The Rule of Law

The idea that government exists to serve the interests of the people rather than the other way around is modern. It underlies the attitude that Americans and the citizens of other democracies have toward their governments. The essence of this idea and of democracy is not that rulers are chosen by the people; it is that however they are chosen their rule—their powers—are limited by law. The rule of law and the limits it places on the power of the state to interfere with our lives is the essential foundation of our liberties, not voting.

Government involvement in the provision of a service or product is a game changer. There is a centrifugal force that draws private players, “special interests,” into influencing outcomes by influencing politicians and government bureaucrats rather than by competing with better services or products in the market place. This centrifugal force must be continually resisted by limiting what government gets involved in and by insisting on the rule of law. Failure to do so creates a government that looks and behaves more and more like, well, like what we are seeing. America has been exceptional in its success and in its attitudes toward the liberty on which it rests. This exceptionalism is worth fighting (continuously) to preserve.

Richard Lowry & Ramesh Ponnuru explain American exceptionalism as follows:

“It was, to simplify, the most individualistic elements of En­glish society — basically, dissenting low-church Protestants — who came to the eastern seaboard of North America…. America was blessedly unencumbered by an ancien régime. Compared with Europe, it had no church hierarchy, no aristocracy, no entrenched economic interests, no ingrained distaste for commercial activity. It almost entirely lacked the hallmarks of a traditional post-feudal agrarian society. It was as close as you could get to John Locke’s state of nature…. All of this made Amer­ica an outlier compared with England, which was an outlier compared with Europe.

“The late Seymour Martin Lipset defined [the American creed] as liberty, equality (of opportunity and respect), individualism, populism, and laissez-faire economics…. Liberty is the most important element of the creed. To secure it, the Founders set about strictly limiting government within carefully specified bounds.”[1]

War always weakens liberty. When forced, people usually chose security over liberty. A never-ending “War on Terror,” if permitted to continue for too long, threatens to significantly undermine the liberty we are trying to defend. The growing importance of our military might, and the industrial and political interests that feed and support it—the military-industrial complex—will ultimately destroy our exceptionalism. We have been saved so far by our deep tradition of limited use of our military might, our exceptionally capably, honorable, and professional military officers, and the civilian control of their activities. I have written about this theme before: “Eisenhower’s farewell address 50- years later”, “When Values Clash”, “Keep it lean”.

But when our security is threatened we can be tempted to set our principles of respect for human dignity aside. The willingness of some short-sighted individuals to contemplate torture as a tool of warfare in such times illustrates this danger. A number of good articles have been written on this issue. One of the best was by Aryeh Neier: “Enhanced to the point of torture”. Other excellent discussions include: “The Torture Debate”, “Torture is immoral and doesn’t work”, and “Gitmo and us”.

The entertaining Robert Redford movie “The Conspirator,” is a dramatic illustration of the dangers and folly of setting aside the rule of law for what a ruler believes is the interest of the country. The movie depicts (whether historically accurate or not I do not know) the overriding of the important principle of the due process in the “interest” of national healing after the assassination of Abraham Lincoln. I recommend the movie.

Almost everything about government is a slippery slope that can only be prevented by continually challenging the entry and expansion of government into new areas and activities. Some times with proper limits and controls they are justified. More often they are not.


[1] Richard Lowry & Ramesh Ponnuru, “An Exception Debate” National Review Online, May 16, 2010.

About wcoats

I specialize in advising central banks on monetary policy and the development of the capacity to formulate and implement monetary policy.  I joined the International Monetary Fund in 1975 from which I retired in 2003 as Assistant Director of the Monetary and Financial Systems Department. While at the IMF I led or participated in missions to the central banks of over twenty countries (including Afghanistan, Bosnia, Croatia, Egypt, Iraq, Israel, Kazakhstan, Kenya, Kosovo, Kyrgystan, Moldova, Serbia, Turkey, West Bank and Gaza Strip, and Zimbabwe) and was seconded as a visiting economist to the Board of Governors of the Federal Reserve System (1979-80), and to the World Bank's World Development Report team in 1989.  After retirement from the IMF I was a member of the Board of the Cayman Islands Monetary Authority from 2003-10 and of the editorial board of the Cayman Financial Review from 2010-2017.  Prior to joining the IMF I was Assistant Prof of Economics at UVa from 1970-75.  I am currently a fellow of Johns Hopkins Krieger School of Arts and Sciences, Institute for Applied Economics, Global Health, and the Study of Business Enterprise.  In March 2019 Central Banking Journal awarded me for my “Outstanding Contribution for Capacity Building.”  My most recent book is One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina. I have a BA in Economics from the UC Berkeley and a PhD in Economics from the University of Chicago. My dissertation committee was chaired by Milton Friedman and included Robert J. Gordon.
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