The Achievement of General Laws

In 1851, in the aftermath of an economic crisis that forced the state to default on its bonded debt, Indiana rewrote its constitution to require that laws enacted by the legislature “be general and of uniform operation throughout the state.” This directive may not seem remarkable from the standpoint of the twenty-first century; we take it for granted that that is what legislatures do. From the perspective of the mid-nineteenth century, however, the provision was groundbreaking. The first such mandate ever enacted, Indiana’s innovation spread to almost all the other US states over the next few decades.

Before Indiana’s innovation, the main business of legislatures was to enact special bills on behalf of specific individuals and organizations (granting them pensions, divorces, permission to sell property belonging to minors, monopoly privileges over ferries and bridges, the right to form corporations, and other boons), or on behalf of specific localities (allowing them to spend public funds, borrow money, levy taxes, set salaries, fees, duties, and meeting times for administrators and judges, and take a variety of other actions). Because some people, groups, and localities were better positioned than others to obtain such favors, this system of special laws was fundamentally inegalitarian. Indeed, it was precisely because it was inegalitarian that it persisted. The competitive democratic politics of the early nineteenth century drove governing elites to consolidate their political support by doling out favors to members of their factions and denying them to people who belonged to other groups. Those in power benefited, for example, from the ability to dispense charters for banks and other valuable economic organizations. Those out of power complained bitterly about this “corruption,” but they behaved in exactly the same way when they were in office, favoring supporters and freezing out opponents. To do otherwise was to risk losing control of the government and, consequently, access to banks and similar advantages.

As John Wallis and I show in “Economic Crisis, General Laws, and the Mid-Nineteenth-Century Transformation of American Political Economy,” the idea that laws should be general was the product of a crisis in public finance in the 1840s that led eight states and one territory to default on their debts and a number of other states to teeter on the brink of default. Most of the defaulting states revised their constitutions to ban common types of special legislation. Indiana went further and mandated in addition that all laws be general in their application. Both types of provisions spread to other states over the next several decades. As they did, they transformed the way government and the economy worked and interacted, giving rise to a more dynamic form of capitalism, new types of economic regulation, and interest-group politics. Individuals no longer had to apply for special legislative favors to obtain divorces, pensions, and other similar objects. Nor did groups seeking to form corporations. Virtually anyone who wanted corporate advantages could secure them as a matter of routine, whether for they sought them for business purposes or for other reasons, including opposition to business interests. Moreover, now that corporations were products of general laws and not the privileged creatures of legislative favoritism, modern regulatory institutions could, and did, emerge. Businesses began to organize to oppose the new regulatory initiatives, but they faced determined and increasingly well-organized opposition from a whole host of new voluntary associations. In some times and places business interests prevailed; in others, the oppositional groups. The rules had changed, and outcomes were not anywhere foreordained.

General laws opened access to economic opportunities, but they did not bring about anything like full equality. Legislatures could still group people and businesses into categories and, so long as they treated members of each group the same, they could treat the groups differently. Such categorization facilitated economic regulation (for example, it enabled legislatures to impose more stringent rules on railroads than other businesses), but it also legitimated racial discrimination (the Jim Crow laws that mushroomed in the late nineteenth century). Nonetheless, the requirement that laws be general gave groups that were disadvantaged by such classifications a legal weapon they could use to push back. Businesses mainly lost the battles they waged against regulation in the courts, but minority groups would gradually prevail. Of course, other developments contributed to these outcomes, but it is difficult to imagine either occurring in a world where legislatures routinely conferred favors on particular individuals or groups. In such a world, regulatory legislation could never be effective. Nor would it be possible to achieve equality before the law.

John and I have written two new working papers from this project. The first, “Democracy, Capitalism, and Equality: The Importance of Personal Rules,” argues that the correlation between democracy and capitalism that is observable in the global data holds only for the richest countries and is a result of the shift to general laws (impersonal rules). The second (“General Laws and the Emergence of Durable Political Parties”) uses the case of Pennsylvania to explore the question of what drove so many states in the 1870s to adopt constitutions with general law provisions similar to Indiana’s. We show for Pennsylvania that the movement was led by Republican leaders who feared their party was self-destructing and believed that the factionalism that threatened their continued dominance was fueled by special legislation. We are also working with Ron Harris to understand the parallel, but very different, shift to general laws that occurred in Great Britain over the course of the nineteenth century. We are planning to synthesize our research on the US in a book tentatively titled, “Making Democracy Safe for America: The Role of General Laws in Economic and Political Development.”

Related publications and working papers:

Naomi R. Lamoreaux and John Joseph Wallis, “General Laws and the Emergence of Durable Political Parties:  The Case of Pennsylvania” (2024).

Naomi R. Lamoreaux and John Joseph Wallis, “Democracy, Capitalism, and Equality: The Importance of Personal Rules” (2024).

Naomi R. Lamoreaux and John Joseph Wallis, “Economic Crisis, General Laws, and the Mid-Nineteenth-Century Transformation of American Political Economy,” Journal of the Early Republic 41 (Fall 2021): 403-433.

Paula Baker, et al., “Interchange: Corruption Has a History,” Journal of American History 105 (March 2019), 912-938.

Naomi R. Lamoreaux and John Joseph Wallis, eds., Organizations, Civil Society, and the Roots of Development (Chicago: University of Chicago Press, 2017).

Naomi R. Lamoreaux and William Novak, eds., Corporations and American Democracy (Cambridge, Mass.: Harvard University Press, 2017).

Naomi R. Lamoreaux, “Corporate Governance and the Expansion of the Democratic Franchise: Beyond Cross-Country Regressions,” Scandinavian Economic History Review 64 (issue 2, 2016): 103-21.

Naomi R. Lamoreaux, “Revisiting American Exceptionalism: Democracy and the Regulation of Corporate Governance: The Case of Nineteenth-Century Pennsylvania in Comparative Context,” in Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective, ed. William J. Collins and Robert A. Margo (Chicago: University of Chicago Press, 2015), 25-71.

Naomi R. Lamoreaux, Insider Lending: Banks, Personal Connections, and Economic Development in Industrial New England (New York: Cambridge University Press, 1994).

Naomi R. Lamoreaux and Christopher Glaisek, “Vehicles of Privilege or Mobility? Banks in Providence, Rhode Island, during the Age of Jackson,” Business History Review 65 (Autumn 1991): 502-27.

Naomi R. Lamoreaux, “Banks, Kinship, and Economic Development: The New England Case,” Journal of Economic History 46 (Sept. 1986): 647-67.