Medieval Cities: Birthplace of Colonial/Early Republic Private/Public Partnerships/Corporations
The American Constitution never intended to set up a three tier system of government. There are only two tiers of government (nation and state) possessing sovereignty—both entrusted to them within a constitution sanctioned by the ultimate sovereign, the American People (popular sovereignty). If the city was not to be a sovereign level of government, then what is it? In the United States, it was described as a “public corporation”. Not a corporation like Google or Apple (they are private corporations), but a public corporation. Not that anyone particularly cares, where did that come from?
Believe it or not, it all starts with English medieval cities and how they got along with the English Crown and Parliament. Paraphrasing Gerald E. Frug’s City-Making[1], medieval towns and cities were created by merchants to ply their trades (guilds) with minimal interference for jurisdictional sovereigns such as Kings and Nobles/Parliament. The early capitalists used their accumulated wealth, and their centrality to medieval GNP (achieved through production of vital goods and lending) to wrest autonomy from political restraints. In my words, the medieval city was constituted to be an early free trade zone which was permitted self-rule and autonomy from much external law and taxes. This autonomy to pursue economic objectives for the good of the kingdom, collective identity of its residents, and power for self-rule was expressed in the form of a corporate charter from the King to the city[2].
Colonies in the New World were granted by the King through one of two forms of corporate charters, both of which preserved and passed on the prerogative of the executive to grant city charters to its colonies. Hence, the American city was originally conceived as a corporation similar in purpose and governance to the Hudson Bay Company or the British East India Company. The Colony, after the Revolution, became the State, replacing the King as the source of corporate charters. Beneath that calm surface of change, however, was an ocean of legal opinion and precedent that would periodically rise up from the depths to punish future economic developers. The corporate charters used by the English to establish cities and towns contained ambiguities and tensions that needed resolution to fit in a modern, democratic system. The initial tension was that early English urban areas were autonomous of both kings and nobles, and later Parliament—and were internally structured to sustain that political and economic autonomy. That created yet another set of tensions. Let’s be more specific.
City autonomy, Gerald Frug argued, required that the individuals residing in that corporation submerge their individual demands/rights and conform to those compatible with the overall city’s public purpose, economic growth. The path to economic growth was set by the city’s oligarchic very undemocratic merchant elite. City political and economic autonomy required private interests to be submerged to the organic community. “It was this autonomy for the merchants and their ability to establish their own communal rules that were recognized in the legal status of the town …. A lack of separation between individual property rights and town sovereignty rights, and a mixed political and economic character[3]. Say it another way, city autonomy and urban growth required the suspension of Lockean individual rights to an oligarchic economic elite.
Within city walls, city governance was not democratic, but oligarchic with guild leaders, prominent families and traders serving in the city council. That such governance could easily develop a sort of class struggle politics (of “thin people” versus “fat people” or “popolo magro versus popolo grasso” as described then) was tempered by the acknowledgement of all that a sort of patriotism defending the city at its wall against its enemies came before individual interest. Jean Braudel, the great historian of European cities, characterized these medieval towns as “the West’s first fatherlands”.
Kings, however, being a fickle lot (definitively proven in Monty Python) the corporate charter eventually was regarded by the Stuart dynasty as revocable by the King (in Massachusetts this produced the Andros affair, alluded to in the previous chapter). The cities and Parliament, however, had other thoughts on the matter and the 1688 Glorious Revolution restored the integrity of the municipal charter. The point of all this being that English corporate law had by the time of the U.S. Constitution not distinguished between private and public corporations, held that the purpose of a corporation was economic, not social in nature, and that the power to issue corporations was the executive’s—by that time Parliament. The status of American colonial cities, however, was clouded by their lack of charters from the English executive. Their status appeared to Frug to be legally ambiguous, but Frug concedes American cities were treated by the courts as if they were corporations[4].
The English public/private corporation, however, fit poorly into the framework of a Republic which embraced Lockean an individual natural right to property. The pure English corporation rendered individual property rights within a corporation subject to the control by the oligarchic elite. To solve this dilemma, American courts divided the corporation into two distinct forms of corporation, one for private economic affairs, and the other for public. Business corporations, only eight in 1780, increased to several hundred by the time of the 1819 Dartmouth College Supreme Court decision[5]. Most of these corporations were those discussed in Chapter 2’s sections on canal, roads, bridges, banks and insurance companies. To us they were mixed enterprises; to Frug they were transitional corporations awaiting Dartmouth’s distinction between private and public corporation. Frug quotes Justice Story’s opinion which to him suggested the Court’s distinction between the two forms: “Another division of corporations is into public and private. Public corporations are generally esteemed such as exist for public political purposes only, such as towns, cities, parishes and counties”[6]. Property held in such public corporations, formed for public purposes only, belonged to the State
[1] Gerald E. Frug, City-Making: Building Communities without Building Walls (Princeton, Princeton University Press, 1999), pp. 27-30.
[2] Gerald E. Frug, City-Making, op. cit., pp. 32-33.
[3] Gerald E. Frug, City-Making, op. cit., pp.27-28.
[4] Gerald E. Frug, City-Making, op. cit., p. 37.
[5] Gerald E. Frug, City-Making, op. cit., pp. 39-40. The Dartmouth decision confirmed the rights of private property and contract law, institutionalizing the legal status of private property within a corporation.
[6] Gerald E. Frug, City-Making, op. cit., p. 41. Justices Marshal and Washington also rendered opinions similar in nature to Story’s. At this point, the reader is advised that Frug is presenting an argument that he believed this line of reasoning was incorrect—and that it left cities without power, unable to cope with demands of its citizenry. In later chapters we will return to Frug, and others, to deal with some of their concerns and remedies. I would also comment that my perspective regarding colonial urban charters varies considerably from Frug’s—especially in regards to his assertion that New England towns controlled the State (p. 43). Frug is developing a line of juridical reasoning which in later chapters will support an enhancement of city powers and freedoms independent of the State.
Ron W. Coan 