Introduction

The term “economic constitution” (Wirtschaftsverfassung, constitution économique) brings into contact two systems key to the revolutionary and post-revolutionary era of the past 250 years, the modern constitution (and, with it, democracy) and the market economy (and, with it, capitalism).

Constitution and economy, democracy and capitalism are in tension. The constitution describes the process and values of self-government (whether more democratic or more elitist), implying a freedom of choice that extends to the conditions of economic life; and yet, interests that gain wealth from the existing economic system influence the polity, making the latter de facto dependent on the economic system. Economic life seems to be both at the disposition of the state and its basis. A similar tension exists from the point of view of the economic system. The economy likewise appears to be the foundation of the state, government appears to be “a committee for managing the affairs of the whole bourgeoisie”, in Marx’s words. But at the same time, the economic system relies on the state (i.e. the political constitution) for stability and order. Presuming a self-regulating market mechanism, for example, raises the question of how such an efficient system can operate without a coherent – i.e. sovereign – legal system, and without a legal system effective enough to ensure compliance.

The tension between constitution and economy goes deeper, because each also may appear to threaten the other, rather than simply to be a precondition for the other. Political sovereignty by its very nature enables the sovereign to make decisions about society’s operating rules, including the rules for the economy. From the point of view of the economy as a dynamic, self-organizing system, however, a constitution empowering that great black box of modernity, the people, threatens to interfere with the operation of the economy. A similar threat exists from the point of view of the constitution that claims to enable self-government. Limiting a democracy’s right to affect economic rules in the interest of the long-term efficacy of market economics, for example, can lead citizens to a sense of powerlessness in the face of an abstract and alien economic system, and threaten the democracy’s legitimacy. A constitution that defers to a certain economic system, whether based on the plan or the market, disempowers the sovereign. The term “economic constitution” brings into focus the real stakes of these debates.¹

The concept focuses indeed on the point where constitution and economy intersect. But one can do that in different ways. A standard handbook on the notion of the economic constitution asks what the constitutional rules are that affect the economy: “Wirtschaftsverfassung” is “the collective term for the constitutional norms that are essential and over the long run decisive for the order and the course of the economic process”. The West German Basic Law, for example, sets the goals for the state, such as the principle of the welfare state and the basic rights; in the most extreme case, for example of the Soviet Union, a constitution makes a “certain decision in principle for an economic order required by constitutional law”.²

This approach allows one to sort through the actual rules affecting the economy. Yet such an approach sets aside the deep debates about what a constitution should and shouldn’t do, and it depoliticizes the question of what an “economic constitution” is, insofar as it plays down the paradoxical power relationship between economic and political systems,³ around which so much political debate over the past few centuries has rotated. Both Philippe Steiner and Guillaume Grégoire have usefully resisted this depoliticizing approach in their contributions.⁴ Each of them raises, implicitly or explicitly, some of the thornier questions surrounding the point where constitution and economy connect.

In Steiner’s essay, for example, a “constitution of liberty”, to paraphrase Hayek, based on free trade and stable property, is paired with political despotism in the Physiocrats. There is no small amount of hubris in the notion that a political ruler, despotic or otherwise, can organize and control the countless daily transactions that make up a modern economy on the basis of discovered-and-imposed natural laws of economic order. Physiocratic political ideas were both revolutionary and deaf to the complex realities of society: herein lies the underlying problem of any ever so enlightened despotism, in Steiner’s view.

The reverse problem appears in Grégoire’s work, namely how a democratic constitution can be used to enable the self-government of society on the one side (in the work of Hugo Sinzheimer), and can be assumed by conservative opponents to normatively limit democratic decisions about the organization of the economy (in the work of Carl Schmitt). The debate over the Wirtschaftsverfassung in the Weimar Republic is a debate over how much power the constitution grants to the constituted power to make substantive decisions about social and economic arrangements. Grégoire also opens up a different conception of change than the static one that the Physiocrats employed: the way a constitution can enable the creation of new social relationship from the bottom up, a long-term social revolution in Marx’s sense.

Both Steiner and Grégoire are also implicitly asking about the relationship between democracy and economic liberalism, especially the far-reaching conceptualization of a self-organizing market economy and society in the work of the Ordoliberals and Neoliberals.⁵ Others in this volume will be discussing contemporary debates about the European Union more directly,⁶ so I will only provide a few remarks at the end on how Steiner and Grégoire raise questions for the discussion, in particular about how constitutional norms dictating economic arrangements can be justified in the EU, a political organization based on treaties with only pseudo-constitutional qualities.

1 Physiocracy, or Legal Despotism

Physiocracy was only in part a school of economics. Their doctrines of free trade and fiscal reform also involved arguments about an ideal society based on free labour, internal markets, and a peaceful international order, as Steiner suggests. This image of an ideal economic (and moral) world certainly links up with some 19th century visions of European liberalism involving the abolition of slavery, markets allowing for free competition, and the development of civilization worldwide (though of course without the baggage of Quesnay’s theory of value and the Physiocrats’ static approach to property). The key difference lies in the political realm, first in the presupposition that Physiocratic economic doctrine would reflect the general interest of the population, and second that such general interest could best be articulated and implemented by a single leader standing above factions, above the varied and opposed passions and interests of society. The “economic government” of the Physiocrats was one of enlightened despotism, or, in Mercier de la Rivière’s famous term, “legal despotism”. This term did not mean that the despot was subject to positive laws, but rather that the single ruler has grasped (or rather was informed of by talented advisors) the natural laws that governed the social world, and applied them.⁷ Such was also the logic of the despotism that a later liberal like John Stuart Mill would defend in India, although Mill and his allies employed a developmental, historically fluid notion of development that did not play such a major role with the Physiocrats.⁸ At the end of his interesting essay, Philippe Steiner connects this idea of legal despotism up with the neoliberal or perhaps the European Union’s sense that politics should be subordinate to proper economics, in the interest of the entire population. In other words, Steiner’s essay is exploring arguments for an undemocratic and depoliticizing conception of the economic constitution.⁹

Quesnay’s work, as Schumpeter noted, came down to two important policy recommendations, free trade in grain (and in general), and the single tax on landowners. He argued that both were the basis for expanded reproduction in a large, agriculturally based policy like France.¹⁰ Manufacturing and trade did not produce value, but they did produce new, useful things, according to the school. Quesnay’s recommendations were therefore about maximizing the wealth of the modern French nation by simplifying administration and eliminating the impediments to trade, increasing incentives for production. Free trade as a policy also involved eradicating complex interests, local or sectoral, of commoners or of nobles, in order to create a more vibrant internal market, allowing for expanded reproduction that would lead back to more agricultural production, more taxes, and more secondary production. Herein lay a program for solving France’s financial crisis, which appeared in different forms in other European countries. The single tax advocated by Quesnay’s school presumed a specific type of land tenure, namely private ownership of relatively large plots by landed gentry, who would rent out individual parcels to small-scale farmers. The point of the reform would be to create an incentive for the gentry to promote conditions for farmers, facing higher rents imposed by owners, to produce more. Free trade and the single tax were articulated within this specific conception of social order.¹¹

There are good arguments that creating an integrated free market and reducing administrative complexity aid economic development, and those arguments played an important role in German economic unification in the 19th century as well as European unification after 1949. There was more to Quesnay’s reform agenda than merely a technical strategy, however. He defended what he saw as a natural and enduring economic order, really a kind of physiological “constitution” of the economic world, which was bound up with the idea of a “tutelary monarch”. His “economic constitution” links nature, economic liberalism, and monarchical absolutism. The question is how Quesnay’s notion of economics fits with that advocacy of monarchism.

Freedom did not involve choosing representatives but affirming the monarch, who in return guaranteed social order and made the people “a participant in all the different kinds of goods and all the refinements of products”, or in other words consumers of products on the market.¹⁴

The agricultural kingdom that Quesnay embraced stood in contradiction to the republic, which he connected with a dynamic, commercial and manufacturing society (implicitly he meant no doubt England and Holland). Since commerce and manufacturing, according to Physiocracy, created no new wealth, these societies thrived by plunder, and they were connected to piracy, invasion, and imperialism. Because their citizens were merchants who hid their wealth behind complex financial arrangements, giving their property a “scattered and unknown character”, they had to be treated as masters and thereby induced to contribute to the state.¹⁵ Factionalism was an inherent part of commercial and manufacturing society, because such societies could not even accept such a thing as a general interest. Not so the agricultural kingdom, however. The “agricultural state” eventually came “to enjoy the benefits of society, of union, of population, of good and equitable laws, and of the appropriate arts and skills”. Such states needed a leader, of course, to produce positive laws: “From this originates the tutelary monarchy”, whose primary, indeed “primitive” task was the establishment of clear property lines and an absolute authority to ensure internal security and to guard against external threats.¹⁶ The absolute and true principles of economic nature formed the divine foundation of his science. The positive law translating these divine intuitions into reality involved, as Quesnay’s famous essay on grain in the Encyclopédie suggested, free trade, eliminating tariffs, and eliminating corporations and the privileges accorded to provinces, towns, guilds.¹⁷

In short, the “economic constitution” of the Physiocrats connected absolute principles of the economy with an absolute ruler unencumbered by the separation of powers, representation, and rights, but in possession of divine knowledge of the world to make decisions without these institutions.¹⁸ Claiming such an abstract and universal truth of human society could have, as Tocqueville famously argued, destructive ramifications.¹⁹ Even a position that seemed obviously good, like Dupont’s critique of slavery, defense of free labour, and call for African nations to develop their own sugar plantations and refineries based on free labour, for example, which Steiner presents positively, has come under scrutiny in the aftermath of developmental colonial experiments: what kind of labour would this free labour be, replacing what kind of existing social organization, and under what kind of control of the property owners?²⁰

The King’s attempt to sweep aside regulations in order to create a free internal market for grain, in 1763 and again in 1775, is a case in point. In the abstract, a free market and stronger property rights would benefit landowners, leading them to invest in land, increasing the agricultural output of small farmers, and in the end helping to solidify state revenues through taxation. As we know, nature intervened, crops yields were poor, the changes did not dramatically and quickly change the habits of proprietors, and underdeveloped markets (related to underdeveloped infrastructure) led to shortages as dealers took advantage of scarcity to speculate on grain prices. The result was a confusing and complex set of crises that quickly took on national significance. In 1775, the King even ordered royal troops to take harsh measures against protestors and rioters, undermining monarchical legitimacy just a decade before the final crisis of the old regime. In any case, neither reform held.²¹ Free trade and integrated markets could well make sense as a model. But models are not reality. Imposing an economic model without empirical knowledge of how an economy works in practice can lead to crisis.²²

2 From Despotism to Modern Constitutionalism

The “constitution” in the case of the Physiocrats enabled the monarch to reorder the economy according to reason and nature. It was a legal despotism insofar as it claimed to follow the laws of nature. Or, as Quesnay hopefully noted using an ahistorical natural image, “the constitution of the tree is the natural order itself, regulated by essential and irrefragable laws which must not be interfered with by extraneous laws”; “constitution” was a physiological term.²⁸

The Weimar Constitution was established in a different context, when the term constitution itself had taken on a different meaning. The Weimar Constitution echoed the rhetoric and structures of the great democratic-republican constitutions from the late 18th century, even as its framers sought to adapt that tradition to the realities of the 20th century. That revolutionary conception of this tradition moved in a direction opposed to Physiocrats’ despotic political theory (even while reflecting some of their anti-monopolist and pro-market economic ideas). The US Constitution of 1789, the 1789 Declaration of the Rights of Man and Citizen, the US Bill of Rights of 1789-91, and the French Constitution of 1791 were rooted in different normative assumptions about the state, republican and commercial. They started with a radical notion of a society based on freedom from the state and of equality of individuals before the law. That universalistic, revolutionary language quickly confronted the particular exclusions to citizenship that were bound up with social and political reality. Women, slaves, aboriginal peoples, and others deemed too dependent, too uncivilized, or inherently irrational were excluded from this vision of freedom and equality, despite challenges. The Weimar Constitution both carried forward and radicalized the universalizing core of the late 18th century constitutional moment, its demand for equality before the law, for empowering the people to rule themselves through representatives, and its affirmation of basic rights of freedom, applying the principles to all people, regardless of race or gender. It went further in its search for inclusion, addressing new social problems associated with class.

The French and US constitutions presumed, in Dieter Grimm’s analysis, that freedom was a “condition of the general welfare”, in other words a precondition for society.²⁹ As such, authority could not be unlimited and simultaneously “constitutional” in a normative sense. In this sense, the Physiocratic notion of the constitution was not constitutional. In the new conception the people, not nature or the monarch, were the source of the constitution, mediated by representatives.³⁰ The constitution thereby created delegated power to lower authorities representing the people, but not in an absolute or unlimited way. The constitutions specified powers, divided powers among different organs of the state, and declared rights that limited those powers. In both France and the United States, the constitutions had a strong libertarian flavor (for those groups that were considered fully citizens) and implicitly affirmed the market economy. Neither, however, explicitly affirmed the universal validity of the market economy, raising it above the legislative power. The French Declaration of the Rights of Man and Citizen repeatedly and explicitly permitted limitations on rights, such as social distinctions “founded upon the general good”, the reserved right of the law to set limits to the “natural rights” of liberty, limitations to religion and to freedom of expression if they disturbed the public order, and so on. The French Declaration permitted expropriation of public property on the basis of “public necessity” determined by law, and an “equitable” (the text does not state “full”) indemnification. The US Constitution in its original form did not guarantee property rights at all, and in the Bill of Rights only the right to receive proper indemnification for the “taking” of property, despite the centrality of property rights to the founders’ conceptions. Rights in these systems were not absolute, and the legislator was delegated powers that could reach very deeply into the economic order. They left the way open, in other words, for some kind of “economic constitution” in Badura’s above cited neutral sense of the term, a constitutionally defined order that affected and organized the economy – through taxation to pay for universal education, for example, the regulation of monopolies and utilities, and social measures. They did assert that interventions be justified by reference to a “common good”, but neither set of constitutional documents explicitly handed that power over to a judiciary that could limit the legislature. Intervention into the realm of human liberty, following this constitutional logic, required that the legislature follow constitutional procedures and consider basic values. These were documents that assumed liberty, and that also empowered the people through their institutions to freely shape themselves.

Despite important differences, the Weimar Constitution was in the tradition of the late 18th century constitutions. The Weimar Constitution continued to stress the separation of powers, government by organs constituted and limited by the constitution, the ability of the people’s representatives (and the people directly, through plebiscites) to shape their legal world in the interest of the common good, a realm of freedom for individuals as well as the right of the legislature to shape and limit those liberties.³¹ Art. 153 of the Weimar Constitution, like Paragraph 17 of the French Declaration, asserted the right of property within the bounds of law, and required not a full but an “appropriate” indemnification for expropriated property. The German constitution left open the possibility that the legislature might not permit compensation or a legal appeal which seemed to differ from the French or American case; in practice, though, both French and Americans left open the way for non-compensation for loss of property in certain cases (e.g. the expropriations of the nobility in the French revolutionary context and the debates on compensation for “expropriation” of “property” in the debates on slave emancipation in the United States).³² The lack of an explicit creation of a supreme German constitutional court able to rule on the constitutionality of the legislature (here again not unlike France or the United States) left the relationship between politics and economy unclear. The Weimar Constitution both presupposed a free society and enabled that society to shape itself through law; as Grégoire shows well, its interpreters clashed over the extent of this freedom.³³

The constitution not surprisingly contained (as all constitutions do) compromises. Far from being infamous ways of avoiding decisions, compromises should be read as statements of a mature democracy consisting of groups with differing world views. The need for compromise is what distinguishes an inclusive democratic republic from a despotism, even if it results in a complicated constitutional document. The basic rights dealing with the economy illustrate the point. They listed multiple basic values, which indicated the compromise between socialists, nationalists, and free market advocates that underlay the constitution.³⁴

Art. 151, for example, demanded that the normative ordering of “economic life” (a term that already insisted on a broad view of economics as part of society) correspond to the principles of justice and the goal of guaranteeing an existence worthy of humans for all; Art. 152 went on to state that legal transactions that transgress basic ethical principles are immoral, in a kind of imperative to the legislature to consider the moral effects of civil law and (explicitly) to outlaw usury. This imperative also applied to the courts.³⁵ It is certainly important, as noted, that Art. 153 permitted expropriations without indemnification. But such expropriation took place only by statute, if the majority of the Reichstag, its delegates divided among five major parties and many minor ones, came to an agreement. The same point can be made about the two most important constitutional articles for the Social Democrats, Art. 159 and Art. 165. Art. 159 guaranteed the right of workers (and employers) to form coalitions for promoting labour and economic conditions, i.e. trade unions and employers’ organizations, and forbid retaliatory measures against union members. The complicated Art. 165 also affirmed trade unions and collective bargaining, while calling for cooperation between workers and owners on the factory level and the creation of a national system of factory councils all the way up to a National Economic Council (Reichswirtschaftsrat) that would advise the Reichstag. The different approaches to the economic constitution of Art. 165 corresponded to different conceptions of labour-capital relations, from the idealized image of national cooperation during the war, to renewed power for trade unions on a national level, to (enforced) harmony on the level of the factory, or to a national corporatist organization that could operate alongside the Reichstag.³⁶ Art. 165 revealed just how many hard decisions would be necessary to take account of the different political and economic demands arising in 1918–19. Notably the Reichstag did not resolve the issue of how to put these approaches together, although it did regulate co-determination and set up a weak National Economic Council.³⁷ Faced with an abundance of alternatives, a legislature can make a decision by not making a decision, too.

A limited, careful, and formal interpretation of the constitution, such as the one provided by Gerhard Anschütz, perhaps the leading “legal positivist” lawyer of the Weimar Republic, stressed that most of the article was in fact a “program for the legislature, i.e. future law” rather than immediately binding law.³⁸ This interpretation stressed how the constitution enabled the legislature to make rights real and concrete through legislation. Herein lies the promise of democratic freedom – and freedom means risk.

3 Sinzheimer’s Social Democratic Reading of the Economic Constitution

The term Wirtschaftsverfassung developed in the Weimar Republic as part of a normative strategy for both organizing industry and empowering workers. A more descriptive use of the term does arise under Ernst Rudolf Huber, but when we look at Hugo Sinzheimer, Franz L. Neumann, and Carl Schmitt, we need to keep this normative use of the term in mind. As Grégoire points out, the man who introduced the term, the labour lawyer and Social Democrat Sinzheimer, played a major role in the National Assembly’s discussion of labor-related basic rights. As Sinzheimer stated in 1919, “Social democracy is dependent on political democracy, for only within its framework can the life of social democracy unfold”.³⁹ In this incisive analysis from 1919, written early in the Weimar Republic before the decisive break between Social Democrats and Communists and the electoral losses of 1920 weakened the left, Sinzheimer described an economic system in formation, organized below the level of the parliament, based on a comprehensive system of councils representation. Alongside and connected to the councils in this early formation were the trade unions, cutting across firms; Sinzheimer called for workers to be required to join unions (although the union of their choice), which were already becoming “necessary organs of social life”.⁴⁰ The National Assembly and Reichstag had the power to set the legal and institutional framework for democratizing the economy. For Sinzheimer, then, the parliament created the framework (the economic constitution); the trade unions cut across firms and branches to address the economy as a whole; and the councils at the base of the economy involved workers in the organization and management of the firm. The closer one gets to the firm, on Sinzheimer’s description, the closer one approaches the complexity and variety of economic tasks.

Running throughout Sinzheimer’s work already from before the war was a notion of social reality brimming with workers’ activity, decisions, complexity, variety, creating law de facto where it had not existed before in the form of social norms regulating the interaction of labour and capital. Collective bargaining developed, on Sinzheimer’s narrative, outside of and in tension with the formal, individualistic law of contracts of the German Empire. And indeed any political constitution, according to Sinzheimer, required a “supplement” that would give the “freedom and community” implied in democracy a “living, social content”.⁴¹ Recognition of the right to organize and the councils was only one, formal part of the basic norms of economic democracy. Socialization of production was a further step, and for Sinzheimer not at all the same as bringing firms under direct, national control; instead, the point of socialization was to bring factory councils and trade unions into the process of administering firms, it included the right of “self-administration in the factory”, the organs of a future socialist economy.⁴² The Wirtschaftsverfassung in Sinzheimer’s conceptual structure was a matter of reality rather than a legal construction, of concrete, developing Sein rather than abstract Sollen; it was the ongoing production of a new reality through the real, physical process of working, learning, and deciding, which developed by way of constitutional, statutory, and customary laws allowing collective bargaining, procedures for deciding conflicts, and the formation of new kinds of social communities of workers. “What the workers’ councils can and should do is to lead an active life as organs of social democracy in the framework of state law, which establishes their scope of action [Spielraum]”.⁴³

The constitution also empowered workers in the present, which, of course, Sinzheimer had firmly advocated in the National Assembly, especially by way of Art. 159 (establishing the right to join employees’ and employers’ organizations). Neumann, who clerked for Sinzheimer in the mid-1920s and was likewise a defender of the republic, pointed out that the right in Art. 159 to join a trade union was more firmly anchored in the constitution than was the right to own property, since Art. 159 was not expressly limited by statute. But the point was that the call for economic democracy was about much more than a static set of rights. Combined with the right to form councils (Art. 156), to define property by statute (Art. 153), and to nationalize, socialize, or communalize property (Art. 156), economic democracy provided concrete and explicit authorization to the Reichstag to transform society.⁴⁴ Even more, these “constitutional” norms empowered workers to begin the process of “constituting” a new society, according to Sinzheimer’s reading.⁴⁵ Sinzheimer described, in an almost Expressionist style, the way labour and society “dissolve the old concepts of the bourgeois legal order”, submerging them in the “enormous abundance of social material” that the legal order struggles to manage.⁴⁶ The constitution of political democracy enabled the development of society in a socialist direction (which was not at all the same as centralized, bureaucratized planning and state control); it enabled councils and unions to form, parallel means for empowering workers, who, through their concrete experience, would build the new society. The slogan of economic democracy in the spd’s 1928 party platform and the concept of the economic constitution in Sinzheimer were the prerequisites for long-term transformations, not merely the assertion of workers’ rights in the present.⁴⁷

Despite the novel content of the constitution and novel ideas of Social Democracy, however, the logic of democratic constitutionalism remained. The procedures and principles embedded in the constitution enabled the self-fashioning of a polity and also a society, not in the static sense of the Physiocrats – implementing revealed natural rules for the best society, modelled on an allegedly unchanging China – but in a dynamic sense. Countries with democratic constitutions, like the United States, had in fact undergone dramatic transformations over the 19th century (with e.g. the end of slavery by and large without compensation, the rise of industrial capitalism, the formation of monopolies and cartels, the development of a trade union movement, and so on) precisely within the context of the constitution. Why should a social “economic formation” not be capable of further development within this open political structure? Sinzheimer therefore did not argue that constitutional law guaranteed a particular shape of civil law; a democratic constitutional structure could open the way for a social revolution that would destroy the “bourgeois legal order”.

Neumann on the left and, as discussed below, Carl Schmitt and Ernst Rudolf Huber on the right painted a picture of dramatic transformation between the late 19th century and the present, as social and economic developments destroyed liberal visions of the future based on natural, individual rights and the market. Neumann asserted that the revolutionary constitutionalist tradition of the late 18th century assumed natural rights, most important the individual’s right to property, that preexisted the constitution. Over the 19th century, monopoly capitalism gradually supplanted this world based on individual, contracts, and property. The “ideal type” of the “free entrepreneur”, he stated, no longer existed in the era of monopoly capitalism. Owners were actors only in name, entrepreneurs “more or less functionaries” of the monopolies and cartels, both replaced by managers, just as risk for the individual investor was eliminated.⁴⁸ While the institutions of contract and market still existed in law, the freedom both implied was diminishing: “In the age of monopoly capitalism, the legal freedoms of capitalism lose their significance. Freedom of contract conceals the monopolist’s dictate to the non-monopolist”. Under these conditions, the “natural right of freedom” and property of liberalism could no longer hold. Even in the United States, Neumann asserted, the development of monopolies led to an expansion of government regulation in the 19th century, limiting freedom and contract from the side of the state.⁴⁹

This moment of monopoly capitalism was the prerequisite, according to Neumann, for the economic constitution of the Weimar Republic. That term did not, for Neumann, mean the legal norms that regulated the economy, nor did it imply the primacy of the existing monopoly capitalist system over the political constitution or their equal political rights. The economic parts of the constitution instead permitted the formation of large interest groups in the economy. These groups, Neumann argued, had long since taken over the parties in parliament; now they intervened in markets politically to ensure the uninterrupted flow of the capitalist economy. Such groups included monopolies, cartels, and large concerns on the side of capital, and another kind of large, centralized organization on the side of labour, the “free, cooperative self-help organizations of the working class, the labor unions”. Freedom now consisted of the ability of these organized social groups to assert interests in an arena not directly controlled by the state. Their right to make meaningful decisions about the economy was guaranteed by Art. 159 of the constitution.⁵⁰

Neumann’s compressed analysis implied that the individual freedoms of 1787 and 1789 included in the Weimar Constitution were merely window-dressing for a fundamentally different reality, beyond free markets; that with the end of this reality also went the end of the freedom of the parliament, which merely balanced social forces; and that “freedom” was preserved at the level of large organizations, guaranteed a space to bargain among themselves in order to unburden the state. Neumann himself defended basic liberal principles, like that of equality before the law, and rejected judicial attempts to limit the freedom of parliament. And yet, writing a decade after Sinzheimer’s exuberant work on the liberating potential of the economic constitution, Neumann’s work hardly painted a picture of a democracy and an economic democracy that enable the worker to come into his or her own as a human deserving dignity, the starting point for Sinzheimer.⁵¹ One feels, reading Neumann from the early 1930s, a change in tone that suggested that the constitutional tradition that he himself defended had in fact been deformed beyond recognition.

4 Schmitt, or an Authoritarian Response to the Economic Constitution

Whatever their visions of the transformation from individual to collective rights and politics, Sinzheimer and Neumann retained the late 18th century conception of a constitution that a) established processes for producing new laws that could shape markets and society, b) asserted rights that claimed, at least, to be inclusive of all citizens, and c) indicated values that should inform political initiatives. Like the liberal politicians like Hugo Preuss and Friedrich Naumann in the National Assembly and the legal positivists, they stressed the constitution’s openness to popular initiative and to a different future. Not everyone agreed. Otto Kirchheimer on the left and Carl Schmitt on the right both viewed the list of rights in the Weimar Constitution as jumbled and contradictory, and the constitution itself as failing to make a clear decision for a specific form of government.⁵² Over more than a decade, Schmitt argued that the constitution was torn between democracy (homogeneity without rights) and liberalism (individual rights without political unity), expressed in the later republic as the drive for unified self-expression of the nation through a populist president and the drive of interest groups and parties to divide up government, destroying unity.

Schmitt’s method for approaching the economic constitution mirrored his method for analyzing the Weimar Constitution: to describe different, contradictory, and clearly distinguishable systems of political and constitutional thought (such as liberalism and democracy); to assign parts of the constitution to these different intellectual systems; and on that basis either to show the contradictory nature of the constitution (at some moments) or to decide which parts of the constitution really mattered. An ideal conception of “constitution” rather than the constitution itself drove his analysis. The dominant conception, he argued, was that of the “bourgeois Rechtsstaat”, which did not admit collective rights or social rights. Since the underlying ideal system of the liberal, bourgeois Rechtsstaat did not admit of collective actors, for example, the collective rights enumerated in the constitution could not be essential. If the essential core of the constitution was democracy, by contrast, parties or factions could not have separate rights, since democracy was about unity and homogeneity.⁵³

In making this argument Schmitt was not defending liberalism; from his early Weimar-era works on the threat to order posed by liberals in 1848 and 1918, to the crude juxtaposition of liberalism and democracy in his work of the mid-1920s, to his account of the bourgeois Rechtsstaat as an unpolitical, individualizing, and out-of-date set of principles, he consistently presented an image of liberalism that was out of touch with the political reality of divisive parties and factions, the legacy of the Versailles Treaty, and international capitalism and communism.⁵⁴ By describing the Weimar Constitution as the combination of a bourgeois Rechtsstaat without political principle and a democracy based on political decision, he was able to argue against attempts by the legal positivists to take the written constitution seriously, both its rights for individual and groups and its openness to parliamentary initiatives. To be sure, at times he defended private property in a way that paralleled a liberal position, and at times he sought an authoritarian solution to the crisis of the Weimar Republic that would exclude National Socialism.⁵⁵ Whatever his motives, his method was to measure the actual constitution against an ideal intellectual and historical model, and to find it lacking.

The last phrase is important. Freedom of conscience, home, mail, and property, for example, preceded the state according to the logic of the bourgeois Rechtsstaat (i.e. liberalism). As such, they were private rather than political rights, which, however, according to Schmitt, took on political forms, since “free expression of opinion, freedom of speech and press, freedom of worship, free assembly, and freedom of association and coalition” implied, in Schmitt’s formulation, “the unhindered exploitation of social power through social organizations”.⁵⁷ These rights would be private and yet paradoxically have an effect on politics, without being “political” in Schmitt’s strong sense of a (unified and homogeneous) democracy. At the same time, though, Schmitt dwelled on the way the constitution permitted the legislature to define and thereby limit rights. Basic liberal rights, conceptualized in Schmitt’s ideal conception as preceding the state and guarding against the state, were in fact defined and limited in application by state law. They now appeared subject to the discretion of the state instead of preceding the state.⁵⁸

In this statement from 1932, Schmitt made his argument clear: he did not start with the actual Weimar Constitution, but with a conception that he placed above the constitution. He made a similar argument in The Guardian of the Constitution from 1931 about Art. 165: the Weimar Constitution was a political rather than an economic constitution. In such a constitution, it was not the individual as producer but the individual as citizen who counted; therefore the “anchoring of the councils system” described by Art. 165 could not refer to any political function, which would make the constitution itself “a construction of fantastic monstrosity”.⁶⁰ Although he (and to an extent Sinzheimer too) viewed such a creation of a corporatist legislation alongside the parliamentary system as bad, that was not his point here. He argued rather that any politicization (i.e. democratization or constitutionalization) of the economy would be unconstitutional, illegal, since not conforming to the ideal form of the constitution. Again, he defined what was legal based on an ideal constitution rather than the empirical one.

This method is problematic from both a factual and a theoretical standpoint. Ideal constitutions always run aground on factual realities. Just to make some obvious factual points: the original US Constitution did not contain a Bill of Rights not because the founders were satisfied that rights were adequately defended at the state level, but rather because they thought the legislature would define and defend rights. It is therefore hard to argue that the US Constitution was based solely on natural, pre-existing rights; in any case, republicanism stressed the primacy of the needs of the community in a time of crisis. Madison had little faith in “parchment barriers” protecting rights against the government. The framers instead focused on empowering the people in such a way as to limit bad and ill-considered decisions that violated rights (such as President Adams’s Sedition Acts).⁶¹ And as noted above, the French Declaration of Rights of Man and Citizen was clear that rights were to be defined, which means delimited, by statute – indeed, how could that be otherwise, since property, marriage, religion, etc. had to be defined first in order to be protected? Again, the freedoms were defined by the Civic Code eventually written. And as the Jim Crow laws in the United States showed, the essence of rights could indeed be violated by the legislature. These are obvious facts about constitutions that included liberal basic rights at the time. The ideal constitutional system that Schmitt described does not seem to exist in reality. Perhaps that was his point.

Schmitt’s conceptualization of democracy as unity and homogeneity made use of a language that one does indeed see in the early moments of the French and US republics, a language of unity and a language against parties and factions in the general interest. The great value of his work lies precisely in prying the tensions and contradictions out of the democratic experiments of the past. But why does democracy have to assume such an unreal unity as the general interest? Even Madison shifted away from believing in a general good separate from passions and interests, when faced with the reality of national parties in 1800; clearly parties were going to form, to argue over which interests should be represented, for example those of agriculture or those of commerce, those of debtors or those of creditors.⁶² But for Schmitt, this pluralism was the big problem, the plural interests of parties and of interest groups seem on his reading outright anti-democratic. His discussion of the “total state” was actually about how the state, representing political order itself as a higher principle, could neutralize factions in the name of guarding the constitution. To be sure, Schmitt’s ideas provided arguments in 1932 for resolving a real crisis of democracy related to the paralysis of parliament and the rise of radical, anti-constitutional parties on both right and left; his arguments, however, seemed to view the very pluralism in modern democracy itself as the crisis.

This digression into legal theory, rights, and pluralism relates directly to Schmitt’s discussion of independent social powers in the economy, which he viewed as a threat to unity. The trade unions, if empowered politically, took away from the primacy of the state and its strong male representative to “decide” who was friend and who was enemy. If organized interests in the economic realm were granted direct political rights in any kind of Wirtschaftsverfassung, they would threaten the “unity of the state will”.⁶³ Or as he wrote in 1933, “I believe that political power and rule is the primary thing and unavoidable presupposition for an effective comprehensive economic plan, and not that the plan is the foundation of political rule”.⁶⁴ In his 1958 remarks on his 1930 essay on “The Problem of the Domestic Neutrality of the State”, Schmitt was clear about the lineage of political thinking into which he was tapping: the absolutism influenced by Hobbes, necessary in Hobbes’s day to neutralize religious factions and to re-establish political order. His discussion about the total state and his opposition to the idea of an economic constitution were not about economics per se. He certainly did not oppose an interventionist state, so as long as that would not mean creating an “economic-democratic trade-union state”.⁶⁵ But that is something different from making the state the tool of capital.⁶⁶

Schmitt was not opposed to change, so long as it strengthened state power. That’s why he described in his Guardian of the Constitution the way that parliamentary paralysis required the president to make use of emergency decrees based on Art. 48; defended the way those decrees took on the status of legislation, i.e. that they displaced the legislature; and defended interventions into the economy. The president became the new guardian of the constitution, defending, however, its ideal core of homogeneity and unity. He became, in a sense, an ersatz monarch, but equipped with far more power than the old German Kaiser had to repress the pluralism that Schmitt declared unconstitutional rather than a normal part of any real, functioning democracy.⁶⁷

One of his closest students, Ernst Rudolf Huber, pulled Schmitt’s ideas together in a long essay from early 1933 that essentially argued for the constitutionality of a transition to a quasi-permanent authoritarian regime, based on a selective reading of the constitution itself. In an essay written as the Weimar Constitution was ending but when the precise nature of the new authoritarian system remained unclear, Huber left unstated but obvious to observers that the president was now the legislator, Art. 48 had become the normal way of doing legislative business. It was the unspoken assumption of the entire essay. Second, he argued that all basic rights, including basic liberties, were subject to the reservation that the state had to protect its existence through statutes and measures taken on that basis; judges and administrative officials, i.e. the state, could suspend rights on the basis of general statutes; no longer were these rights limited by the text of Art. 48. The existing Art. 48 had limited the rights that could be suspended by emergency decrees; now that the president was able to produce law, that limitation was gone. Third, he argued that the state would recognize basic individual rights such as the right to self-expression, but only within certain bounds of the community, in particular in recognition of national and Christian values; the same held for religious liberties. A basic principle of the rule of law, equality before the law (Art. 109), became an objective principle of the primacy of the nation, not a subjective right. Similar reservations appeared with respect to political parties and other associations, just as the Communist Party was being smashed by the sa and ss, now outfitted with police powers.⁶⁸ Huber’s interpretation read the constitution as a document of authoritarian constitutionalism, using arguments we hear today from Hungary, Poland, Turkey, and Russia.⁶⁹

With this shift towards authoritarian constitutionalism, the economy took on a particularly important role. All of the general phrases of the constitution about economic life of became ways of maintaining the national community: “no new economic order is created, but a new order of values in economic life”, as Huber put it. Free markets were at an end, now organized by state-recognized groups; individual property rights were replaced by property rights bound up with social responsibility (i.e. state control). Art. 159, granting the explicit right to join a trade union, became a call for the state to obligate a worker to serve the entire community. The term “trade union” drops out of the entire discussion, replaced by the notion of a collective labour contract protecting workers as an estate (Stand), as a “basic form of our economic organization”. Mirroring this post-individual guarantee was a reformulation of all social life on corporatist lines: the state guaranteed the free operation of social organizations, from churches to businesses, unless the common good was threatened. Art. 165 now served Huber as a bridge to the creation of occupational estates (Berufsverbände) under the control of the state: “The state has a free hand [with respect to the corporations] and can take action against a corporation damaging state unity with all given means”. The basic rights therefore became, for Huber, the public order itself: “the social and national forms and institutions are placed under constitutional protection as components of public order” – and also are subject to the oversight and control of the state.⁷⁰ This public order was not a Wirtschaftsverfassung in Sinzheimer’s sense, a constitutional enabling of workers’ powers at all economic levels, but rather a “natural national order” (natürliche Volksordnung), an enforced unity that on Huber’s reading reflected the homogeneity of the German nation.⁷¹

The concept of the economy changed dramatically in this conception; even more dramatic, however, is what happened to the idea of the constitution, which was no longer a set of rules enabling self-government on the basis of individual freedom, but a declaration about an organized society existing under authoritarian tutelage : Sein not Sollen.

5 Ordoliberal Fantasies

At the beginning of his 1933 essay on basic rights, Ernst Rudolf Huber invoked the left-liberals Friedrich Naumann and Hugo Preuss, claiming that both recognized that liberal basic rights contradicted the “spirit of real democracy”.⁷² Preuss was the main author of the constitution, and played a key role in holding together the pro-democratic alliance of democrats, Social Democrats and Catholic Center Party delegates during the National Assembly’s deliberations. Naumann called for basic rights during the National Assembly’s deliberations that would transcend the liberal individualism of the 19th century and articulate the values of the German nation – including individual rights. Both viewed the constitution as a means for integrating a nation divided by politics, religion, and class, and enabling social legislation in the future. Huber invoked precisely this call for a national and social future, two ideals at the heart of German left-liberalism since at least the 1890s, and arguably already in 1848, but in a way that broke with liberal affirmation of the individual and with democracy and political rights (though not with some kind of representation of labour). Huber himself joined the National Socialist Party on May 1, 1933, a party that claimed to transcend liberal individualism and that renounced liberalism.⁷³

It is not correct to call Huber’s and Schmitt’s (not completely identical) political positions authoritarian liberalism. Nor does the adoption by future ordoliberals of Schmitt’s language of the strong state indicate that the neoliberals necessarily were and remained fascist.⁷⁴ I think that Grégoire treads this fine line very well,⁷⁵ refusing to identify neoliberalism with fascism while still noting its dalliance with authoritarian tendencies. There is no doubt that the liberal tradition was willing to countenance authoritarianism; this was part of the modernizing and civilizing drive that marked their best thinkers, such as Benjamin Constant and John Stuart Mill, who argued that if people are unable to honor contracts, unwilling to respect others as fellow humans, all too willing to follow established authorities, and willing to use violence in ordinary life, then they are not able to exercise civilized, modern freedom. The German National Liberals were not out of line with this liberal tradition.⁷⁶ It was something quite different to call essentially for a Gleichschaltung of all social groups, to put them under the vigilant control of an authoritarian state apparatus. Neither Huber nor Schmitt affirmed and defended entrepreneurs or capitalism in the strict sense of a system that left basic economic decisions to the logic of the dead hand of capital (profit and interest rates); they affirmed the primacy of politics over economics. Nor were they interested in the key problem of Ordoliberal social theory found in the early Wilhelm Röpke and Alexander Rüstow: how to create the institutional framework for a responsible individualism able to resist totalitarianism and the age of the masses (a position that connects the Ordoliberals with the classical liberalism of Mill with his resistance to established authority, Constant with his denunciation of modern despotism, and of course Tocqueville with his criticism of the age of the masses).

At the same time, some who later became part of the Ordoliberal group clearly flirted with Hitler’s new state in 1933, as seen in Müller-Armack’s almost mystical affirmation of the myth of national unity and with it a state-dominated, corporatist economy; but others, like Röpke, simply rejected Nazism on the grounds of basic human decency.⁷⁷ For anyone seriously concerned with the liberal social project (and it’s not clear that Müller-Armack was in 1933), the problem of authority remained essential. As Thomas Biebricher has argued, later neoliberals were fundamentally ambivalent about state power. On the one hand, people like Friedman and Hayek entertained the fantasy of an authoritarian leader who would establish and enforce the economic ground-rules of liberal society like a neutral umpire; Röpke’s endorsement of Atatürk was a broader endorsement of a civilizing dictatorship, creating the character needed for modern liberalism (in this sense closer to Mill’s defense of despotism in colonies). But on the other hand, economic liberals distrusted state power, not surprisingly since it was hardly likely in reality that a strong ruler would remain satisfied with playing the neutral umpire.⁷⁸ This ambivalence about power (with which this essay began) confronts any intellectual movement aiming at social transformation: it would be great to have a strongman help in the process, but how can you trust a strongman to listen to the experts? Here we do get to an interesting parallel to Physiocracy. One encounters a kind of hubris all too often among economists claiming to know the right answer to an economic problem, and dismissing factions and interests as distorting the right answer. From the point of view of the economist in possession of truth, democratic politics is a confusing and at times irrational black box.⁷⁹ But for any realistic economist, so is authoritarian politics.

Here, I think, one sees the limits to comparing the Ordoliberals and the Physiocrats (insofar as either group can be reduced to a clear and unambiguous set of principles). Yes, certainly, Franz Böhm invoked the Physiocratic notion of applying natural law (or rather the laws of human nature) to the economy in his 1933 work on monopolies.⁸⁰ It is far less clear, however, that his 1930s account of a basic decision on the economic order – free trade or centralized planning – translates into absolutist or despotic politics, especially after 1945. Böhm and the others recognized the gap between assumptions of the natural functioning of economics and economic reality, whether it came to policies regulating utilities or defining competition, social insurance or state investment. His 1933 work makes a reasoned and differentiated argument against both Sinzheimer and Schmitt, first that for legal as well as practical reasons, the Weimar Constitution made market competition the default, “normal” system; second that there were serious legal and economic reasons to support the market economy, not just ideology; and third that Schmitt himself misread the whole point of economic liberalism, which was not about making the individual absolute but about competition ensuring pluralism and social coordination, which could require government intervention.⁸¹ And throughout he stressed the central role of the legislator. Böhm was striking later less for his hubris than for his willingness to get involved in political arguments with his Social Democratic opponents about legal and economic policy in West Germany’s new democracy. Also striking, as Gunther Teubner has pointed out, is the way that Böhm, like Sinzheimer but from a liberal perspective, described law as a means of enabling the development of economic order from below. Both thought of the economic constitution as a set of norms that enabled people to build their own society.⁸²

The ordoliberal yearning for a neutral umpire and simultaneous fear of political capriciousness mirrors the basic enabling/restraining dialectic of the democratic constitutionalist tradition itself.⁸³ In fact, most German ordoliberals embraced the West German Basic Law, which in many ways paralleled the Weimar Constitution. And the Basic Law, despite occasional arguments to the contrary, did not cement in place the ordoliberal world view.⁸⁴ Its framework did not bar the opening to economic democracy: both co-determination and a strong, unified, national trade union were possible. Further reaching worker control did not take place, not because of the constitution, but because of popular support for conservative parties. Neither did the judiciary halt a process of economic democratization: the Federal Constitutional Court deliberately set wide parameters for economic initiatives by the legislature, so long as it guaranteed the principles of liberty (basic rights), the rule of law, and social responsibility (the Sozialstaat).⁸⁵ The more recent decision to amend the Basic Law to require a (somewhat) balanced budget was not imposed by a dictator but rather was the decision of a super-majority of the parliament: it was democratic and constitutional, and represented an agreement on how to shape the economy – in this sense a normative “economic constitution” oriented towards political self-restraint. And at the same time, the German balanced budget amendment includes exceptions for severe recessions and natural disasters. And it can be reversed by a 2/3 majority. The constitution enables the people to shape their economic world, but also remains open to information received from the economy that might require change of course. The economy has not been depoliticized in the Federal Republic, it has been made the object of politics at the constitutional level – including by making it more difficult for the polity to reverse earlier super-majoritarian decisions.

Conclusion: European Union Dilemmas

This essay starts with two tensions that the concept of an economic constitution highlights. First, a constitution’s claim to enable a polity to rule society is problematic, because the constitution and polity depend for their own survival on economy and society. Physiocratic attempts to order economy and society ran into challenges of the whims of nature and the lack of infrastructure, and contributed to food shortages and popular violence in the years before the French Revolution. Second, a constitution’s claim to set down the rules for self-government, as implied in the French and American Revolutions and as stated explicitly in the Weimar Constitution, also involves limiting self-government, which necessarily brings up hard questions of where those limits are to be found. Whether we focus on the leftist call for an economic constitution that involved economic democracy or the right-wing call for an authoritarian constitutionalism, both claimed the existing constitution as their foundation. While the first suggested a parliamentary path to socialist transformation, the second suggested a parliamentary and constitutional process of centralizing power and defanging rights. Both raise the question of whether certain changes really are constitutional, and even what the term “constitutional” means. Yet drastically limiting society’s ability to rule itself (through imposing inalterable laws) might undermine legitimacy even more than allowing a democracy to make mistakes, insofar as it creates the image of a tutelary minder of the democratic child. This problem of a “constitution” that sets down strict economic rules limiting how the polity can respond to economic conditions is one of the dilemmas currently facing the European Union. In other words, there is a tension in the EU as well between a “constitution” that enables polity and society to organize itself and the way the same “constitution” limits self-government.

In a series of essays, Dieter Grimm analyzes the challenge of a European constitution, be that the European “constitution” in its current form as a bundle of treaties signed by the sovereign member states or one in the form of an actual constitution, such as the one that failed at the proposal stage at the turn of the millennium.⁸⁶ As Grimm says: first, a set of treaty agreements are not the same thing as a constitution.⁸⁷ Modern constitutions usually (but not always) lay out the basic rules for creating, administering, and adjudicating laws, putting these basic rules under the protection of special procedures for constitutional amendment. At the same time, a constitution also allows change of normal laws by simple majority. In the case of the EU, the conditions set out by treaties are treated as constitutional laws. Yet it is very difficult, even after the Single Europe Act, to alter the terms of a treaty, which requires in some cases a unanimous and in others a qualified majority. Treaties are not constitutions insofar as they contain both basic principles and simple laws – a lot of them. A treaty-based system makes both constitutional amendment and the reform of normal laws more difficult. And at the same time as the European Court of Justice has expanded its ability to quash industrial, health, environmental, and labour regulations by the member states, the actual bearers of legitimacy in this system, as Grimm notes. As a result, first, social legislation becomes more difficult to create; and second, responding to extraordinary challenges is impaired.⁸⁸ The rules in treaties appear as diktats imposed on democracies from above.⁸⁹ Because the EU focuses so much on free markets in things, people, services, and capital, citizens can easily gain the impression that basic economic decisions have been “depoliticized” in Steiner’s sense, i.e. taken out of their hands.⁹⁰ This sense of depoliticization need not neutralize politics; it may have the opposite effect, rallying people (correctly or incorrectly) to “reclaim” their sovereignty.

Second, the EU’s structure makes dealing with crises on a Union level more difficult, especially when interests of “sovereign” states are at issue. This was the main message of the Greek crisis. Where was the leadership that would be capable of expressing a position above that of the individual states? The representatives of the individual “sovereign” states, however committed they were to the European project, had above all to respond to citizens at home. It was easy for national political actors to blame the “center” for problems and avoid confronting hard issues. The result was a populist reaction replete with images of the “enemy”. That crisis fomented far-right and far-left populism in Greece and Germany, for example.⁹¹ EU rules are not the rules of a “legal despot”, but they are relatively inflexible precisely because of the lack of a clearly identifiable set of European leaders. The inflexible nature of the “constitution” of the EU contributes to its political weakness. Indeed, the 2008–2015 Eurozone crisis more than anything else seems to have point up the lack of a coherent relationship between economic rules and political constitutions, as the rules intended to promote stability become sources of instability, both economic and political.⁹²

It is not clear that the Weimar Republic discussion about an economic constitution that enables more democratic labour relations and socialization of property is directly important for the EU. EU rules do not dictate property laws of member states. They do not close off the possibility of experimentation with labour relations, though they do limit subsidies, tariffs, and other attempts to shield firms from competition.⁹³ Indeed, a wide variety of approaches to labour law exist across individual member states, unionization levels vary widely from state to state, and laws establishing co-determination and levels of public or public/private ownership likewise vary widely.⁹⁴ But these remain limited member state-level initiatives. What is crucial for the EU is not Sinzheimer’s notion of the economic constitution per se, but rather the further development of a European-wide (political) constitution.

The discussion of an “economic constitution” does, however, lead to a general question that has plagued all modern constitutions and poses particular problems for the EU. Would it contribute to a sense of European solidarity to create a constitution that clearly distinguished between constitutional and normal law; created European legislative and executive institutions with real power that were clearly demarcated and easy to grasp; and set down some basic legal rights and rules for all members states? Or does European solidarity have to exist before a confederation can become a federal state? And, most speculative of all: might it be possible to imagine a concrete utopia in the form of a transformative economic constitution that opens the way for social transformation, around which a new European project might coalesce? This is not an abstract question of constitutional theory. It is a concrete question about the constitution and society of a political unity somewhere between confederation and federation.