New Horizons in Institutional and Evolutionary Economics series
Chapter 5: Interstate commerce and federal regulation of business
The division of power over commerce between the states and the federal government established in Gibbons and confirmed in Veazie was clear. Each state had regulatory power over commerce occurring entirely within the boundaries of the state. Congress had regulatory power over commerce between and among states, with the Native American tribes and foreign countries. This distinction held up well during the first half of the nineteenth century when most business was local, organized in sole proprietorships or partnerships and engaged primarily in intrastate commerce. The widening of markets that came with the development of transportation and communication infrastructures and the growth of industrial enterprise under the corporate form would result in scrutiny of the distinction between state and federal power in terms of what was “commerce” and what was “interstate.” This scrutiny of the demarcation between state and federal authority would be manifested primarily in two fields of the exercise of federal authority: (1) antitrust law and (2) federal intervention to ameliorate the effects of the Great Depression. The statutory activity and litigation in each of these fields would contribute to an evolution of the relationship between the states and the federal government. Preceding the activity in those two fields, however, was the first foray of the federal government into regulating an industry.
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