Commentary / History

Steamboat Case Clears Way for American System

 by Edward Spannaus

 Fourth in a series on The Supreme Court Affirms the American System

 It is not immoderate to say that no other judicial pronouncement in history was so wedded to the inventive genius of man and so interwoven with the economic and social evolution of a nation and a people.

Thus did John Marshall biographer Albert Beveridge, almost one hundred years ago, laud John Marshall’s ruling in the 1824 “Steamboat” case, Gibbons v. Ogden. While modern scholars are typically more cautious and circumspect in their assessment, it is generally accepted, even in this age of cynicism and “realism,” that Marshall’s ruling in this case not only paved the way for the flourishing of trade and commerce that followed it, but had an unrivaled influence on U.S. constitutional law up to the present day.

Steamboat Case Clears Way for American System

Steamboat on the Hudson River, as depicted in the 19th century

To appreciate the significance of the Gibbons case–which ended a New York State-granted monopoly over river navigation–it should be recalled that the need for centralized regulation of commerce and trade was a major element of the drive to remedy the defects of the Articles of Confederation, which culminated in the Philadelphia Constitutional Convention.

At least as early as 1781-82, in The Continentalist papers (nos. 4 and 5), Alexander Hamilton argued that Congress must have the power of regulating trade. The 1786 Annapolis Convention was convened at the initiative of Virginia to try to work out arrangements with Maryland and Pennsylvania, for navigation of the Potomac River, and establish a link to the Ohio River. The January 1786 Resolution of the Virginia General Assembly stated that the purpose of the Annapolis meeting should be to examine the trade relations of the various states, and to “consider how far a uniform system in their commercial regulations may be necessary to their common interest and their permanent harmony.”

The lack of success of the Annapolis Convention led directly to the convening of the Federal Convention in Philadelphia the next year, impelled by disputes and squabbles between the states, particularly over questions of trade, the protection of property, and the need for uniform regulation of commercial transactions, which would enable the new nation to prosper and grow.

The Federal Convention wrote a Constitution which met these requirements in principle, and on paper.  But it took decades, and above all the three decades of the Chief Justiceship of John Marshall, to enforce these principles, and make the Constitution the actual law of the land.  The Steamboat case was a key element of that process of implementing the Constitution, by clearing the way for the American System of economic development.

The Court’s Unfinished Business

Part 2 of this series left off with Marshall’s 1821 ruling in Cohens v. Virginia, which should have settled, once and for all, the principle of the supremacy of the federal Constitution – and of the Supreme Court as its final interpreter and expositor. This ruling was the culmination of Marshall’s development of the principle of judicial review.  In 1803, in Marbury v. Madison, he had established the authority of the Supreme Court to review acts of Congress, and in Fletcher v. Peck (the 1809 Yazoo lands case) he passed judgment on the constitutionality–or unconstitutionality–of acts of a state legislature.  In Hunter v. Fairfax (1816), his colleague Joseph Story’s ruling  established the principle that the Supreme Court could hear an appeal from a state court and declare a state court ruling to be in violation of the Federal constitution.  And finally, in the 1821 Cohens case, Marshall pounded what should have been the final nail in the coffin of the “compact” theory of the Union, by asserting the authority of the Supreme Court to pass on the constitutionality of state laws and state court decisions.

All this Marshall had accomplished by 1821.  Yet, still unsettled were the closely-related questions of internal improvements (“infrastructure”), and Congressional power over commerce between the states.  It wasn’t until 1824 that the Supreme Court was squarely presented with the opportunity to rule on the question of federal versus state regulation of commerce.

After all, the Supreme Court can only decide “cases or controversies” that are put before it.  It does not offer its advice or opinion on matters not before the Court.  At least it usually doesn’t.  There was one notable exception to this rule, in 1822, when President Monroe sought the Court’s views on Congress’s authority to fund internal improvements, and Justice William Johnson responded to Monroe affirming Congress’s authority to do so.

Justice Johnson “Advises” Monroe

Justice William Johnson was one of Thomas Jefferson’s bigger miscalculations.  He was Jefferson’s first Supreme Court appointment in 1804, when the “sage of Monticello” was looking for a “Republican zealot” to place on the Court to counter the old Federalists. (This ranks right up there with Jefferson’s recommendation in the 1790s that it would be better to get John Marshall out of the way by appointing him a judge, rather than electing him to Congress, as Hamilton wanted.)

Steamboat Case Clears Way for American System

The route of the National Road, which clearly needed cooperation between the states.

Johnson’s first break with Jefferson was his ruling that Jefferson had unconstitutionally exceeded his authority in enforcing the Embargo Act of 1808–thus following Marshall’s precedent in Marbury v. Madison of declaring unconstitutional an act of the Executive.

Although he emerged as a strong nationalist over his years on the Court, Johnson did not always agree with Marshall, and was more inclined to strictly define federal jurisdiction. But on the core planks of the American System–the national bank, protective tariffs, and internal improvements–he was in complete agreement, as shown by his correspondence with his friend Mathew Carey, who “stood in the vanguard of nationalist economists,” as one scholarly authority on Johnson accurately put it.

In May 1822, President Monroe vetoed the Cumberland Road bill, believing that Congress lacked the constitutional authority to appropriate funds for internal improvements; he thought a constitutional amendment would be needed to give Congress this power. In addition to sending his lengthy veto message to Congress, Monroe also sent it to each of the Justices on the Supreme Court for their views.  While Marshall and Story declined to comment directly, Johnson did reply, saying that he had polled his fellow Justices, and that they had instructed him to convey their views. He stated that the Justices

… are all of the opinion that the decision on the bank question [McCulloch] completely commits them on the subject of internal improvements as applied to post-roads and military roads. On the other points it is impossible to resist the lucid and conclusive reasoning contained in the argument.

The principle assumed in the case of the Bank is that the grant of the principal power carried with it the grant of all adequate and appropriate means of executing it. That the selection of those means must rest with the general government, and as to that power and those means the Constitution makes the Government of the U.S. supreme.

Johnson’s letter apparently had some effect, as shown in Monroe shifting course and signing a bill for internal improvements as he was leaving office in March 1825.  But that not only reflected the Supreme Court’s view as conveyed by Johnson, but it also showed the impact of the Court’s 1824 ruling in the Steamboat case.  To that, we now turn our attention.

The Steamboat War

Between the 1821 and 1824 terms, only one case of any constitutional significance came before the Supreme Court.  But much was going on in Congress and the states. Debates over internal improvements and protective tariffs were raging throughout the nation. At the same time, attacks on the Union were growing in the South, especially South Carolina and Virginia.  The “compact” theory of the Union, and the future of slavery, were inextricably intertwined.

Steamboat Case Clears Way for American System

Robert Fulton, inventor of the steamboat

Just three weeks before the Steamboat case–Gibbons v. Ogden–was argued before the Supreme Court, debate was beginning in Congress on the bill to appropriate funds for surveying roads and canals. John Randolph of Virginia made clear the connection between slavery, and the doctrine of implied powers which was giving Congress increasing power over the economy. He complained that in the election of 1800 “the construction of the Constitution according to the Hamiltonian version” had been repudiated, but now it seemed stronger than ever.  Where will this lead?

If Congress possesses the power to do what is proposed by this bill … they may emancipate every slave in the United States — and with stronger color of reason than they can exercise the power now contended for.

At the same time, Jefferson was escalating his attacks on the judiciary, and bills were introduced in Congress to strip the federal courts of jurisdiction over the states. Despite the fact that Jeffersonian Republicans had held the presidency since 1801, and that they had appointed five of seven sitting Supreme Court Justices, Jefferson complained that the court was still Federalist “almost to a man.”  It was true that Marshall had brought the Republican judges closer to his view–especially Joseph Story and William Johnson–but he also was compelled to play more of a mediating role, so as to try to achieve consensus and unanimity, and avoid splits in the Court which would undermine its authority.  This was evident in the Steamboat decision–the first case on the Court’s 1824 docket.

The case grew out of the monopoly granted by the State of New York in 1808 to inventor Robert Fulton and lawyer-jurist Robert Livingston, for exclusive rights to navigate the New York waters by steamboat. All other steam-powered craft were required to obtain licenses from the Livingston-Fulton partnership. In 1811, they were granted a similar monopoly by Louisiana for navigation of the lower Mississippi River. Other states–in New England and in the South–chartered their own monopolies, and New Jersey and Connecticut passed retaliatory legislation authorizing seizure of New York-based boats.  The latter three states seemed on the verge of civil war. And they certainly were at war in the courts, with lawsuits abounding, especially in New York. If such conflicts were to persist, commerce would be stifled, and the economic expansion of the nation jeopardized.

The case that finally made its way to the Supreme Court involved: (1) Col. Aaron Ogden, who was operating a ferry between New York and New Jersey under a license granted by the Livingston monopoly, and (2) Thomas Gibbons, who was running boats between New York and New Jersey under a federal license granted under the Federal Coasting Act.

The much-anticipated arguments before the Supreme Court opened on February 4, 1824, with Gibbons being represented by the same team (Daniel Webster and William Wirt) that had prevailed five years earlier in McCullough v Maryland.

The Constitution and Commerce

Four weeks later, Marshall delivered the opinion of the Court–the opinion, which, in the words of Albert Beveridge written one hundred years ago, “has done more to knit the American people into an indivisible nation than any other force in our history, excepting only war.”As he did earlier in delivering the McCulloch opinion, Marshall came very quickly to the nature of the Union. It has been argued, he noted, that prior to the formation of the Union, the states “were sovereign, were completely independent, and were connected with each other only by a league.”

“This is true,” Marshall says. But when they converted their league into a government, and converted their “congress of ambassadors” into a legislature, the whole character of the relationship between the states and the general government underwent a change.

Steamboat Case Clears Way for American System

The Signing of the Constitution, an oil by Thomas Rossiter. Courtesy of the New York Historical Society

The Constitution contains an enumeration of powers granted by the people to their new government, Marshall continued. “It has been said that these powers ought to be construed strictly.”  But why? Who says?  “Is there one sentence in the Constitution which gives countenance to this rule?”  Why should we adopt such a rule of construction, not found in the Constitution, which would cripple the general government and render it incompetent and unequal to the great objects for which it was established?

The Framers of the Constitution meant what they said, Marshall declared.  They wrote, “Congress shall have the power to regulate commerce with foreign nations, and among the several States, and with the Indian tribes.”  And that is what they intended; there is no basis for giving it any different construction.

Nor should we, as has been argued, limit “commerce” to just buying and selling, or barter. Commerce refers to commercial intercourse of all kinds, and of course this includes navigation. Everybody knows this, Marshall states; it was one of the primary reasons for forming the national government and writing the Constitution.

Moreover, the Constitution gets more specific.  (1) It says that no preference shall be given to the ports of one state over another with regard to regulation of commerce or revenue; (2) that vessels traveling to or from one State, shall not be made to pay duties in another States; and (3) Congress may impose embargoes–which are not only instruments of war (as was argued), but are also instruments of commerce.

What is this power? Marshall asks. It is the power to regulate, and it is complete in itself (plenary), subject to no other limitation than the Constitution. It encompasses navigation within a State, so far as it is connected “in any manner” with foreign commerce or commerce among the several States.

Supremacy of the Constitution

Now, Ogden’s lawyers had argued “with great earnestness,” that the States can exercise the same power within their jurisdictions. Marshall side-stepped the question of whether the federal power to regulate commerce is exclusive–that is, that under no circumstances could the states regulate commerce within their jurisdiction, because Congress had already taken action to regulate it, through, for example, the Federal Coasting Act.

There are areas in which the States can act, Marshall acknowledged, such as under state inspection laws, or health measures, but these don’t derive from the commerce power.  A state may inspect goods for export for quality-control purposes, before they enter into commerce; or a state can enforce inspection laws or quarantine laws to protect the health of its citizens, without conflicting with the federal commerce power. Such laws are not on their face unconstitutional, and in fact federal authorities will cooperate with the states in these matters.

Steamboat Case Clears Way for American System

Associate Supreme Court Justice William Johnson

However, if the laws of New York come into conflict with an act of Congress, then New York must yield, Marshall says.  Some would argue that this constitutes a collision between two equal powers–but the Framers of the Constitution foresaw such eventualities, and provided for them, by declaring the supremacy of the Constitution, and the laws made in pursuance thereof.  A law enacted by a State which is inconsistent with the Constitution, is a nullity.

Marshall concluded his opinion with another blow at the “strict constructionists.”   Those “powerful and ingenious minds” who want to contract the powers granted to the government of the Union into the narrowest-possible compass, while retaining all the original powers of the States, may “explain away the Constitution of our country, and leave it, a magnificent structure, indeed, to look at, but totally unfit for use.”

While Marshall’s opinion, written to express the consensus of the Court, did not rule out all state regulation of commerce–just that which conflicted with federal law–Justice Johnson, in a concurring opinion, did declare that Congressional power to regulate commerce was exclusive, and left no room whatsoever for the states. Johnson contended that when the states ratified the Constitution, they transferred all commercial power to the federal government, and there was nothing left for them to do.

Many believe that Johnson’s concurrence reflected the personal views of both Marshall and Bushrod Washington (the only other remaining Federalist on the Court), and that Marshall encouraged Johnson to write a separate opinion.  This left Marshall free to forge a consensus view, so that the Court was unanimous in rejecting the New York monopoly, and thus freeing up national commerce from state obstruction and interference.

Commerce and Infrastructure Unleashed

This was the only genuinely popular opinion that Marshall ever delivered.   The response was immediate, and overwhelmingly favorable.  Newspapers North, South, and West acclaimed the ruling for freeing commerce from monopoly.

Virginia was almost alone in attacking Marshall’s ruling. The Richmond Enquirer warned that the Steamboat decision, coming on top of McCulloch and Cohens, would eventually sweep aside the state governments. Virginia Congressman Robert Garrett warned that it could lead to regulation or prohibition of the slave trade.

Most important were the consequences for the real economy. Steamboat navigation multiplied at an explosive rate. By November 1824, it was reported that there were 43 steamboats plying New York waters, as compared to six before the Court’s ruling. The Albany Argus reported that since the ruling, ”steamboats in our waters are as ‘thick as blackberries.’”  One of the new steamers was named “Chief Justice John Marshall.”

Steamboat Case Clears Way for American System

Steamboat on the Ohio River.

Steamboat construction on the Ohio River almost doubled in the first year, and quadrupled in the second year after the ruling. Opening up river navigation propelled the growth of canals, which in turn spurred the takeoff of manufactures and industry.

The most lasting impact came with railroads, as steamboats became obsolete. Marshall’s ruling gave encouragement to those entrepreneurs who developed steam-powered railroads, wrote Beveridge in 1919:

It was a guarantee that they might build railroad across state lines and be safe from local interference with interstate traffic.  Could the Chief Justice have foreseen the development of the railway as an agent of Nationalism, he would have realized, in part, the permanent and ever-growing importance of his opinion … for the telegraph, the telephone, and oil and gas pipe line were also to be affected for the general good by Marshall’s statesmanship as set forth in his outgiving in Gibbons v. Ogden.

As we noted above, President Monroe shifted course in the wake of the Steamboat ruling. Later in 1824, he signed an internal improvements bill that allocated funds for surveys and estimates for the proposed roads. Then in 1825, shortly before leaving office, Monroe signed a bill extending the Cumberland (National) Road from Wheeling to Zanesville, Ohio. Succeeding Monroe was the great John Quincy Adams, whose Administration brought about an explosion of infrastructure building in all areas of the country–and put the United States on the road to becoming the world’s greatest industrial power.

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