banks, and the distribution of the "money power" throughout the country. The claims of the easy money party are in a measure embodied in the provisions for the issue of notes partly on the basis of general wealth instead of gold alone. The requirements of stability are met by the theoretical application of the gold standard principle.

Still the conflict goes on. The debates over the Federal Reserve Act, the amendments proposed and defeated, and continued protests against the operations of the system reveal discontent with it. After the collapse of war prosperity in 1920 this discontent flamed out among the farmers of the West as it had in the days of the free silver battle. The price of wheat fell below a dollar per bushel and the debt burdened farmers could not meet their obligations. They concentrated their attacks on the federal reserve system. They alleged that it had enriched the bankers and that business men, not farmers, had benefited from the inflation of the currency under it. They accused the Reserve Board of favoring business instead of agriculture; they demanded and secured the appointment of at least one agricultural member on the Board. So the endless conflict over the currency goes on, and must go on while civilization rests, as it must rest, upon money economy.

There is general agreement that gold is too narrow a basis for any currency system but that issues of notes in large quantities unsecured by gold are ruinous to all classes and all interests. To find the right mean is always a fundamental problem of government, calling for talents of the highest order, an impregnable sense of honor, and a firm devotion to fair play. How difficult to find all these qualities combined in any man or any party! How difficult to apply general principles in concrete cases!

Indeed there are many statesmen who believe with Jefferson that the landed interest rather than the business interest is the most secure foundation for a republic and who make the advancement of agriculture their first care. As a concession to the agrarian groups and on principle, Congress established in 1916, during the administration of President Wilson, an agency to facilitate the making of loans to farmers, known as the Farm Loan Bureau, composed of the Secretary of the Treasury and four additional members appointed by the President with the consent of the Senate. An inquiry made a few years previously revealed

the fact that farmers, especially in the Southwest, were paying eight, ten, and even twelve per cent for money lent to them on farm mortgages; in other words, that they were paying far higher rates of interest than merchants and manufacturers for accommodations at the hands of banks and money lenders. It was to meet this situation that Congress created the Farm Loan Bureau, laid the whole country out into twelve districts, authorized the establishment of a Federal Land Bank in each district, and made provision for lending money to organized groups of farmers, known as farm loan associations. At first the law provided merely for lending money to owners of land on the basis of farm mortgages, but in 1923 it was supplemented by the Agricultural Credits Act which authorized loans on live-stock and farm commodities on the way to the market. As an additional aid to agriculture, Congress exempted from state and national taxes the bonds issued under these laws for the purpose of obtaining money to lend to farmers. It declared them to be instrumentalities of the Government of the United States. The effect of the Government's activities in this field has been a material reduction in the rate of interest charged on farm loans, especially in the South and West.

Somewhat in line with the policy of lending aid to persons of small means is the maintenance of a postal savings bank system designed to encourage thrift and afford absolute safety to small depositors who are often the victims of fraudulent stock selling concerns and irresponsible private bankers. This institution was established in the Post Office Department in a tentative way in 1911. At the present time all post offices receive deposits ranging from $1 to $2500, paying a low rate of interest on ordinary deposits and a slightly higher rate on long-term savings bonds. The post offices also handle war savings stamps and savings certificates of the Treasury Department — devices created during the World War to raise money and continued after the war to promote thrift and secure funds for the Government at a moderate rate of interest.

CHAPTER XVIII

COMMERCE, INDUSTRY, LABOR, AND
COMMUNICATIONS

Under a brief but significant clause of the Constitution giving Congress power to regulate interstate and foreign commerce there has grown an immense body of federal legislation transcending in its scope and nature the wildest imagination of the Fathers. When that clause, the subject of a long and bitter controversy, was written into the Constitution the wretched state of the roads made travel hazardous and the transport of freight by land almost prohibitive. Industry was in the hands of small proprietors who usually manufactured for the local market and shipped only a portion of their output to neighboring states by slow sailing vessels. Foreign commerce embraced mainly the export of farm produce and the import of manufactured goods from Europe.

Since that day what a revolution has been wrought in American economic life! Railways, automobiles, improved roads, and airplanes have obliterated state boundaries. Staple industries have grown to mammoth proportions to supply national and international markets, and they have passed largely from individual into corporate ownership. Not a single important industry manufactures for a purely local market. Thus while the Constitution remains unchanged, the number of matters within the scope of foreign and interstate commerce has been increased, and the very nature of that commerce revolutionized. By sheer economic development the powers of Congress have in fact been magnified beyond all plans of the framers. Moreover the Fourteenth Amendment has given the federal courts jurisdiction over all state laws affecting industry and trade, so that in a positive and negative sense the powers of the National Government over American economic life have become immense. They are increasing; they will inevitably increase.

Strictly speaking, the power of Congress in this sphere is lim

ited to the regulation of interstate and foreign commerce.1 In the minds of the framers who wrote the clause in question, transportation, not manufacture, was the fundamental matter to be brought under federal control. In accordance with this concept the term "interstate commerce" has been interpreted in a long line of judicial decisions to include the carriage of passengers, the transportation of commodities, the transmission of ideas, orders, and information by telegraph, telephone, or wireless, and the transmission of oil by pipe lines from a point in one state to a point in another. In short it covers traffic and intercourse in a general sense, regardless of the changes which time and ingenuity have wrought. The term "foreign commerce' is even broader in its connotations, for it embraces the whole domain of foreign trade. Its scope is enlarged by virtue of the fact that the Federal Government has a complete and exclusive jurisdiction over all relations with foreign countries, including the right to tax imports, regulate immigration, and make treaties dealing among other things with commerce and industry.

As noted above Congress is not authorized to regulate production as such; still the fact that an article in process of manufacture is destined to interstate or foreign trade brings it to some extent under federal regulatory power. The Supreme Court finds it difficult to discover the exact point in the process of collecting materials, manufacturing, and shipping at which production ceases and commerce begins. One issue however is settled: interstate commerce does not include life, fire, or marine insurance and ordinary contractual relations even though they are incidental to transaction of interstate business.

Regulation of Common Carriers - the Railway Problem

The most important group of federal laws respecting interstate commerce relates to the regulation of railways, sleeping car companies, and other concerns engaged in transporting passengers and commodities or transmitting communications by telegraph, telephone, and wireless. In the beginning of the railway era in

The power of Congress to regulate commerce with the Indians is no longer of any importance. Its power to regulate in general is subject to the limitation that it cannot lay duties on exports from any state, give preference to the ports of one commonwealth over those of another, or compel vessels bound from one state to another to enter, clear, or pay duties in any state.

the United States, Congress made no attempt to devise any comprehensive and far-sighted plan of public control. The largescale operations involved were novel, and no one foresaw their significance. Moreover, Congress, bent upon the swift development of the country, devoted its attention rather to bestowing generous favors on railway corporations. As a result all the early legislation dealt with grants of public lands, concessions of "rights of way," assistance from the national treasury, the remission of duties on railway materials imported from abroad, and kindred measures. Scandals and frauds, as well as high and romantic adventure, marked the path of congressional procedure as huge railway systems were flung out under government patronage, now to the Great Lakes, now to the Gulf of Mexico, now to the Pacific.

In the operation of the railways all kinds of abuses appeared. Stocks and bonds were issued in enormous amounts often without any proper basis in material values; bankruptcies were frequent, ruining thousands of innocent investors and enriching inside speculators; in some cases it was more profitable to "wreck" companies than to operate railways. The highest possible rates were charged on the theory that the companies should collect "what the traffic will bear." There were also discriminations in many forms. Freight rates were made high to one shipper and low to another, enabling the beneficiary to ruin his competitor. Frequently the money paid in freight rates by favored shippers was returned to them in whole or in part in the shape of "rebates." Some shippers found it easy to obtain freight cars when they needed them; others met with delays and reports of "car shortages." There were discriminations in terminal charges for switching, storage, lighterage, and similar services. As the "long haul" was more profitable than the short one, railway companies sometimes charged less for carrying freight to distant cities than to those nearer at hand. There was constant complaint, often not well founded, that the railways favored certain ports or sections at the expense of others. The companies were competing and fighting among themselves, by no means always for the permanent good of the communities they were supposed to serve. Hence there arose abuses and problems of great magnitude which demanded public consideration.