States, Not Nation

Naomi R. Lamoreaux and John Joseph Wallis

The third Indiana State House, constructed 1835. Woodcut from The American Cyclopædia, 1879. Courtesy of Wikimedia Commons.

When we first started to write the paper that became “Economic Crisis, General Laws, and the Mid-Nineteenth-Century Transformation of American Political Economy,” we called it “States, Not Nation.” That pithier title underscored a key historiographical insight that we wished to convey: that the institutional changes that mattered most for the economic and political development of the United States occurred at the state—not the national—level, and were a product of the mid-nineteenth century, not the founding era. As we revised our paper for publication and responded to comments from referees and other readers, we found ourselves downplaying this issue in favor of others that currently preoccupy historians. The argument is critically important, however, and so we glad to have the opportunity to highlight it here.

Viewed in the context of world history, the United States is one of a very small number of countries that have made the transition from a government organized around personal rules (rules that vary depending on the identity of the individuals to whom they apply) to one based on impersonal laws (laws that apply uniformly to everyone or at least to broad groups of citizens). Most economic and political theory acknowledges either explicitly or implicitly the centrality of this transformation for the development process, but scholars know almost nothing about when and how it occurred. Indeed, most American historians do not even know that politics in the United States was for a long time organized around personal rules and that most of what legislatures did in the first half of the nineteenth century, at both the state and the national levels, was to enact private and local bills on behalf of specific individuals, groups, and localities. Those acts included the special charters for banks and corporations that historians have written about, but they also included many other types of bills. Moreover, despite the scholarly attention devoted to the general incorporation laws that spread in the middle third of the century, these statutes actually did little to curb the practice of granting special charters or other privileges to favored business organizations.

What did bring change was a set of state constitutional revisions initiated by Indiana in 1851 and then adopted by almost all the other states over the next several decades. These revisions typically prohibited legislatures from enacting private, special, and local bills in a long list of categories, including corporate charters, but they went further and mandated that whenever possible laws had to be general and uniform throughout the state. In the wake of these revisions, private, special, and local bills for all practical purposes disappeared. Instead, the bulk of the now greatly reduced legislative output consisted in the first place of general laws and secondarily of measures needed to structure and fund state governments, whose responsibilities were also growing during this period. This growth in state capacity was not coincidental. To the contrary, as we show, the regulatory state was itself largely an outgrowth of the shift to general laws.

An Act for the Relief of Thomas Carrico of Knox County, 1846.

These developments occurred entirely at the state level. The federal constitution was never similarly amended, and the features of that document that scholars have lauded, such as separation of powers and the Bill of Rights, did nothing to prevent Congress from enacting droves of special bills. Nor did the Fourteenth Amendment. Although the state constitutional mandates for general laws changed the norms for how governments should operate, reform came only slowly to the federal government. For nearly a century after Indiana’s pioneering provisions, Congress systematically undermined the general laws it enacted by enabling favored individuals and companies to escape their terms through special legislation. Not until 1946, with the passage of the Administrative Procedures and Legislative Reorganization Acts, did Congress make a serious effect to rein in private bills. But even then it did not completely halt the practice, as illustrated by the 1980 Abscam scandal, a sting operation in which several congressmen were convicted of accepting bribes in exchange for private legislation granting asylum to a fictitious sheik.

Our article, which focuses on Indiana’s pivotal constitutional revision, just scratches the surface of what needs to be done to understand the transformation to general laws and its effect on the workings of the economic and political system. To the extent that the historical literature has considered the role of state governments it has been mainly to debate whether the U.S. had a strong or weak state in the nineteenth century. We think this is the wrong question. Governments can be strong in a conventional sense, yet operate on the basis of personal rules. Sustained economic growth and healthy democratic politics require impersonal rules. Historians’ obsessive focus on the federal constitution and national-level developments cannot advance our knowledge of this transformation. What we need instead is a new narrative built up from a foundation of ground-breaking research on the individual states. The work will be difficult because there are many states and as many variations in the way the shift to general laws played out. But it is critical to produce these accounts and to learn how to generalize from them. The payoff from undertaking this still largely unknown history is potentially huge. Can we say the same about another study of the framers?

14 September 2021

About the Authors

Naomi R. Lamoreaux is Stanley B. Resor Professor of Economics and History at Yale University, Senior Research Scholar at the University of Michigan Law School, and a Research Associate at the National Bureau of Economic Research.

John Joseph Wallis is Mancur Olson Professor of Economics at the University of Maryland.

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