatever the market fiction, an elevator operator’s word was made both plausible and unverifiable by the space he controlled. His elevator contained the truth about grain supplies, but by invoking his private property rights, he could deny others the opportunity to confirm his word.

Public Space and Access to Market Information

After the Civil War, Midwestern farmers belonging to cooperative organizations known as Granges successfully pressed Midwestern state legislatures to enact railroad and grain elevator rate restrictions, leading to a series of six cases testing the legitimacy of statutory economic regulation. The court’s ruling in Munn was the first in the “Granger Cases,” which upheld the state rate regulations.²⁷ Illinois farmers did advocate grain elevator rate restrictions, though the more powerful impetus for elevator regulation came from Chicago grain traders who wished to peer inside the bins. The story of this strange alliance of farm and finance shows that critical economic spaces like the Chicago waterfront were the site of fierce contests over more than just goods. In Munn, the court used the language of space—the “gateway of commerce”—to pronounce upon a conflict over information.²⁸

That fight began in the Board of Trade during the 1850s, and it spilled out into state politics. The board’s members comprised, in part, grain traders who wanted a public accounting of supplies and elevator operators who sought to hide their stores from prying eyes. In 1857, the grain traders took the upper hand, compelling the board to appoint inspectors to enter the warehouses and report on the quality and condition of stores. At the same time, the Board of Trade also began to act as a clearinghouse for market information by recording incoming and outgoing grain shipments to prevent the issue of false receipts.²⁹ Two years later, the Illinois state legislature enhanced the Board of Trade’s powers by granting the organization a special charter as “a body politic and corporate.” The board thus assumed a quasi-governmental status with legal authority to compel its membership, which included the elevator owners, to comply with its inspection rules and standards for weights and grades.³⁰

Elevator owners nonetheless sidestepped board regulations. Since the elevators were private property, board inspectors depended on the permission of their owners to enter. Consequently, elevator operators could arrange for inspections at times when they were in compliance with regulations or their abuses could be masked.³¹ In light of these evasions, a growing faction of board members began to call for state regulation of the warehouses. That faction drove the grain elevator operators out of power during the 1870 Board of Trade officers’ election. Thus, the board that Munn had headed ten years earlier was now committed to using the state government to, in the words of its president, break “a monopoly highly detrimental to every interest of the city.”³²

The Chicago Board of Trade immediately pressed the state of Illinois for regulation. At the same time as the pro-regulation faction had gained power in the Board of Trade, Illinois lawmakers were in the midst of drafting a new state constitution. Constitutional convention delegates were being bombarded by petitions from merchants and farmers calling for passage of an article regulating grain elevators.³³ The convention did not take action, however, until the Board of Trade threw its weight behind the effort. At its urging, Delegate William Cary introduced an article calling for warehouse regulation, the text of which, some alleged, had actually been drafted by members of the board. The Board of Trade’s support for the measure made some delegates uneasy. Claiming to represent famers, delegate Thomas Turner, for one, decried the article as a means to help grain traders who he described as “leeches upon commerce and the community, that suck the life blood out of the farmers and dealers in grain.”³⁴

Even if the article was drafted for the benefit of grain traders, other delegates noted that farmers too would profit from accurate market information. Delegate William Coolbaugh, for instance, asked, “Can it wrong the farmer in Fulton county who ships a thousand bushels of grain to Chicago and holds it there, subject to the market, to require the warehousemen there to inform him and the public how many bushels of grain are in store, so that he may exercise his judgment about the best time to sell it?”³⁵ Coolbaugh’s rhetorical question not only described farmers’ need for market information, it underscored the challenges they faced operating over time and distance. The farmer had to pay to transport his crop to Chicago before he knew what price it would fetch on the grain market. The rapid price fluctuations brought about by the market manipulations of grain elevator operators could make this all the worse. Farmers, like commodities traders, had an interest in securing accurate information about grain supplies.

The delegates to the Illinois State Constitutional Convention designated grain elevators as “public” spaces in order to ensure access to market information. They passed an article stating, “All elevators or storehouses where grain or other property is stored for a compensation … are declared to be public warehouses.” If warehouses were public, the delegates reasoned, elevator operators could not invoke their private property rights to prevent inspection. The constitution not only designated the warehouses public, it mandated that their operators take responsibility for disseminating market information by making daily reports of the quantity and quality of grain stores. It also required elevator operators to permit the holders of grain receipts to inspect stores as well as the elevator’s account books. To give “full effect” to this article, the constitution called on the state legislature to “pass all necessary laws to prevent the issue of false and fraudulent warehouse receipts.”³⁶ Members of the state legislature, in turn, invited the Chicago Board of Trade to draft laws regulating warehouses and railroads. With the board’s proposals as a framework, the Illinois General Assembly passed the 1871 Warehouse Act designed to curtail railroad rate discrimination, set maximum storage fees, and prevent the issue of false elevator receipts. The legislature also required warehouse owners to obtain a state operating license and submit to the regulatory power of a new Board of Railroad and Warehouse Commissioners.³⁷

Grain elevator operators resisted state regulation, but Chicago’s Board of Trade and its banks ultimately forced them to comply with the law. Munn and Scott, for instance, refused to obtain an operating license or to let state inspectors enter their elevators. The state sued and won. In July of 1872, the court ordered Munn and Scott to pay a fine of one hundred dollars. The warehousemen appealed the ruling to the Illinois State Supreme Court, beginning the case that would culminate in the U.S. Supreme Court’s 1877 decision in Munn v. Illinois.³⁸ Even before the high court ruling, however, bankers and the Board of Trade forced elevator owners to comply with the regulations intended to prevent the issue of bogus receipts. Chicago banks refused to accept receipts from elevator operators that did not register them with state inspectors, and the Board of Trade barred unregistered receipts from the trading pits.³⁹ Thus, state law did not, in and of itself, solve the problem of bogus receipts; rather, it gave financial institutions a means to stop accepting unverified receipts as currency. By the summer of 1872 it was all but impossible for grain elevator operators to issue false receipts. They did, however, commit fraud by failing to retire old receipts from circulation after grain had been claimed.

Munn and Scott recycled receipts in order to raise money to speculate with a financial instrument designed to eliminate spatial and temporal risk from grain trading, the futures contract. Buyers and sellers of commodities like grain had long been plagued by the fact that the price could change wildly during the time it took to conduct a transaction over great distances. With the use of a telegraph, however, buyers and sellers could sidestep this problem by contracting to deliver a set amount of grain at an agreed-upon price on a future date. While the futures contract eliminated the risk of price fluctuation, it created new opportunities for speculation. Historian William Cronon offers this hypothetical example: “Imagine, for instance, that Jones sold Smith a futures contract for 10,000 bushels of No. 2 spring wheat at 70 cents a bushel, to be delivered at the end of June. If that grade was in fact selling for 68 cents a bushel on June 30, Jones could either purchase 10,000 bushels at the lower price and deliver the receipts to Smith or—more conveniently still—accept a cash payment of $200 from Smith to make up the difference between the contract price and the market price.” These speculations also created the possibility of a market “corner.” A corner occurred when a group of speculators surreptitiously bought up nearly all the real grain supplies as well as the contracts for delivery at a future date. When the futures contracts came due, those who were obligated to deliver grain discovered that they could purchase it only from the very speculators they owed. In other words, cornerers forced their marks to buy grain from them in order to deliver it to them. When that happened, the victorious speculators would bleed their victims dry by charging exorbitant prices.⁴⁰

During 1872, Munn and Scott joined a group of speculators in an attempt to corner wheat that they financed by selling old grain receipts. The group included warehouse owner Hugh Maher, Munn and Scott’s former broker F. J. Diamond, grain merchant Thomas H. Chisholm, and commission merchant John B. Lyon. In the spring, Lyon began buying contracts for future delivery at the end of August. By July, the trading pits were buzzing with news of Lyon’s maneuvers, and the price of wheat shot up from $1.16 a bushel to $1.35 by the end of the month. As the price rose, more farmers sent their crops to Chicago, making it more difficult for the group to buy up the physical stores of wheat before the August futures contracts came due.⁴¹ In order to raise the capital to support their corner, Maher, Munn, and Scott recycled elevator receipts rather than retiring them from circulation after the owner claimed the grain. This practice came to light when fire destroyed Maher’s “Iowa Elevator” located near the confluence of the north and main branches of the Chicago River. The postfire property loss investigations estimated that Maher had circulated receipts for three hundred thousand more bushels of grain than the Iowa Elevator had in store.⁴²

Maher’s duplicity led many Board of Trade members to suspect Munn, Scott, and other elevator operators of the same. The board demanded inspectors be allowed into all the city’s elevators to confirm that receipts matched stores. Munn and Scott acquiesced, or so it seemed. The warehousemen requested some time before the inspection to consolidate their holdings into a few bins. Their request was granted, and Munn and Scott set to work. But, rather than consolidate their grain, the warehousemen installed false bottoms in the bins of their great Northwestern Elevator. By raising the floors of the bins much higher, Munn and Scott made it seem as if their elevator was brimming with all the grain for which they had issued receipts. Their deception went undetected until November. In the meantime, Munn and Scott persisted in their wheat corner attempt, which brought financial ruin upon them.⁴³

Some of the very Midwestern farmers who accused elevator operators of exploitation likely contributed to Munn and Scott’s downfall. As Lyon continued buying up all the wheat supplies, prices soared to $1.50 a bushel on August 10 and to $1.61½ by August 15. At these prices, farmers hastily unloaded their stores; receipts in Chicago rose from 75,000 bushels a day in the second week of August to as many as 179,000 bushels per day in the third week of the month. Acting on behalf 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.