After the “Court Packing” Attempt of 1937, the Supreme Court Gave Up Its Mission of Protecting Property from Depredations

 When the Supreme Court, operating under the old principles, declared unconstitutional a number of New Deal laws, Roosevelt tried to alter its composition by adding new and more liberal justices. Although the infamous attempt to “pack the Court” in 1937 failed, the demoralized Court beat a retreat, and as old justices retired and appointees of Roosevelt replaced them, its philosophical complexion underwent substantial change:

The lacerating struggle over the validity of the New Deal Program engendered lasting hostility to the judicial protection of property rights. . . . Once the Supreme Court accepted the New Deal, the justices abruptly withdrew from the field of economic regulation. This reflected a monumental change in the Court’s attitude toward property rights and entrepreneurial liberty. From its inception, one scholar noted, “the Court deemed its mission to be the protection of property against depredations by the people and their legislatures. After 1937 it gave up this mission.” A sharply limited concept of property rights thus operated for the next generation. . . . Consequently, the Court gave great latitude to Congress and state legislatures to fashion economic policy, while expressing only perfunctory concern for the rights of individual property owners.

—Richard Pipes, Property and Freedom (New York: Alfred A. Knopf, 1999), Vintage e-book.

To Ensure “Economically Just Prices,” The Reich’s Commissar for Price Formation Suspended the Operations of the Price Mechanism

In 1933 the government issued the “Law on Compulsory Cartels,” by virtue of which it assumed the right to consolidate enterprises as a means of regulating the market for their products and reducing competition. In time, Berlin forged hundreds of such compulsory cartels, which determined, under state guidance, what their member firms could produce and what prices they could charge: the normal practice until the end of 1941 was for enterprises to operate on a cost-plus basis, presenting government agencies with evidence of costs and then being allowed to add 3-6 percent profit. In 1936, the office of the Reich’s Commissar for Price Formation was created to ensure “economically just prices.” The operations of the price mechanism of the open market were thus suspended. The cartel law made new investment conditional on state approval. State authorities also regulated dividend payments: a law issued in 1934 decreed that the profits to be distributed to stockholders were not to exceed 6 percent of the paid-in capital; another law of that year provided that any excess was to be invested in state bonds for future distribution. Holders of municipal and other bonds were compelled to convert them into new issues carrying lower interest rates. Private enterprise was constantly whipped into shape by complaints of “economic egoism” and tireless reminders that the interests of the community took precedence over those of the individual.

—Richard Pipes, Property and Freedom (New York: Alfred A. Knopf, 1999), Vintage e-book.