No More Learning

xix
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? FOREWORD
It was lawyers who made the constitution under
which we live. To that profession belonged Samuel
Adams, John Adams, John Quincy Adams, James
Otis, Thomas Jefferson, James Madison, Alexander
Hamilton, James Monroe, as later, Daniel Webster,
John C. Calhoun, Henry Clay, Abraham Lincoln.
Such justices of the court as Jay, Marshall, and
Taney were statesmen. The idea that interpretation
of the law should take place in a vacuum is of recent
origin, born of the desire for fixity. The notorious
fluidity of facts must cause conclusions based on
facts to alter with the times.
President Wilson said once, to the writer of this
narrative comment, that since so ideal an appoint-
ment as that of Brandeis he had no hope of equaling
it, because other lawyers of the first rank in technical
grasp are in outlook defenders of privilege rather
than of human life; Wilson's words approximately
were that the others represented money rather than
the people. That is a distinction in statesmanship,
and there is no cause for posterity, if it grasps the
predicament, to be astonished that the opposition to
the confirmation of the Brandeis nomination was em-
bellished by a former President of the United States,
a former Attorney-General of the United States, a
former Secretary of State, the head of our most
eminent University, and seven heads of the American
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? PROPHET AND STATESMAN xxi
Bar Association. Why be astonished? These men
believed the existing system to be imperiled by the
President's appointment; it was. It still is.
In the years since 1916 we have become accus-
tomed to seeing a dissent promise more influence
on the new generations turned out by the law
schools than was exercised by decisions of the court.
"Holmes and Brandeis dissenting" has become an
expression not of defeat but of triumph, and although
Holmes has retired the notion that law grows with
life does not frighten Stone or Roberts, and the selec-
tion of Cardozo, being the nation's choice, shows how
fast is now the progress of this conception.
The harmony that formed itself, as soon as Bran-
deis appeared, between him and Holmes, was a thing
of beauty. In this friendship contrast was easier to
descry than similarity. The natural bias of Holmes
was conservative and skeptical, that of Brandeis ven-
turesome and enthusiastic. The ancestry and en-
vironment of one were Brahmin, of the other
revolutionary and pioneering. The bonds that made
them friends and allies could be seen only by sharper
observation. Brains they had in common; knowledge
of the law; courage. "The life of the law," Holmes
long ago had said, "has not been logic. It has been
experience. " He expected little from any proposal
that any legislature might emit, but he knew his duty
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? FOREWORD
was to interfere with legislatures only to the smallest
minimum commanded by our constitution. Brandeis
eagerly agreed to the limits, but used his vast mastery
of economic, industrial, financial affairs to show
affirmatively why a regulation might well be reason-
able.
[When Emerson wrote
Things are in the saddle
And ride mankind
the moral he had in mind is the same that lies in
one of the works of literary art most often quoted by
Justice Brandeis, Goethe's ballad, "The Magician's
Apprentice" (Der Zauberlehrling). The magician
had ordered the apprentice to scrub the floor while he
himself was absent. The water had to be brought
from the brook, but the apprentice had seen his
master order a broom which stood in the corner to
bring the water, and had noticed the words used; so
he repeated them, and the broom obeyed. It brought
a bucketful, emptied it on the floor; then another
and another. Not knowing how to stop the flooding
of the room, the apprentice broke the broom. Then
each part began bringing as much as the whole
broom had brought before, and the house was full.
Finally the magician returned, and knowing how to
control the process, as well as to set it going, he or-
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? PROPHET AND STATESMAN xxiii
dered the broom back into its corner. From Goethe
also comes a favorite quotation of the Justice's, with
the same implication: "even if we had the wise man's
stone, the stone would be without the wise man. "
(Wenn wir den Stein der Weisen hatten, der weise
mangelte dem Stein. ) Modern machinery, organiza-
tion, and mass production are the magic broom and
stone.
Back in the time when Lenin was riding the revo-
lution, and was a symbol of it, a friend said to the
Justice: "If you had the power to determine the
treatment the world would give to Lenin, what would
be your course? " Brandeis answered: "I would give
him everything he wishes. It is the only way to
dispose of him. " Some agony would have been
spared the world if in the formative period of the
new Russia the great powers had possessed, in the
seats of the mighty, men who were willing to risk the
comparison of one truth in action with another. Wil-
son was ready to do so (although this is not suffi-
ciently known) but he had a world of problems on his
shoulders and a world of potentates against his
visions.
The Justice spoke once to the same friend about
the same topic, in words about like these: "There
must be some potential point at which competition
and regulation can be in a desirable balance. With
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FOREWORD
us some aspects of competition need checking.
Russia has jumped to the other extreme and will have
to evolute back toward more freedom for individual
responsibility. As she moves in one direction, and
we move in the opposite, why should we not ulti-
mately arrive together at the desired spot V
Lest the revolutionary character of the Brandeis
influence and the Brandeis philosophy and ideals be
placed wrong in perspective, it should never be for-
gotten that a starting point with him is always that
our constitution is an inspiration, elastic enough, if
wisely interpreted, to permit all needed growth; that
slow, patient, and studious experiment is better than
sweeping and abstract theory; and that large, violent,
theoretical change is to be shunned. A letter from
him, written to Robert W. Bruere in 1922, can be
found in the Columbia Law Review, Vol. xxxl, No.
7: "Refuse to accept as inevitable any evil in busi-
ness (e. g. , irregularity of employment). Refuse to
tolerate any immoral practice (e. g. , espionage). But
do not believe that you can find a universal remedy
for evil conditions or immoral practices in effecting
a fundamental change in society (as by State Social-
ism). And do not pin too much faith on legislation.
Remedial institutions are apt to fall under the con-
trol of the enemy and to become instruments of
oppression.
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? PROPHET AND STATESMAN xxv
"Seek for betterment within the broad lines of
existing institutions. Do so by attacking evil in situ;
and proceed from the individual to the general.
Remember that progress is necessarily slow; that
remedies are necessarily tentative; that because of
varying conditions there must be much and con-
stant enquiry into facts . . . and much experimen-
tation. . . .
"The great developer is responsibility. Hence no
remedy can be helpful which does not devolve upon
the workers' participation in responsibility for the
conduct of business; and their aim should be the
eventual assumption of full responsibility--as in co-
operative enterprises. . . .
"Democracy in any sphere is a serious undertaking.
It substitutes self-restraint for external restraint. . . .
It is possible only where the process of perfecting the
individual is pursued. His development is attained
mainly in the processes of common things. Hence the
industrial struggle is essentially an affair of the
Church and is its imperative task. "
That these principles are in a deep sense a heritage
of America Brandeis is taught by his reading of his-
tory. "Those who won our independence," he wrote
in the famous case of Whitney v. California, in 1927,
"believed that the final end of the State was to make
men free to develop their faculties, and that in its
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FOREWORD
government the deliberative forces should prevail over
the arbitrary. They valued liberty both as an end and
as a means. They believed liberty to be the secret of
happiness and courage to be the secret of liberty. "
On the question of size, in its relation to efficiency,
safety, and wholesomeness, the answer that would be
natural to the Justice is clear also, and it includes
the point about the relative safety or danger of dif-
ferent classes of securities. His whole life testifies
to his distrust of great size. He drove it in, again
and again, in the Presidential campaign of 1912, the
last in which he took part before going on the bench.
Since he joined the court there is no enterprise with
which he has kept so closely in touch as one in which,
fathered by him, the efficiency of a small, sound, pub-
lic service, has been year after year put to the test.
Savings Bank Life Insurance was begun in Massa-
chusetts, the adopted State of the Justice, in 1907,
and on June 22, 1932, there was noted, if not loudly
celebrated, the twenty-fourth anniversary of the writ-
ing of the first policy issued under this system. "The
plan," says a 1932 report by Miss Alice Grady,
Deputy-Commissioner for Savings Bank Insurance,
"owes its authorship to Louis D. Brandeis and was
inaugurated as a constructive protest against the high
cost of life insurance as furnished by the life insur-
ance companies. For five months its passage through
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? PROPHET AND STATESMAN xxvii
the Legislature was marked by one of the bitterest
fights ever witnessed on Beacon Hill. "
There is nothing fundamentally surprising in such
a fight. Those who opposed the idea were protecting
something they desired to keep--a privilege of their
own,--just as those who endeavored to prevent con-
firmation to the Supreme Court were right when they
believed the presence of Brandeis on that court would
be a menace to their view. The saving in the cost
of insurance is by no means restricted to the dif-
ference between the cost of one system and the cost of
a better system. There must be reckoned also the
savings brought about by the degree to which the
better system has, by its competition, forced better
terms from the weekly premium insurance companies
--as contrasted with the fact that before the Bran-
deis innovation the conditions of the policy-holders
in the weekly premium companies, for a quarter of a
century, instead of being made more favorable, had
several times been made even more unfavorable.
One line of attack was that people would not
voluntarily seek insurance; they would not take it
out at all if the expensive system of soliciting should
be done away with. The answer is that in thirty-six
months ending October 31, 1931, there was sold
strictly over the counter, in Massachusetts Savings
Banks, insurance to the amount of $29,726,417,
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representing a steady growth that gives every promise
of continuing. It may never become huge; only the
future can answer; but the point, for the Brandeis
philosophy, is that it is sound.
Another argument was that only bad risks, which
the regular companies would reject, would go to the
Savings Banks. The answer is that the mortality
rate among the subscribers to the Savings Bank In-
surance has been consistently less than that of sub-
scribers in the regular companies. In 1931 a record
of 39. 43% of the expected in the Savings Bank In-
surance is to be set against 63. 48% for the insurance
companies, in their regular business, and 59. 50% in
the weekly premium business.
How familiar, in many fields, is this other argu-
ment brought against the Brandeis insurance plan:
that because of limited opportunity for investment
the savings banks could not earn as high a rate of
interest! The average net rate of income earned on
the investment of the insurance departments has been
uniformily higher than that earned by the insurance
companies; in 1931, 5. 12% as against 4. 91%.
Cost would inevitably be higher? The net cost is
on the average 26% less than in the insurance com-
panies, on their ordinary policies, and 50% less than
on the weekly premium policies.
One more prophecy was made--that the lapses
would be heavy. In 1931 they represented 1. 24%
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? PROPHET AND STATESMAN xxix
of the number of policies written that year, as con-
trasted with a ratio of 35. 75% for the companies in
ordinary business, and 76. 18% for those in the
weekly premium field.
If, as seems to me, the question of size is one of
the primary concepts of our philosopher, we must
distinguish--and this is of the first importance--be-
tween size on its merely money-making aspect and
size as an influence on human life.
"Already," he said, back in 1911, "the displace-
ment of the small independent business man by the
huge corporation with its myriad of employees, its
absentee ownership, and its financial control, presents
a grave danger to our democracy. The social loss is
great; and there is no economic gain. "
Eighteen years later, dissenting in Frost v. Corpo-
ration Commission, discussing cooperative organiza-
tions run by farmers, he declared: "Besides promot-
ing the financial advantage of the participating
farmers they seek through cooperation to socialize
their interests--to require an equitable assumption
of responsibilities while assuring an equitable dis-
tribution of benefits. Their aim is economic democ-
racy on lines of liberty, equality and fraternity. "
Before a Senate committee, before he went on the
bench, Mr.
Brandeis said: "If we are to work out a
satisfactory system of profit-sharing as a means of
reconciling capital and labor, it can only be done by
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FOREWORD
reducing the return to capital and the purveyors of
capital and letting the people who do the work, be
they managers, the skilled handicraftmen, or day la-
borers, take all that is earned above a reasonable re-
turn on the capital invested. "
And before the United States Commission on In-
dustrial Relations: "Society and labor should de-
mand continuity of employment, and when we once
get to a point where working men are paid through-
out the year, as the officers of a corporation are paid
throughout the year, everyone will recognize that a
business cannot be run profitably unless you keep it
running, because if you have to pay, whether your
men are working or not, your men will work. "
When, exploring the principles of Justice Brandeis,
we say that every business, every institution, has a
unit of greatest efficiency, from which a departure to
less size or greater is a decrease in efficiency, we are
not using the word efficiency as if the business existed
in a vacuum. We are talking about it--if we under-
stand the Brandeis philosophy--as part of a social or-
ganism; and it is inefficient, socially considered, if
it injures the whole. Even, therefore, if it makes for
itself more money than a smaller unit, it may be a
social liability where the smaller business or institu-
tion is a social asset. Frequently size gives power,
and power that no business ought, for the general wel-
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? PROPHET AND STATESMAN xxxi
fare, to have. There is no yard-stick We need to
study each type of institution separately.
Here is a central truth, of the gravest moment.
The efficient small unit lives. The inefficient small
unit dies. On the other hand, a big unit such as the
United States Steel Corporation or New York's two
giant banks may, through the mere ramifications of
its influence, possess inherent advantages to offset
economic losses incident to overgrowth
The essential difference between British and Cana-
dian banks, on the one hand, and American banks,
on the other, is not in size. The difference that is
essential is partly in the branch-bank system, which
is entirely different from the so-called branches of the
big New York banks, which are mere stations for the
receipt and withdrawal of deposits; but it is still more
in the tradition behind the banks, which goes to the
root of everything. It is true that some of our banks
are too small,--for a unit may be too small for the
purpose, as well as too large; and such banks account
for a large portion of the failures; $25,000 for ex-
ample is an absurd capital for a bank
Illustrating the point that the size that is most
efficient may be large or small, according to the nature
of the business and the attention required, we might
choose the postal service, the function of which is
uniform and simple, not calling for a great deal of
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FOREWORD
individual judgment; therefore an efficient postal
service may be a large unit; although our own is not
efficient.
Of the great figures of our time who have seen the
values of life in general harmony with Justice Bran-
deis one was President Wilson. That he was acutely
aware of the importance of financial evils of our
system, and trusted particularly Brandeis's way of
thinking about them, was shown in many ways: those
who wish to know the part taken by Brandeis in the
final decisions about the Federal Reserve Act will
find the documents in the latest volume of Ray Stan-
nard Baker's "Life and Letters of Woodrow Wilson. "
The President's appreciation and confidence con-
tinued to the end of his life. Even after his break-
down he was accustomed to seek advice from the
Justice on matters of world and national consequence.
Indeed this belief of Wilson in the wisdom of Bran-
deis was whispered about, until it became a fantastic
fable, so that when Henry Ford was at the height of
his mania about the Jews the "investigators" who
were on his salary list concocted for the Detroit me-
chanic a story that a secret telephone led from the
office of the President to the office of the Justice, for
consultation on matters of world-policy. The folk-
tale is a grotesque shadow cast by the truth about the
harmony of the two believers in freedom; and I like
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? PROPHET AND STATESMAN xxxiii
to think of that harmony along with the picture of
Holmes and Brandeis strolling through the streets of
Washington, and discoursing with Socratic depth.
In this hook, as any careful reader will see, Bran-
deis works out with mastery and care one series of
related ideas that were also dear to Wilson, and helped
much to arouse his interest in the hrilliant lawyer:
the series of central ideas about the money oligarchy
as brought about through consolidation and interlock-
ing directorates; its inefficiency and disloyalty in
management; the losses caused by it to small inves-
tors; its extortions from the public. Since the first
edition appeared interlocking directorates have been
in part abolished. It ought not to be difficult to take
the next steps of selling state and municipal bonds
direct to the public, and perhaps railroad bonds.
To promote the smaller industrial units, for effi-
ciency, for social justice and welfare, and for liberty,
is of course a far more complex evolution. A de-
mocracy must grow, but it may learn from other
forms of government, and Justice Brandeis was
keenly interested when, in 1932, he read that the
Budget Committee of the Italian Chamber of Depu-
ties had reported against huge amalgamations, except
in unusual cases, on the ground that they were largely
the product of banker management and credit infla-
tion, and because: "Their very size has been a draw-
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FOREWORD
back to them. Men fitted to manage such mammoth
concerns are extremely rare. Moreover the huge
scale on which they work leads them to open factories
in different parts of the country. And the man at
the head loses personal contact with the business he
is managing. "
Of the Justice's Court opinions that reflect the
belief in experiment, and in the smaller units within
our national form of government, making experiment
easier and less expensive, none has attracted more
attention than the dissent delivered in 1932, in which
he contended that the State of Oklahoma has a con-
stitutional right to control the manufacture and sale
of ice. Behind this question of constitutional law
obviously lies a political problem that will long be
with us, regarding the wisdom of regulating produc-
tion and distribution by political action. It was
because the peril of unregulated competition is1
recognized that the dissent aroused much approval.
Justice Stone concurred.
"Whether the local conditions," said the dissent,
"are such as to justify converting a private business
into a public one is a matter primarily for the deter-
mination of the state legislatura . . . The transporta-
tion, storage and distribution of a great part of the
nation's food supply is dependent upon a continuous
and dependable supply of ice. Were it not for re-
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? PROPHET AND STATESMAN xxxv
frigeration, the market for perishable foodstuffs, in
warm seasons, would be limited in area to a few miles
and in time to a few days or even hours. . . . We
cannot say that the legislature of Oklahoma acted ar-
bitrarily in declaring that ice is an article of primary
necessity, in industry and agriculture as well as in
the household, partaking of the fundamental character
of electricity, gas, water, transportation and com-
munication. "
Justice Brandeis is not a socialist, but he may well
seem a dangerous socialist to rigid minds that think
the way to meet economic emergencies is for the pos-
sessing class to sit firmly on its haunches. What
should the majority think of language such as this:
"The need of some remedy for the evil of destructive
competition. . . had been and was widely felt"? And
what could be more alarming than this: "The notion
of a distinct category of business 'affected with a
public interest,' employing property 'devoted to a
public use,' rests upon historical error. . . . In my
opinion, the true principle is that the State's power
extends to every regulation of any business reasonably
required and appropriate for the public protection"?
Can this problem fail to be one of the solemn respon-
sibilities of our children; and shall the required
adaptation be made in glad experiment, or in bitter
turmoil?
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Of this remarkable opinion the passages most
widely discussed by the general public were these:
"The people of the United States are now confronted
with an emergency more serious than war. Misery is
widespread, in a time, not of scarcity, but of over-
abundance. The long-continued depression has
brought unprecedented unemployment, a catastrophic
fall in commodity prices and a volume of economic
loss which threatens our financial institutions. Some
people believe that the existing conditions threaten
even the stability of the capitalistic system. "
"Business men are seeking possible remedies. Most
of them realize that failure to distribute widely the
profits of industry has been a prime cause of our pres-
ent plight. But rightly or wrongly, many persons
think that one of the major contributing causes has
been unbridled competition. " And this! "Increas-
ingly, doubt is expressed whether it is economically
wise, or morally right, that men should be permitted
to add to the producing facilities of an industry which
is already suffering from over-capacity. " This opin-
ion, he goes on to say, applies to industry in general;
that it has become capable of producing from 30 to
100% more than was consumed even in days of
vaunted prosperity. "And some thoughtful men of
wise business experience insist that all projects for
stabilization and proration must prove futile unless,
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? PROPHET AND STATESMAN xxxvii
in some way, the equivalent of the certificate of public
convenience and necessity is made a prerequisite to
embarking new capital in an industry in which the
capacity already exceeds the production schedules. "
Justice Brandeis says that the objections to this
view are grave. The remedy might be worse than the
disease. "The obstacles to success seem insuperable.
The economic and social sciences are largely un-
charted seas. We have been none too successful in
the modest essays in economic control already entered
upon. The new proposal involves a vast extension of
the area of control. Merely to acquire the knowledge
essential as a basis for the exercise of this multitude
of judgments would be a formidable task; and each
of the thousands of these judgments would call for
some measure of prophecy. Even more serious are
the obstacles to success inherent in the demands which
execution of this project would make upon human
intelligence and upon the character of men. "
Yet we must experiment. Men used to say, "it is
as impossible as flying. " In the physical sciences the
value of trial and error is proven. "There must be
power in the States and the Nation to remold,
through experimentation, our economic practices and
institutions to meet changing social and economic
needs To stay experimentation in things social
and economic is a grave responsibility. Denial of the
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? xxxviii
FOREWORD
right to experiment may be fraught with serious con-
sequences to the Nation. "
The end has much feeling. Happy are we in the
United States that a single courageous state may act
as a laboratory, and make trial of ideas without risk
to the rest of the country. "The court has power to
prevent an experiment. " It has the power on dubious
interpretation of a clause in the constitution, but it
has it. "In the exercise of this high power, we must
be ever on our guard, lest we erect our prejudices into
legal principles. If we would guide by the light of
reason, we must let our minds be bold. "
Followers of Justice Brandeis know that for a long
time he has prophesied that, barring some unexpected
development in the supply of gold, there must come a
time when prices would begin to fall; that this period
of decline would be of considerable duration; and that
it would be dangerous if we did not prepare for it.
Dissenting, in 1923, with Mr. Justice Holmes (in
the case of S. W. Tel. Co. v. Pub. Serv. Comm. ),
Mr. Justice Brandeis penned some sentences which
may be scanned by those who wish to measure the
distance that separates the occasional true prophet
from the horde of financial money-seekers by whom
we were misled. The Justice said: "Engineers testi-
fying in recent cases have assumed that there will be
a new plateau of prices. In Galveston Electric Co.
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? PROPHET AND STATESMAN xxxix
v. Galveston, 258 TJ. S. 388, the company contended
that a plateau 70 per cent. above the price level of
1914 should be accepted, and a plateau of 33% per
cent. above was found probable by the master and
assumed to be such by the lower court. In Bluefield
Water Works and Improvement Co. v. Public Service
Commission, 679, post. one 50 per cent. above the
1914 level was contended for; in the case at bar a
plateau 25 per cent. above. But for the assumption
that there will be a plateau there is no basis in
American experience. The course of prices for the
last 112 years indicates, on the contrary, that there
may be a practically continuous decline for nearly a
generation; that the present price level may fall to
that of 1914 within a decade; and that, later, it may
fall much lower. Prices rose steadily (with but
slight and short recessions) for the 20 years before
the United States entered the World War. From the
low level of 1897 they rose 21 per cent. to 1900; then
rose further (with minor fluctuations, representing
times of good business or bad) and reached in 1914
a point 50 per cent. above the 1897 level. Then the
great rise incident to the war set in. 'Wholesale
Prices, 1890 to 1921,' U. S. Department of Labor,
Bureau of Labor statistics, Bulletin No. 320, pp.
9-26. These are averages of the wholesale prices of
all commodities. In the Bureau chart the 1913
?