Buchanan v. Warley: markets vs. government and discrimination

This is the longer version (which will appear in IPR) that also appeared in the Courier-Journal (800 words) and Business First (600 words)... (Here's an article on lead lawyer Storey by Damon Root in Reason-- and then a similar story in Reason, celebrating the life and work of Philip Payton Jr.)

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This year is the 100^th anniversary of a key U.S. Supreme Court case on civil and economic rights, involving Louisville. Buchanan v. Warley (1917) overturned racial zoning ordinances in Louisville which prohibited whites selling and blacks buying homes in white-majority neighborhoods. (On November 29^th, the city dedicated a historical market at 37^th and Pflanz to commemorate this.)

The NAACP organized a test case to challenge the law. (Charles Buchanan was the plaintiff—a white real estate agent who wanted the law overturned as well.) In Rehabilitating Lochner, David Bernstein describes Kentucky’s case as “extraordinary” and “notable for its length and its blunt racism,” arguing that segregation was divinely ordained and that “negroes carry a blight with them wherever they go.” (80)

Moorfield Storey argued against Kentucky before the Supreme Court. He had been president of the American Bar Association and was the founding president of the NAACP for 20 years until his death in 1929. He was deeply opposed to American imperialism, a proponent of laissez-faire economics, and a strong civil rights advocate.

Storey invoked the 13^th Amendment (a civil rights argument) and the 14^th Amendment (an economic argument), but the Supreme Court decided on the basis of the latter. Storey had argued that the law reduced the value of Buchanan’s house because he could not sell to William Warley, an African-American. Thus, the ordinance was a “taking” which violated the 14th Amendment right not to be deprived of property without due process of law.

In particular, the Supreme Court focused on “freedom of contract.” For example, writing for the Court’s unanimous decision, Justice Day supported “the civil right of a white man to dispose of his property if he saw fit to do so to a person of color and of a colored person to make such disposition to a white person.” (81)

By the same standard, the Court had previously struck down workplace safety laws and minimum wages. This approach stemmed from Lochner v. New York (1905) where the Court overturned laws that restricted the number of hours workers could be employed at a bakery.

Such rights were not seen as unlimited; they were subject to reasonable government regulation—to serve a legitimate and demonstrable public health or safety purpose. But under Lochner and as followed in Buchanan, “unreasonable, unnecessary and arbitrary interference with the right and liberty of the individual to contract” violated the 14th Amendment. 

In light of Plessy v. Ferguson (1896), many legal scholars had argued that such laws restricted both races, and thus, were not discriminatory. Others rationalized government regulation to “prevent race conflict.” Buchanan was a key part of the Court’s move to oppose those interpretations. “In short, Buchanan helped to repudiate Plessy’s presumption that segregation laws…are reasonable.” (82)

At the time, other cities were considering or implementing their own residential segregation plans; Buchanan stopped those particular schemes. W.E.B. DuBois said it should be credited with "the breaking of the backbone of segregation." And it also helped to protect Chinese-Americans from racist policies in California.

Bernstein’s book focuses on the influence of Lochner as a pivotal court case, but he devotes an eight-page section to Buchanan and its impact. “Buchanan was an extremely significant case. While it did not lead to a rollback of Jim Crow legislation, the decision inhibited state and local governments from passing more pervasive and brutal segregation laws akin to those enacted in South Africa.” (82) He also notes that African-Americans lost 22 of 28 cases on the 14^th Amendment before 1868 and 1910, but won 25 of 27 cases from 1920 to 1943 (84).

As Bernstein notes, “Giving Buchanan its due does not absolve the Supreme Court of its acquiescence to Jim Crow in other contexts.” (85) Likewise, “Liberty of contract supporters among the legal elite did not often distinguish themselves as advocates for African-American rights. But at least, unlike their Progressive adversaries, their skepticism of statism and their support for constitutional protection for property and contract rights provided one of the few counterweights to overwhelming expert and public opinion that segregation was good social policy.” (85-86)

This sort of racism is deeply troubling today, but was quite acceptable at the time of Buchanan—with the emergence of Evolution, the popularity of “race science,” and a Progressive passion to use government activism to pursue “progress”. Unfortunately, given the prevalence of racism, advocates for segregation found ways around the Buchanan ruling.

Many cities ignored the rulings, differing their laws slightly to avoid direct comparisons with the Supreme Court decision. Other cities respected Buchanan as law, but used zoning by income class (e.g., single-family homes) to reach similar results. This was a catalyst for professionalized zoning efforts which had been rare before World War I.

For example, city officials would change an area’s zoning from residential to industrial if too many African-Americans moved in. They allowed taverns, liquor stores, nightclubs, and brothels in African-American neighborhoods, while prohibiting them in white areas. They allowed houses in industrial areas to be subdivided, leading to the prevalence of apartments and rooming houses.

In The Color of Law, Richard Rothstein provides a useful history of government discrimination against African-Americans in the housing market. When the Federal Housing Administration (FHA) later promoted mortgages and home ownership, banks and the FHA made African-Americans ineligible since the neighboring businesses weren’t good for housing values—a form of de facto segregation. The FHA wouldn’t even insure a project if there were too many African-Americans living nearby.

Rothstein argues that the Lochner-influenced reasoning of the Supreme Court was one of the few anti-segregation forces of that time, dampening racial abuse by the government. (In Only One Place of Redress, Bernstein argues the same with respect to labor markets.) But the Supreme Court eventually repudiated its Lochner phase, allowing increasing restrictions on what could be done with property and leading the way to massive, federal economic interventions in the 1930s.

In this context, the courts made zoning laws—and their use to oppress African-Americans—more palatable. Communities used “deed clauses,” “restrictive covenants,” and community association by-laws—with explicitly racist provisions—to some effect. Eventually, the Supreme Court would again explicitly restrict discrimination in buying and selling property—with Jones v. Mayer in 1968—this time, under the 13^th Amendment as a Civil Rights ruling.

In Civil Rights in the Gateway to the South, Tracy K'Meyer describes such matters for Louisville from 1945 to 1980. She notes that, as a border city, Louisville would have been expected to have relatively good record, compared to the South. But being a border city also gave Louisville a greater opportunity to rationalize lesser gains and cover for whatever civil rights sins it had. 

On housing, K’Meyer tells the story of the Wades and the Bradens. In 1954, the Carl and Anne Braden bought a house in a white neighborhood in Shively and signed over the deed to the Wades. Despite the violence and threats of their opponents, the only arrest was Andrew Wade and a friend for “breach of the peace,” when the friend showed up without first notifying the police. Carl Braden was charged with sedition and sentenced to 15 years, but the verdict was overturned on appeal.

Segregated neighborhoods have historically been seen as de facto thru market preferences: consumers in tandem with realtors and banks. As such, “white flight” and economic decline often resulted in a chicken/egg downward spiral for neighborhoods. Rothstein says that this theory has “some truth, but it remains a small part of the truth” within a far larger one: until the last quarter of the 20^th century, many cities had “racially explicit policies” with bureaucratic enforcement. These laws were systematic and forceful enough that the racial outcomes are better considered de jure—by law and public policy.

All of this reminds me of Walter Williams' terrific point about Apartheid in South Africa. Anecdotal discrimination is annoying, but it results in modest segregation, as each side largely avoids the other. With moderate levels of discrimination, it's common for separate (and often thriving) markets to arise. Unless discrimination is complete, you'll find some mixing, from people who don't care about race all that much. And that was the role of the law in this context—to enforce the majority (racist) view on people who didn't hold racist views—to prohibit them from engaging in trade and other activities with those of other races. 

One of the beauties of markets is that people engage in mutually beneficial trade. Competition and an interest in greater personal well-being generally encourage people to work with each other cooperatively. But the law can be used to enforce racism and other views by force. History teaches us to be wary of such efforts.