Don’t Do to Economic Rights What We’ve Already Done to Speech Rights

Fascinating article today by Samuel Gregg on why it would be a bad idea to enshrine stronger protections for property rights and a sound money supply in the U.S. Constitution, as some are proposing. Short version: constitutions are important and some constitutional protection of economic rigths is necessary, but the recent experience of Europe (both in the Euro and in some domestic developments within EU nations) shows how these kinds of constitutional and treaty obligations can actually be counterproductive if it’s too far at odds with the prevailing cultural winds. Example: the treaties creating the Euro required European nations to get their fiscal houses in order, but those nations faced countervailing cultural imperatives that were stronger; in order to obey their cultural imperatives in favor of ever-expanding welfare and debt without openly violating their treaty obligations, they began engaging in all kinds of fudging and ledgerdemain. This has now greatly compounded the problem of fiscal irresponsibility by removing most of it from easy view; it has also opened many more doors for graft and injustice as compared to the old “honest” irresponsible finances.

Fascinating history in the article as well about a movement in late 19th and early 20th century Germany, the “ordoliberals,” that advocated similar constitutional reforms to fight cartelization of the economy, but insisted constitutional reforms could only be effective insofar as they tacked with rather than against prevailing cultural winds.

Image by Kiwi

2 Thoughts.

  1. Okay, two things. First, that is a most excellent graphic.

    Second, I think Gregg’s point was a little more nuanced. I suspect he would distinguish between constitutional provisions that (a) enshrine first principles; as opposed to (b) reflect prevailing popular sentiment. So greater protection of the first variety (say, preventing the government from taking your property without just compensation, or inflating away your savings) are not likely to introduce economic dislocations because they simply strengthen the natural order of things. Additionally, they are generally not outcome-oriented prescriptions or proscriptions; they establish rules of the road.

    Those of the second variety, however, much more frequently create problems because they are designed to accomplish specific ends without regard to first principles. And because it is next to impossible to avoid all unintended consequences on the way to the compassed goal, economic dislocations are almost certain to follow. The magnitude of the dislocation is roughly proportional to the magnitude of the intervention. So when you try to restructure the economies of Europe, you get Greece. And Spain, and Portugul . . . and Ireland. I doubt this came as a surprise to the European architects. They just thought the countervailing benefits they were expecting would more than balance the harm. Turns out they’re not as smart as they thought they were.

    The European project is failing not because the treaty obligations are out of whack with popular expectations (although the misalignment is unquestionably there), but because fiscal responsibility is incompatible with generous welfare states (or welfare states period; the jury is still out on this, but is giving every sign of handing down a conviction).

    Constitutional (or even statutory) enactments go awry when they try to legislate without due respect for reality. Mismatches between reality and popular sentiment may prevent enactment of the plan, but that’s not what creates the economic problem. The problems come when the legislation is based on the latter instead of the former. Greater economic protections, when based on fundamental principles and with due regard for reality, will reap economic benefits. We need to be chary of those based on other foundations.

    • That’s not how I read him. For example, you identify not inflating away our life’s savings as a first principle that ought to be enshrined. But Gregg identifies it precisely as something that shouldn’t be enshrined because we’re not going to obey the rule.

      So I think you, good lawyer that you are, are proposing a mostly intellectual distinction between what are and are not first principles, where Gregg is saying the criterion for constitutionalizing something is that it is both a first principle and in accord with the direction of the culture. (To complicate matters somewhat, he acknolwledges that the process of fighting for and enacting a constitutional amendment can itself move the culture.)

      You write: “The European project is failing not because the treaty obligations are out of whack with popular expectations … but because fiscal responsibility is incompatible with generous welfare states.”

      I don’t see the distinction between these. Aren’t they two ways of saying the same thing? Surely the incompatibility of fiscal responsibility with the European welfare state would raise no problems at all if popular expectations did not demand continued unlimited welfare states? They would just reform their welfare states and be done with it.

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