The Greater Separation Of Powers

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Road to the Middle Class

Saturday May 19, 2012

by Christopher Chantrill

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In the Federalist Papers 47, James Madison quotes the famous dictum of Montesquieu:

When the legislative and executive powers are united in the same person or body... there can be no liberty, because apprehensions may arise lest the same monarch or senate should enact tyrannical laws to execute them in a tyrannical manner.ⁱ

It is Montesquieu’s concern about united powers that inspired the founding fathers to write a constitution in which the legislative, executive, and judicial powers were separated, as far as possible, into three separate branches of government. Above all, of course, they wanted to perfect the partial separation of powers in the British Constitution, where the executive is appointed out of Parliament and the judiciary is half and half out of the House of Lords.

But many Americans felt that the constitution as written did not go far enough in its separation of powers. They wanted not just to separate the powers of government but to separate the religious power from the political power. To mollify these opponents to ratification Madison proposed a Bill of Rights, including a clause to prohibit an establishment of religion, a government-sponsored church. Then in 1802, in a famous letter to Baptists in Danbury, Connecticut, President Thomas Jefferson first introduced the idea of the separation between church and state.

I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should "make no law respecting an establishment of religion, or prohibiting the free exercise thereof", thus building a wall of separation between Church & State.

The First Amendment and Jefferson’s letter extended the doctrine of separation of powers. It introduced the notion that the defense against tyranny must forbid a condominium between politicians and divines, that there should be a distance between institutions of moral power and institutions of political power. They wanted to deny government the strategic advantage of a combined army of religious and political troops. Today, people express this fear about a too-close relationship between church and state when they warn against the danger of “legislating morality” or of a “theocracy.” In these slogans people express the universal fear of the moral traditions of others, though every law must be inspired by a notion of the good, and that idea of the good must have come from some moral tradition.

The Bill of Rights stopped at the prohibition of an establishment of religion. But at the ratification of the US Constitution and afterward, many anti-Federalists were concerned about another potential coalition of power, that between government and commerce. This fear was articulated by Thomas Jefferson, who believed in the virtues of agriculture and feared the power of cities and banks.

[F]or the general operations of manufacture, let our workshops remain in Europe... The mobs of great cities add just so much to the support of pure government, as sores do to the strength of the human body.ⁱⁱ

When Alexander Hamilton, first Secretary of the Treasury, unveiled and then implemented his financial system in the early 1790s, Jeffersonians were horrified. They were afraid that his system would make the federal government too strong and the commercial sector too strong as well.

Hamilton’s financial system rolled out in two stages, each heralded by a report written mostly by himself. First, in the 3,000 word First Report on the Public Credit he proposed to refinance the revolutionary war debts, both from the Continental Congress and the states, with United States bonds funded by new federal excise taxes and import tariffs.ⁱⁱⁱ Second, in the Second Report on Public Credit, he proposed a national bank, modeled on the Bank of England, to act as the government’s banker and thereby to sit atop the credit system.

Hamilton’s system proved everyone right. It made the federal government strong, and it laid the foundation for a strong economy with a vibrant financial system. The rock-solid credit of the United States government made the government immensely powerful, and the rock-solid credit of the United States government created a firm foundation for a powerful commercial and financial sector. When Jefferson became president in 1801 he found that it was too late to change it. He encouraged his Treasury Secretary to change Hamilton’s policies, but Albert Gallatin demurred. “I have found the most perfect system ever formed,” he said.^iv

Hamilton’s financial system created a symbiotic relationship between government and finance. The rock-solid US Treasury bonds proved to be excellent as collateral, thus strengthening confidence in banks and the credit system. The expanding economy increased the power of the federal government, its ability to borrow and tax. The power of the United States government has been there when the American people needed it, especially when it came to winning wars.

But the power of government has also been a irresistible temptation, On the one hand, countless moral activists have sought to use the wealth thrown up by the economic sector to enact their moral agenda using the power of government. On the other hand, countless economic actors have sought to use the power of government to enhance their economic prospects by using the language of moral activists.

In the United States in 2008 the governments at all levels spent approximately 7.2 percent of GDP on the basic functions of government, the defense against enemies foreign and domestic. But they spent 21.5 percent of GDP on an array of social programs, from government pensions to government health care, government education, and government welfare.^v This is the fruit of a century and more of moral activism. The activists have asserted that the economic sector and the moral-cultural sector cannot be trusted to allocate resources towards these social activities without force.

Meanwhile countless economic interests and activists have sought to use the power of government to enact or subsidize their uneconomic pet projects, whether canals, railroads, dams, bridges, affordable housing, synthetic fuels, biofuels, or clean energy. They justify their projects on every basis from national defense to saving the planet from global warming, arguing that the economic sector cannot be trusted to allocate properly the resources needed for these social activities.

This lack of trust in the economic sector is curious, because the economic sector itself is drenched in trust.

Three stories illustrate why this is so. The first story, from the 19th century, involves John D. Rockefeller’s daughter Bessie. On a expedition with college friends in New York City shopping for a present she found herself short of cash.

At a Manhattan store they found the perfect gift: a $100 desk. Since Bessie and her companions had only $75, they asked the merchant if he could wait a few days for the remaining $25. He agreed to do so if a New York businessman would vouch for them. “My father is in business,” Bessie offered meekly. “He will vouch for us.” Who is you father? Asked the man. “His name is Mr. Rockefeller,” she said. “John D. Rockefeller: he is in the oil business.”^vi

The merchant knew who Bessie’s father was. But if Bessie’s father hadn’t been John D. Rockefeller then the merchant could have checked the business directory to determine his trustworthiness as a New York businessman.

The second story is about J.P. Morgan, American financier, the man that saved the financial system after the Crash of 1907. At the Pujo Committee hearings into the “money trust” in 1913, J.P. Morgan testified before the House of Representatives. Morgan and committee counsel Samuel Untermyer tussled over the question of money and credit.

Mr. UNTERMYER. Is not commercial credit based primarily upon money or property?

Mr. MORGAN. No, sir; the first thing is character.

Mr. UNTERMYER. Before money or property?

Mr. MORGAN. Before money or anything else. Money cannot buy it.

Mr. UNTERMYER. So that a man with character, without anything at all behind it, can get all the credit he wants, and a man with the property can not get it?

Mr. MORGAN. That is very often the case.

Mr. UNTERMYER. But that is the rule of business?

Mr. MORGAN. That is the rule of business, sir.

Mr. UNTERMYER. If that is the rule of business, Mr. Morgan, why do the banks demand, the first thing they ask, a statement of what the man has got, before they extend him credit?

Mr. MORGAN. That is what they go into; but the first thing they say is, “We want to see your record.”

Mr. UNTERMYER. Yes; and if his record is a blank, the next thing is how much has he got?

Mr. MORGAN. People do not care, then.

Mr. UNTERMYER. For instance, if he has got Government bond or railroad bonds, and goes into get credit, he gets it, and on the security of those bonds, does he not?

Mr. MORGAN. Yes.

Mr. UNTERMYER. He does not get it on his face or his character, does he?

Mr. MORGAN. Yes; he gets it on his character.

Mr. UNTERMYER. I see; then he might as well take the bonds home, had he not?

Mr. MORGAN. Because a man I do not trust could not get money from me on all the bonds in Christendom.

Mr. UNTERMYER. That is the rule all over, the world?

Mr. MORGAN. I think that is the fundamental basis of business.^vii

Notice the difference between the understanding of Untermeyer and Morgan. To Morgan, business is a question of trust and relationship. To politicians it is a question of conspiracy and under-the-table deals.

A young salesman once told me the story of his first big contract. He was sitting in the client’s office after the deal had been struck, and watched his client put the contract in his desk drawer. If he ever had to take that contract out of the drawer, his client told him, then their business relationship would have failed. He meant, of course, that in future their business dealings would be done on the basis on mutual trust and a spirit of give and take. The contract was there in case their mutual trust failed.

Business dealings are drenched in words of trust, words like bond, trust, equity, redeem, company, partner, credit, and grace.^viii That’s the argument of Frederick Turner in Shakespeare’s Twenty-first-Century Economics when he analyzes the contract for a “pound of flesh” in The Merchant of Venice.

A contract, though it contains a necessary orientation towards an eternal and unchanging perfection of clarity and justice, and implicitly stipulates the most unambiguous construction of its words at the moment of their composition and signing, is always an ongoing relationship of persons. It can work only so long as it contains enough free play, enough lubricant of inexactness, so that it does not seize up.^ix

The certainties of a written contract are an illusion, for the real business relationship features contingencies never imagined in the contract. The real business relationship enacts the age-old exchange of gifts and the rough-and-ready give-and-take that renews and confirms the trust between two friends.

The importance of trust as a basis for a prosperous and peaceful society is argued by Francis Fukuyama in Trust: The Social Virtues and the Creation of Prosperity.

Thus, economic activity represents a crucial part of social life and is knit together by a wide variety of norms, rules, moral obligations, and other habits that together shape the society... [O]ne of the most important lessons we can learn from an examination of economic life is that a nation’s well-being, as well as its ability to compete, is conditioned by a single, pervasive cultural characteristic: the level of trust inherent in a society.^x

Fukuyama investigates the trust question on a national and regional level, the difference between “high-trust” societies like the United States, United Kingdom, and Germany versus “low-trust” like China, Italy, and France. The difference lies mainly in the ability of people to extend trust beyond their families, their blood kin. The high-trust societies have in recent times included a wealth of voluntary associations in the space between the family and government, and it is the high-trust societies that led the way from agricultural to commercial and industrial society. Trust, argues Fukuyama, is the key marker of social well-being.

So the time has come to extend Jefferson’s thinking. If the separation of church and state is so good, why would not the separation of economy and state be equally beneficial and necessary? Just as Americans have decided that religion is too powerful a force to be entrusted to politicians, so also a new generation may decide, after the experience of the last century, that the economy is too important to be the plaything of people whose devotion is to reelection and political power.

If the United States should decide to add the separation of economy and state to its traditional separation of church and state, then Americans need to think about what that would mean and how it would work.

Informally, we have already differentiated the economic sector from the political sector. Michael Novak has analyzed the modern differentiation of society in The Spirit of Democratic Capitalism. He is clear that in the modern world, the space of democratic capitalism, human society is differentiated into three social sectors.

What do I mean by “democratic capitalism”? I mean three systems in one: a predominantly market economy; a polity respectful of the rights of the individual to life, liberty, and the pursuit of happiness; and a system of cultural institutions moved by ideals of liberty and justice for all. In short, three dynamic and converging systems functioning as one: a democratic polity, an economy based on markets and incentives, and a moral-cultural system which is plural and, in the largest sense, liberal.^xi

All traditional societies impose “a collective sense of what is good and true... [E]very decisive economic, political and moral-cultural power is exercised by one set of authorities.”^xii Bureaucrats of the state and the church control the economic sector. At the same time the clergy meddle in politics and the politicians meddle in religion.

It is a distinctive invention of democratic capitalism to have conceived a way of differentiating three major spheres of life and to have assigned to each relatively autonomous networks of institutions.^xiii

This is extremely beneficial when it comes to ambitious people with a taste for power.

This differentiation of systems sets individuals possessed of the will-to-power on three separate tracks. Political activists may complete for eminence in the political system, economic activists in the economic system, religious activists and intellectuals in various parts of the moral-cultural system. But the powers of each of the three system over the others, while in each case substantial, are firmly limited.^xiv

There is only one problem with Novak’s concept. It remains cloistered in his excellent book. It is not a “meme” that has penetrated beyond Novak’s readers. It seems clear that society has evolved into a differentiated system or organism in which there are at least three recognizable sectors: political, economic, and moral-cultural. But very few people experience modern social arrangements in that way.

Further, many people would not see the differentiation of human society into three co-equal sectors as a good thing at all. They see it as a dangerous collapse of order. Particularly in the moral-cultural elite, many people shrink from any idea that the economic sector should be a co-equal sector that shares power and prestige with the political and moral-cultural sectors. They believe that the economic sector is a dangerous monster, threatening all the time to burst its shackles, and return the modern world to the law of the jungle. They believe that the economic sector must be kept in subjection by an alliance between practical politicians in the political sector and the intelligent and ethical intellectuals in the moral-cultural sector.

In many ways it is understandable that elites have reacted with fear to the sudden transformation in human life over the last two centuries. The sudden emergence of giant economic institutions, the huge migration from the countryside to the city, the remarkable power of capital markets to control economic life, the blind power of the price system, all these events are unprecedented in human history. But if we have learned one thing in the last two centuries it is that we resist the new order at our peril. We have seen where resistance to democratic capitalism leads. It leads to the escape from the pluralism of the three-sector society. It leads unremarkably and repeatedly, ever since the French Revolution, to totalitarianism, the vain attempt to collapse the three-sector society into a unitary state where politics, economics, and the moral-cultural are reunited into their compact origin.

Perhaps we need not plumb the depths of human psychology to explain these favorable views of totalitarianism... The desire to escape pluralism, rather than its acceptance, is the norm in man’s history... [In a plural political system] [w]e choose, through both reason and morality, the mutual limitation under law of our desire for power. But, following our natural inclination, what person would not choose absolute power, if he could be sure it would always be his own and never another’s?^xv

We must make explicit what is implicit in the daily practice of democratic capitalism and what is hinted at in terms like “free enterprise” and “market economy.” We need a new name into which we can breathe a new vision of the society we wish to build, a word that expresses the idea of three equal sectors of society, jealous and independent, but intertwined and respectful, and anchored by a Greater Separation of Powers that expresses a great social compact: the mutual limitation under law and in each heart of our desire for power. It is a society in which not merely government is limited by the separation of powers between legislative, executive, and judicial branches, but power across society itself is limited by a separation of powers between the political sector, the economic sector, and the moral-cultural sector. When we say “separation of powers” we mean a wall of separation between the moral-cultural sector and the political sector, not just Jefferson’s wall of separation between church and state. We mean a wall of separation between the political sector and the economic sector, and an end to the ruinous meddling by which the political sector forces the economic sector to pay tribute to its power.

The separation of church and state, obliquely suggested in the First Amendment to the US Constitution, was conceived at a time when thinkers and citizens were deeply conscious of the dangers of combining the religious power with the political power. Advanced thinkers knew that they did not want their money funding an established church and they did not want priests from an established church having political power. Nevertheless, our national elites have never hesitated to trespass from the moral-cultural sector into the political sector and from the political sector into the moral-cultural sector when it served their power interests. The first breach of the wall of separation occurred in education.

The common school movement was, from its inception, driven by religious power motives. The agitation for common schools mounted in the 1830s by Horace Mann and others was a naked attempt to get political control of child education. Apart from the fact that Mann boasted that his system would reduce the crime rate—presumably because of superior moral education—the common school movement was an attempt by Harvard Unitarians to dilute the moral influence of the dominant Puritan churches in New England. The Congregationalists and Presbyterians, for their part, were more worried about the moral education of the Irish Catholics. They aimed to reform them by teaching Bible studies in the new government schools out of the Protestant Bible. All this took place before the appearance of “secular” religions in the mid 19th century.

The French Revolution was the clear sign that, with the decline of belief in a personal God, modern political movements would combine the features of religious and political movements. The French Revolutionaries were open about substituting the worship of Reason for the worship of God, and they created secular rituals and festivals to create a quasi-religious cult around the political movement for liberty, equality, and fraternity. The cathedral of Notre Dame in Paris was converted, for a while, into a Temple of Reason.

But that was just the beginning. The 19th century spawned numerous secular political movements and many of them sought to collapse the religious and political into a single unitary force. Marxism wanted to replace the coalition of church and state with a single political elite that would dominate all sectors of society. Auguste Comte’s Positivism and his “religion of humanity” was a big draw for the educated youth of mid century. Then non-revolutionary Socialism came to dominate the minds of educated youth in the late 19th century, with its variants such as American Progressivism and British Fabianism. At the turn of the century Nietzsche captivated young minds with a religion of self-worship; it developed into the radical individualism for intellectuals advertised by Jean-Paul Sartre in the mid 20th century. Bolshevism and Fascism established a model for any charismatic political leader in the 20th century to follow: a personal messianic cult that could combine religious and political elements in a unique package of self-deification and statolatry. And after Sartre came the New Left, the Hippie movement, the New Age movement, the environmental movement, and the global warming movement. Ours is a great age of secular religions.

Secularist intellectuals such as Steve Bruce argue that religion is in a permanent decline in the sense that we experience today “fewer people... influenced by religious beliefs” and can expect an endpoint of “widespread indifference” to religious ideas, i.e., religious ideas predicated on supernatural powers or events.^xvi

This kind of thinking does not occur in a vacuum. If you define religion as a belief in the supernatural, and churches as places where religious people create a community, then the separation of church and state means the separation of state only from moral communities that worship a supernatural being. But the issue of the separation of church and state is a larger one than that. Its purpose is to dramatize the danger of a dominant moral-cultural community, whether “religious” or “secular,” from forming an alliance with the political sector and using the power of the government to repress other moral-cultural communities and world views.

All moral-cultural views, whether from church of Christian believers or a group of secularist activists, attempt to frame a vision of the meaning of human life and create principles and precept to guide the faithful in their lives. This applies to a Pentecostal church of women in a Third World slum trying to be saved in Christ to build a life of discipline and decency in the city; it applies equally to an environmental group agitating for people to live simply so that others may simply live and we can all save the planet. It is just as much the “legislating of morality” for the one group to lobby for Sunday blue laws as it is for the other to lobby for criminal penalties against failure to recycle.

There is at least a grudging agreement among elites that religion should not dominate politics—certainly not other peoples’ religions. The idea of the separation of church and state is accepted, in principle, however much it is traduced by the temptations of power. But the separation of economy and state is a far more radical notion. No politician feels shame in attacking banks or corporations, and no amateur hesitates before advancing proposals to reform business practices. No intellectual hesitates to assume moral superiority over business owners and managers. The fact is that people are afraid of business. They are afraid of its power, afraid of its wealth, afraid of its dynamism, and afraid of its inscrutability. They feel that the economic sector is a raging beast that must be kept under tight control lest it get loose and ravage the land like the Bull of Heaven sent by the goddess Ishtar into Mesopotamia. The writers of Fabian Essays in Socialism were also afraid. “The Period of Anarchy,” written by Sidney Webb, painted a lurid picture of life under the power of business at the height of the Industrial Revolution.

The result of the industrial revolution, with its dissolution of mediaevalism amid an impetuous reaction against the bureaucratic tyranny of the past, was to leave all the new elements of society in a state of unrestrained license... No sentimental regulations hindered the free employment of land and capital to the greatest possible pecuniary gain of the proprietors, however many lives of men, women and children were used up in the process...

Women working half naked in the coal mines; young children dragging trucks all day in the foul atmosphere of the underground galleries; infants bound to the loom for fifteen hours in the heated air of the cotton mill, and kept awake only by the overlooker’s lash... complete absence of the sanitary provisions necessary to a rapidly growing population: these and other nameless iniquities will be found recorded as the results of freedom of contract and complete laisser faire in the impartial pages of successive blue-book reports.^xvii

The narrative of left-wing reformers has not changed from that day to this. It was economic regulation, the limiting of working hours, ending child labor, empowering unions, taxing industry for social benefits that saved ordinary people from economic subjection in the days of unregulated laissez-faire.

Mr Herbert Spencer and those who agree in his worship of Individualism, apparently desire to bring back the legal position which made possible the “white slavery” of which the “sins of legislators” have deprived us; but no serious attempt has ever been made to get repealed any one of the Factory Acts.^xviii

Of course, people are right to be afraid. Business is a revolutionary force that continually upsets established economic relations, and never more so at the moment when a country first converts from an agricultural society to the culture of democratic capitalism. It can demolish the economic status of any established player, from a great public corporation down to an ordinary worker slow to adapt to the new skills and techniques.

But then religion also is a revolutionary force. It sets the moral agenda under which social life and politics operate. So is politics, the endless conflict between the Ins and the Outs for the right to defend a territory from enemies foreign and domestic, and to force a living from a cruel world. So also is science. It was, after all, the revolution in science that permitted business to exploit enormous natural forces in the competition to supply the consumers with products and services to slake their insatiable human appetite. It is because business is so powerful that Michael Novak assigns it its own sector in his analysis of modern society. And it is the power of the economic sector that requires its separation from the political sector so that its power may not be joined in unholy alliance with the politicians.

Each sector of society has its defining principle. For the political sector it is force: people go to government for protection; they want government to use its force on their behalf. For the moral-cultural sector it is the mystery of meaning for the human condition: what does life mean and what should we do to give our own lives meaning? For the economic sector it is trust: people may choose a business for products based upon an advertising message; they continue based upon the continuance of trust.

iHamilton, Madison, Jay, The Federalist Papers, Mentor, p. 271

iiThomas Jefferson, Notes on the State of Virginia, p. 291. http://etext.virginia.edu/etcbin/toccer-new2?id=JefVirg.sgm&images=images/modeng&data=/texts/english/modeng/parsed&tag=public&part=19&division=div1

iiiTreasury Department, First Report on the Public Credit. http://www.wwnorton.com/college/history/archive/resources/documents/ch08_02.htm

ivRon Chernow, Alexander Hamilton, p. 647.

vChristopher Chantrill, usgovernmentspending.com. http://www.usgovernmentspending.com/numbers?year=2008&units=p

viRon Chernow, Titan: The Life of John. D. Rockefeller, Sr., p. 232.

viiPujo Committee Hearings, transcript for December 19, 1912. http://c0403731.cdn.cloudfiles.rackspacecloud.com/collection/papers/1910/1912_12_19_Morgan_at_Pujo_C_t.pdf

viiiFrederick Turner, Shakespeare’s Twenty-first-Century Economics, p. 11.

ixIbid., p. 73.

xFrancis Fukuyama, Trust, p. 7.

xiMichael Novak, The Spirit of Democratic Capitalism, p.14

xiiIbid., p. 49.

xiiiIbid., p. 56.

xivIbid., p. 56.

xvJean-Francois Revel, The Totalitarian Temptation, p. 27.

xviSteve Bruce, God is Dead, p. 2, p.42.

xviiG. Bernard Shaw (ed.), Fabian Essays in Socialism, p. 40-41.

xviiiIbid., p. 41.

Christopher Chantrill blogs at www.americanmanifesto.org.

print view

The Crisis of the Administrative State
It wasn’t supposed to be like this.

Beyond Mere Blame
What led our liberal friends into the blind alley of the administrative welfare state?

Government and the Technology of Power
If you scratch a social reformer, you will likely discover a plan for more government.

Business and the Web of Trust
Business is all about trust and relationship.

The Bonds of Faith
No society known to anthropology or history lacked religion.

All of the Above
Society is differentiated into three sectors.

Springtime for Freeloaders
The modern welfare state encourages freeloaders.

The Curse of Compulsion
The larger the government, the smaller the society.

The Real Meaning of Society
Broadening the horizon of cooperation in the “last best hope of man on earth.”

The Greater Separation of Powers
If you want to limit power then you must limit power.

The Greater Separation of Powers

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