Capitalism, Democracy and Constitutionalism

Capitalism and democracy follow different logics: capitalist market societies build on economic rationality and are dedicated to the enhancement of wealth. Democracies trust in public will-formation and promise to pursue the common good. The course will deal with the tensions between these two logics and the efforts to reconcile them through constitutionalism and the rule of law. Reflections on the potential of a legal ordering with a potential to resolve these tensions must engage in interdisciplinary debates on the economy and society, law and society, and law and the economy.

The course will re-construct the development of these debates with the help of classical texts. It will depart from Eugen Böhm-Bawerk’s argument of the factual supremacy of “economic law” over “political power” (1914). The implication was spelled out by liberal “economic constitutionalism” with the plea to keep politics separate from “the economic”, and to respect the logic of the latter. Two highly influential varieties of this argument are, on the one hand, German Ordoliberalism (Walter Eucken and Franz Böhm) with its insistence on the control of economic power, and, on the other, the Austrian School (Ludwig von Mises, Friedrich A. von Hayek) which prioritised the protection of freedom over the concern with societal consequences. Max Weber’s Sociology of Law (a section of his Economy and Society, 1922) has affinities with both. Weber asserts that modern capitalism is inextricably linked to, and dependent upon, a formally rational law, but threatened by the quests for social justice, which seemed to become irresistible from the end of the nineteenth century. These political forces materialised in the two Polanyian “counter-movements”: one was the critique of both legal formalism and parliamentary democracy submitted by Carl Schmitt (Habermas: Max Weber’s “natural son”) in 1932 in his “Address to Business Leaders” with its plea for a “Strong State and Sound Economy”. An alternative supported by Karl Polanyi in 1944 was realised in the US by Roosevelt’s “New Deal” and envisioned in Germany and elsewhere in the quest for “economic democracy” submitted by labour lawyers and by the constitutionalist Herrmann Heller, Schmitt’s opponent, with his theory of the “social Rechtsstaat”.

For a good while, during “the golden age of embedded liberalism”, capitalism and democracy seemed to co-exist peacefully. “History does not repeat itself, but it rhymes”. All of the traditions dealt with so far, are back on stage. We should address: (1) modern American neoliberalism and the critique of its complacency about law by the exponents of the ordoliberal tradition; (2) Economic Sociology in the tradition of Karl Polanyi as a variety of economic democracy; (3) the renaissance of völkisch nationalism in populist movements; (4) the renewal of the Heller’s theory of the social (welfare) state by Jürgen Habermas in his “Discourse Theory of Law and Democracy”. -- Europeanisation and globalisation are the most important challenges to the post-war welfare-state settlement. The reasons, implications and responses can be re-constructed with the help of a fervid dispute between Jürgen Habermas and Wolfgang Streeck.

This course is for 2nd year MIA and MPP students only.