The statutory foundations of corporate capitalism, 1865-1900: states and the law in the formation of the American political economy

America is a nation founded on rule by the people, yet the federal system designed to protect individual power paradoxically contributed to the concentration of power in business corporations. Nineteenth century corporations had been owned and controlled by proprietors. After 1900 corporations became much larger, with ownership separated from management, and with managers in control. The new system of corporate capitalism required a new set of legal rights. Existing scholarship claims these rights were constructed via judicial interpretation of antitrust law. However, there are two ways to regulate the corporation: antitrust law and statutory law. The second is arguably the stronger of the two, and in America it was crafted in the several states. Elements of state law included provisions for corporate creation, internal governance, liability, and consolidation. I argue that federalism shaped corporate capitalism, and led to the concentration of corporate power in America. Because there is no extant systematic data on state corporation law, I construct a dataset tracing development of these provisions in 35 states over 35 years. I analyze the provisions according to section, time, level of economic development, and degree of capital concentration. Minutes of state constitutional conventions provide evidence of the arguments for and against the various provisions. Results show variation between and within sections. States sought to preserve their authority to regulate their local economies, and yet also promote development. They promulgated laws specific to the industrial structure of their state: those with capital concentrated in a few firms were more likely to lift restrictions. This places the well-known New Jersey innovations of the 1890's in a new light. New Jersey drew from provisions already existing, but not assembled in one place. Richard Bensel argues that national market building was protected by the most insulated branch of government, the Supreme Court. Yet state legislatures, the least insulated branch, acted as well. As states liberalized their laws to accommodate the national market, they lost regulatory capacity. This loss of regulatory authority was necessary precursor for 20 th century national administrative statebuilding.