capitalism

Rule of Law 447
such a pressure group system worked with perfect fairness
to every group it would still tend to work inefficiently.
All of this pressure group activity is in breach of the rule
of law as Hayek understands it.
However, there are examples from modern politics that
show that direct democracy can produce classical liberal, or
at least conservative, results. Perhaps the best of these is
Switzerland, where the regular use of the referendum at the
cantonal and federal levels has insulated the country from
the advance of European socialist programs. Even today the
combined spending of the cantons is still more than that of
the federal government: a situation that has not obtained in
the United States since the early part of the 20th century. In
2005, the electorates in the Netherlands and France rejected
by referendum the proposed heavily centralist European
constitution. In Japan, former Prime Minister Junichiro
Koizumi conducted the 2005 general election as if it were
a referendum on his plan to privatize the postal system:
a market scheme that had been held up by a previous
Parliament riddled with pressure groups.
Despite the depredations that it has suffered from
communism, socialism, and, more surreptitiously, unlimited
democracy, the rule of law remains an essential building
block in the framework of a free society. Indeed, there
are encouraging signs in the United States that some traditional
values with respect to property are being reasserted.
Over the past 20 years, the Supreme Court has delivered
several decisions favorable to property owners in disputes
involving the several legislatures’ use of the takings power
(eminent domain). If transactors are to be secure in their
dealings, they need a reliable set of rules and not the creative
activity of politically motivated judges. In a world of
uncertainty about science, religion, and art, in a genuinely
liberal society, these ultimate questions must be left to the
individual conscience and not placed in the public domain,
where government can use coercion to enforce its beliefs.
However, as Hayek has pointed out, there is a distinction
between law and legislation. The former encompasses
private actions, especially economic ones, and the rules that
enable people to conduct their aims peacefully. The latter
refers to those public actions that the state undertakes; legislation
is not a series of guidelines, but a structure of commands.
People are ordered to do things that they would not
do or to refrain from doing things they otherwise would do
were governments effectively restrained by the rule of law.
In the modern world, there is too much legislation and not
enough genuine liberty-enhancing law.
The rule of law is a necessary condition for a free society.
However, it must be supplemented by other protections,
notably constitutionalism and the absolute guarantee
of private property. Only if these are realized will we really
have a society governed by the rule of law and not the rule
of men.
See also Constitutionalism; Hayek, Friedrich A.; Hobbes, Thomas;
Locke, John; Republicanism, Classical; Whiggism
Further Readings
NB
Barnett, Randy. The Structure of Liberty: Justice and the Rule of
Law. New York: Oxford University Press, 2000.
Hayek, F. A. Constitution of Liberty. Chicago: University of Chicago
Press, 1960.
Hobbes, Thomas. Leviathan. Richard Tuck, ed. Cambridge:
Cambridge University Press, 1996.
Locke, John. Two Treatises on Government. Peter Laslett, ed.
Cambridge: Cambridge University Press, 2005.
Madison, James. “Federalist No. 10.” The Federalist. Clinton Rossiter
and Charles R. Kesler, eds. New York: Signet Classics, 2003.
Olson, Mancur. Power and Prosperity: Outgrowing Communist and
Capitalist Dictatorships. New York: Basic Books, 2000.