Mapping Boundaries: The state, commerce, and trade
Mapping Boundaries: The state, commerce, and trade

Mapping Boundaries: The state, commerce, and trade

Dooyeweerd proposed a third way between radical liberal individualism and thoroughgoing statism that has principled implications for how we understand the relationships between state, commerce and trade, society, and the individual.

October 17 th 2011

For the past quarter of a millennium, the big debates on the state and commerce and trade have been framed in various ways—mainly about the boundaries between the state and commerce and the individual. Whatever shape the debate takes—mercantilism versus free trade, Marxism versus capitalism, fascism versus communism and socialism, totalitarianism versus Western constitutionalism, social democracy versus democratic capitalism, Keynesianism and welfarism versus the Austrian economists, Keynesianism versus monetarism, monetarism versus fiscalism versus Modern Monetary Theory (MMT)—each attempts to draw the boundaries around how the state exercises authority and control in commerce and trade, and the individual.1

But when these big debates limit themselves to these dynamics, they fail to account for the many other dynamics of commercial and trade relations. Dooyeweerd, who was then a professor at the Free University of Amsterdam, argued that a way existed between radical liberal individualism on the one hand and thoroughgoing statism on the other, and his work has principled implications for framing our understanding of the relationships between the state, commerce and trade, society, and the individual.

The Three Phases of Individualism v. Statism: Historical Context

Dooyeweerd began his discussion by tracing the development of two theories of the state: the creation of what he calls "the old liberal law-state" (around the turn of the 18th to the 19th century) and the rise of fascism and bolshevism (near the beginning of the 20th century).

To Dooyeweerd, there is a logical line from the liberal law-state, "the modern welfare state," and the statism of fascism and bolshevism. This line will not, of course, necessarily be a historical line. However, the logical line drawn by Dooyeweerd provides a helpful tool for evaluating our current historical time.

The liberal law-state has five qualities:

  1. Finds its origins in the French Revolution
  2. Is "borne of an individualistic philosophy"
  3. "Untied all bonds that restricted the free play of the social forces of free enterprise"
  4. Prized government's abstention "from economic life"
  5. Considered that the state should be limited to enforcing contracts between capital and labour "as individual parties" treated "formally as equals"

It is this laissez-faire, laissez aller relationship between state and economy Dooyeweerd identifies as the first phase in individualism versus statism.

The second phase arises from the untenability of "unfettered competition" that causes "unemployment and impoverishment" and affects the state itself with respect to "its position of financial and military power." With the rise of organized labour, the surrender of "the individual freedom of contract . . . exerted a strong political pressure upon the state to abandon its formal juridical standpoint" of abstention. Thus the second phase began, "in which government attempts to introduce material justice in the enterprise through social legislation." With the state's legislative intervention in the economy, limited partnerships and companies superseded "the individual entrepreneur" and developed into corporations, trusts, and cartels as means of coping with the state from a position of strength. Meanwhile, the state engaged in a program of state takeovers of private enterprise in order to control the means of production and "in the long run gain control of pricing policy. It would be able to regulate distribution and consumption in a rational manner and with its coercive power it would be able to bring to an end the conflicts of power between capital and labor."

And so, state corporatism rose in parallel to business corporatism, vying for control of economy, in the case of the state, and for the clout to exercise market force, in the case of business.

Dooyeweerd continues his analysis into the third phase, which begins as the state ramps up its control—most notably in fascist Italy and bolshevist Russia, but also in Germany's Weimar Republic. Third-phase relations between state and economy were defined by "direct interference in the structure of the economy itself in a gradual absorption of private initiative into the coercive activity of the state." In fascism, the state allowed business corporatism a measure of independence so long as business recognized the state's authority and served its objectives. In bolshevism, the state simply took over business corporations, integrating them into the machinery of the state.

The Conditions of Statism in "the Liberal Law-State"

Dooyeweerd traces the origins of statism in the old liberal law-state's abandonment of justice as "the aim and purpose of the state." Instead, the liberal law-state "limited the task of the state to an individualistic, albeit somewhat crude, view of law: Protection of the inalienable objective rights of the citizens to life and property." The abandonment of justice as the state's raison d'être meant "the law-state had undergone a radical inner change . . . [that] caused it to lose all material content." What was left was "formal law" that could take on any content.

In this second phase—the new formal idea of the law-state—"the executive power must be subject to the legislature and the judiciary." Instead of "material subjective rights to life and property," social legislation put formal legislation "at the service of the new ideal of the welfare and power state, which recognized no material boundaries to government interference." The Bolshevik Russian and fascist Italian revolutions merely extended this surrender of boundaries as "the law merely became the form in which the will of the dictatorial power of the executive was embodied."

By the third phase of the development of the law-state, justice was identified with the will of the state—a state without any limits on its competence, "the omni-competent state."

Dooyeweerd notes the neoliberal responses of his contemporaries and their attempts to recover the old liberal law-state by finding "the essence of justice in the limitations to the task of the state in the maintenance of natural freedom and equality behind the purely legal freedom and equality."2 For neoliberals, the purpose of the state was "to make a free social community of the people, as the source of all culture and prosperity." The state's role was "not to bring prosperity and culture" but "to remove the impediments to the development of these material and spiritual goods from the free society." This neoliberalism was "rooted in the humanistic idea of the absolute value of the free, autonomous personality."

The "Christian theory of justice and the state"

For Dooyeweerd, the alternatives are defined in terms of who or what determines the boundaries of state competence. Dooyeweerd describes a theory of the state with a juridical competence that is self-grounded and autonomous as "the theory of the unlimited sovereignty of the state." In this conception,

the doctrine is nourished equally from two directions. One source is rationalistic individualism, that construed the state from a contract, made by all individuals who thereby transferred all their natural power and freedom to the state with the exception of a few natural and unalienable basic rights. This theory sees the state as the only absolute and sovereign legal community.

Coming from the other direction "of the juridical omnipotence of the law," the state is not constructed "out of the individual," but is an "all-encompassing and therefore absolutely sovereign organic bond, of which all other bonds, such as family, the association, the church and the enterprise, were merely organic parts."3

For Dooyeweerd, a Christian theory of the justice and the state is neither self-grounded nor autonomous, but grounded in divine sovereignty and divinely instituted structure and "fixed laws," each with its own sphere in a world "in the service of God." As an individual, "spiritual" thing, the state possesses a "juridical function"—"an historical function of power with a special character." The state's other functions, including its economic functions, are subordinate to its core or leading "function of public justice." The state's reason for being in the service of God is the pursuit, facilitation, and enforcement of public justice. Public justice with a view to human flourishing is the state's reason for being whether it is making laws and regulations, creating public policy, administering the public treasury, policing, or defending the territorial integrity of the country by force of arms.

The "leading function" of business enterprise is economic. Its juridical function is limited to its internal organization. Preserving its sphere sovereignty with respect to economic competence as over and against "unlawful state interference" is not just a right but a duty of business since its leading function of economic competence is divinely delegated. Business' reason for being in the service of God is the pursuit of wealth-creation and profit. Wealth-creation and profit is business' reason for being when it makes investments, identifies new business lines, creates jobs, markets new products, opens new markets, launches an IPO, manages its accounts payable and receivable, participates in labour relations, and convenes an annual general meeting. But in each of these, business will keep uppermost its overarching responsibility to serve God for human flourishing as it pursues wealth-creation and profit.

For Dooyeweerd, the state "has received the task from God to guide the internal structure of the juridical community in all its functions through justice." This doesn't mean "the state may wipe out the structural differences between the organizations and interfere with their internal juridical structures" but it does mean "that the state must see to it that the economic sphere does not smother and absorb man as a juridical subject."

The juridical role of the state as adjudicator in the economic sphere also includes "the protection of industries in distress, the execution of public works or the regulation of emigration." If it extends itself into a public enterprise "vital for the entire internal organization of the state," a juridical basis "must always be present, which is different in the case of private enterprise."

A boundaries map

Let's further draw out some principles for the state, commerce and trade:

  1. Our understanding of human relationships should not be reduced to state and individual, to state and taxpayer, or business and per capita GDP. Take account of the myriad organizations—religious, voluntary, and charitable, families and households, and relationships between and among these when describing the state, commerce, and trade. Networks of human relationships are often the basis for how a supplier or service provider is selected and how a sale is closed.4

  2. Governments don't trade, people and their businesses do. Recent understandings of commerce and international trade as "global supply chains" or "trade corridors" or "clusters" express this idea. This fundamentally calls into question the notion of "trade surpluses," "trade deficits," or "balance of trade," as though states and governments trade. People or businesses, including "sovereign businesses," buy and sell goods and services within and across political jurisdictions.

  3. Government has a role that is neither minimalist nor "maximalist." Government is limited to, but extends to, protecting citizens and their property and adjudicating between the various organizations and institutions of a jurisdiction. Should a government "nationalize" a business or a hospital? Surely not. But government should create a regulatory framework so that businesses can compete fairly without fear of predatory practices that defeat a regulated but free and open market, for example. "Limited government" that is adjudicatory and uses coercive authority to enforce its adjudication, as necessary, but not "absolutely."

  4. When businesses characterize people only as economic units or per capita units of productivity and profitability, they impoverish their understanding of humankind, generally, and their employees, specifically. Formerly, most businesses understood this and cultivated good relations with workers and staff employees with family-friendly policies and personnel practices that engendered and secured bi-directional loyalty between employer and employee. Generally speaking, contemporary labour relations are most accurately characterized as adversarial and hostile—"every man for himself."

  5. Labour unions that understandably negotiated "deals" for their membership, predicated on adversarialism and hostility, may have priced themselves or the businesses with whom they made the deals out of the market. The technical analysis of this is "cutting off your nose to spite your face." Labour unions and businesses both have roles that overlap in respect of employees. Is it possible the best interests of employees could be better satisfied by labour-corporate relations characterized by cooperation?

  6. People live their lives as members of families, churches, and other religious institutions, voluntary organizations, schools, supporters of charities, and so on. Their participation in the economy as business owner-operators and investors or employees and service providers, or in the state as voters and elected officials, does not—or, should not—exhaust how they live their lives. Human well-being and flourishing flows from people's attending the various responsibilities of living.

  7. A state grounded in the individual or in all-encompassing authority is a state that will fail human flourishing. Put differently, a state that is accountable only to itself, or a state that is accountable only to popular, democratic will, is a state whose moral compass is only as good as the virtue of people controlling the totalizing state or the virtue of the electorate. The excesses and consequences of both are illustrated by the France of the Sun King, a nearly absolute monarch, and the France of Robespierre, a totalitarian (and murderous) democracy that guillotined by shows of hands.

  8. Profit or wealth-creation is not bad by definition, nor is it an end in itself. But it should be directed to the service of God for human flourishing in such a way as to reward talent and hard work, inculcate a limited responsibility for others among the talented and hard-working, and militate against rewarding irresponsibility.

Dooyeweerd argues for a shift from a materialist state and business culture to a state and business culture with an ethos of service. His call for self-understanding points not to an autonomous, self-grounding state or economy, but to states, economies, families, and organizations grounded in the transcendent. He is calling for an ultimate check on any attempt at unfettered autonomy. For him, this is the beginning—and end—of human flourishing.

Notes

1

See especially, Herman Dooyeweerd, "The Limits to State Interference in the World of Enterprise (As seen from a Biblical Perspective)." Tr. by Magnus Verbrugge, first delivered April 17th 1931 to Patrimonium. Patrimonium is an organization of the Christian labour movement in the Netherlands, founded by Abraham Kuyper in 1876.

2

Although one could argue that these fulfill an instrumental function in Hayek's thinking—the furtherance of individual freedom.

3

In a presentation given to a landmark conference on "Pluralism, Religion and Public Policy" at McGill University, October 2002, Chief Justice Beverley McLachlin argued for Paul Kahn's thesis on the rule of law as comprehensive of society. Her development of it suggested a conflation of state and society. Chief Justice McLachlin insisted that the state must carve out public space for religion. But her respondent, the political theorist Jean Bethke Elshtain, offered a spirited critique of the conflation, suggesting the choice is not between "totalistic religious goods versus totalistic legal and political goods," but between "competing understandings of a public good." Cf. Recognizing Religion in a Secular Society: Essays in Pluralism, Religion, and Public Policy. Ed. by Douglas Farrow. Montreal & Kingston: McGill-Queen's University Press, 2004.

4

In his Reflections on the Revolution in France, Edmund Burke reached conclusions similar to those noted by Dooyeweerd: the Revolution's reducing state authority to a single chamber, the National Assembly, and eliminating ancient, French institutions created the conditions leading to less liberty, not more, as borne out in Robespierre "Reign of Terror."

Topics: Markets Economics
Russ Kuykendall
 
Russ Kuykendall

Russ Kuykendall is a former director of policy to a past Canadian Minister of Natural Resources and a former research fellow with Cardus.

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