Breaking Down the Walls of Economic Protectionism

December 2003

Breaking Down the Walls of Economic Protectionism

By Clark Neily

The so-called “dormant” Commerce Clause forbids states from disrupting interstate commerce either by discriminating against citizens of other states or by enforcing regulations that unduly impede the free flow of commerce. In the Institute for Justice’s New York wine case, we argue that permitting in-state wineries to ship wine directly to New York consumers while denying out-of-state wineries the same right violates the dormant Commerce Clause. Similarly, we argued that Oklahoma had no power to impose its parochial licensing requirements on the interstate sale of caskets.

Although the primary goal of IJ’s economic liberty work is to strengthen the protections afforded by the Due Process, Equal Protection, and Privileges or Immunities Clauses of the Fourteenth Amendment, the dormant Commerce Clause serves as a living reminder that courts can—and should—take economic liberties seriously.

After first resisting the federal government’s massive usurpation of power during the New Deal, the U.S. Supreme Court soon decided to abandon its role in protecting economic liberties. To support this remarkable abdication of responsibility, the Court simply invented a distinction between so-called “fundamental rights,” which it deemed worthy of rigorous protection, and non-fundamental rights (including economic liberty and private property ownership), which it did not.

Not surprisingly, the wholesale demotion of an entire class of constitutional rights—particularly one whose common law pedigree and importance to the Framers was so firmly established—proved awkward.

As a result, the Supreme Court’s treatment of economic liberties has been inconsistent, to say the least. On the one hand, the Court has given states a green light to engage in the most blatant forms of economic protectionism, rent seeking and outright expropriation of property—as long as the primary victims of that conduct are the state’s own residents. Abusing the economic interests of non-residents, however, is strictly forbidden.

Why is the High Court so schizophrenic when it comes to economic liberties, treating them as insignificant in most cases, but sometimes—in dormant Commerce Clause and racial discrimination cases, for example—according them full constitutional standing?

The answer is suggested by the infamous footnote four of the 1938 Carolene Products case, where the Supreme Court expressed its belief that “political processes . . . can ordinarily be expected to bring about repeal of undesirable legislation.” Of course, even the most fervent majoritarian must concede that non-residents have little ability to repeal burdensome or discriminatory laws emanating from states where they cannot vote, which is why the Court protects even “non-fundamental” rights under the dormant Commerce Clause.

But if economic liberties are important enough to protect against cross-border depredations, why not defend them against home-state incursions as well? Because, as suggested in Carolene Products, the Supreme Court decided to turn a blind eye to the realities of special interest politics (or “faction,” as the Framers called it) and indulge the naïve fiction that legislatures generally act in the best interests of the people.

Of course, the reality is far different. We know that politicians who curry favor with one set of special interests by sticking it to out-of-state wineries today will gladly legislate politically powerless jitney drivers out of business on behalf of some other special interest tomorrow. So do the entrepreneurs that IJ represents have enough political clout to defend their right to earn an honest living from the onslaught of multi-billion dollar liquor wholesalers and big-city transit unions? Apparently, it depends whether you’re looking down from an ivory tower or up from the street.

Clark Neily is an IJ senior attorney.