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On Socializing the Constitution of Economic Coordination


Sanjukta Paul (@sanjuktampaul) is Professor of Law at Michigan Law School.

This post is part of our symposium on socialist constitutionalism.

Professor Forbath’s essay, drawing from his research into the Weimar Constitution, urges us to reconsider what we mean both by socialism and by constitutionalism. He recovers and makes vivid a socialist vision that is neither about (simply or necessarily) “nationalizing” industry nor only about redistributing the material benefits of economic activity, but about creating participatory structures of decision-making across both the “public” and “private” spheres that empower workers and others who are currently largely excluded from it: in short, robust economic democracy. The essay also hints toward a broader sense of “constitutionalism,” encompassing not only the drafting and interpretation of public constitutions, but also the re-constitution of putatively private or semi-private associations like business corporations and labor unions. These two reorientations are connected by one of the grounding LPE principles: that law constitutes markets. Centering the constitutive power of law destabilizes the usual public/private distinction and enables a vision of socialism that incorporates transformative reforms to “private” entities—and that has room for localism and decentralization, where appropriate.

For example, some of the reforms Forbath mentions would involve changes to corporate charters, which are themselves constitutions of a sort. Paying attention to this highlights how the “nationalize industry” perspective common in parts of the socialist left begins by ceding too much to its political opponents. By treating control as a matter of ownership, it reifies corporations’ claim to the private sphere.

Chartering Corporations as Constitutional Acts

In fact, corporate charters link them in a fundamental way with the public sphere. Charters convey a grant of special, legal privileges only a state—a “public”—can confer. Indeed, corporate charters and written constitutions have a long intertwined history of mutual influence. More broadly, corporations derive their basic economic coordination rights from the public, though rules and definitions set out in antitrust and other areas of traditionally public law. More precisely, particular sorts of actors within firms and society enjoy legally supported privileges to exercise control over individual economic enterprises and to coordinate markets as a whole. The dynamics of control have shifted over time, but there is little doubt that yawning material inequalities among households are accompanied by—in part caused by—concentrated economic coordination rights.

Once we see that corporations are already semi-public grants of control over production and social provisioning, we can see that it is the nature and distribution of public privileges and private benefits that must be transformed. Economic coordination rights can be re-allocated—in the direction of economic democracy and cooperation, and away from hierarchy and control. This is one way of re-describing Forbath’s vision of socialism—and it is also what a left antimonopolist project is all about.

In recent public debate, socialism—real socialism—has frequently been counterposed to a Progressive antimonopolist project. Antimonopolists want “big structural change” that will rectify properly functioning markets, partly by decentralizing them. Socialists say that market logic itself is the problem and must be transcended (except, of course, that market socialists assert both that market logic is a thing and that it can be reclaimed for public benefit).

The first problem is that too often, #bothsides essentialize “markets” and their logic, whether pro or anti, and get hung up there. Beyond this, certainly there is a difference of degree between some Progressives and some socialists in terms of the extent to which they wish to see transformative changes to participatory structures in the direction of economic democracy. That difference, however, tends to get run together with others that are not logically connected to it—notably the question of centralization. Is the drawing-in of economic coordination rights into a centralized state structure always the best—let alone the only—way to transition to democracy in both the production and social provisioning processes? Or is there room for localized participatory structures that may span public and private, as well as transformative reforms to existing “private” industry?

Interestingly, the self-described socialist candidate in the recent Democratic primary embraced what can only be called a left antimonopolist platform. Senator Sanders proposed a radical reconstruction of markets and the entities that populate them, which included detailed plans for corporate and antitrust law reform to empower workers, consumers, and small enterprise. Strong independent labor unions and a strengthened public role in economic coordination must also be part of this vision for reallocating economic coordination rights. Forbath quotes Austrian socialist Karl Renner on the Weimar Constitution as entailing “the transfer of enterprises to the control of councils of consumers and producers, at least to some significant extent.” The left antimonopolist vision and the socialist vision Forbath seeks to revive are brethren—separated, if at all, in degree and not in kind.

Big C and small c constitutional delegations

Balancing or reconstituting the roles of branches of government—plain old “structural constitutionalism”—is still part of this project. And it’s not clear that the socialist approach to these questions can be truly characterized as just a negative project (judges and constitutions getting out of the way, as Sam Moyn implies in his response to Forbath). There is still an affirmative choice of delegation involved—and it is crucial to emphasize that this choice is continuous with the choices just discussed about how to delegate economic coordination rights among “private” actors. In this regard, it is useful to consider the constitutional treatment of the National Industrial Recovery Act, the closest the United States ever came to a “planned economy”, and to contrast it with the constitutional treatment of today’s highly concentrated coordination rights.

Early New Deal policy—with NIRA at the center—embraced a participatory form of market governance that drew upon earlier models of associationalism and upon a concept of “fair competition” linked to the Federal Trade Commission. The meaning of fair competition in a particular market was to be worked out within that market, through the vehicle of existing trade associations, in theory incorporating the collective voices of both labor and the public. While the scheme had serious problems in execution—a big one being its failure to truly guarantee collective worker participation—it was rejected by the Supreme Court for grounds that had nothing to do with these failures. Rather, the ruling was continuous with many of “Lochner era” rulings in imposing empty formalism in the presence of institutional creativity. Schechter Poultry was decided in part on the ground that Congress had improperly abdicated its legislative function, delegating this function to the President and ultimately to private market participants. In other words, part of the constitutional problem with the NIRA was that it gave too much power—a legislative power—ultimately to business leaders (and, to a much lesser degree, labor leaders and consumer representatives) to coordinate the production and social provisioning processes.

(Certainly, we can ask if the outcome would have been different if Congress had articulated the principles that define “fair competition,” delegating only their application to particular sectors. In practical terms it would have not, because the Court also held that the statute exceeded Congress’ commerce clause power—but that ruling, unlike the nondelegation holding, has been superseded. And as a policy matter, we would likely want more concreteness in laying out the role of labor and public, and ensuring their independence.)

Today’s framework for market governance (in most markets) also involves a delegation of the legislative function via a plethora of enactments involving corporate charters, property rights, merger approvals, the permission of vertical restraints imposed by dominant firms on less-powerful actors in their orbits, and more … and nobody questions its constitutionality. The main difference is that the delegation is not explicit, easy to find in one statute, nor (ironically) structured by Congressional deliberation and design. Instead, this delegation is mediated by the courts’ own interpretation of the Sherman Act as a grant of law-making power to judges. Closely connected with that self-allocation has been the elevation of neoclassical law & economics as the normative framework for antitrust law. Expert judgments, supposedly based in morally and politically neutral science, justify the allocation of market coordination rights to powerful firms on the grounds that this is “efficient”—the reigning criterion for economic organization that has replaced “fair competition.” Powerful firms now serve as the effective managers of many markets (their own, and more splintered upstream or downstream ones), just as in theory all market participants—small and large firms, labor, and consumer representatives—were to manage markets under NIRA. Coordination is still happening, and the right to engage in it is still being allocated by a branch of government other than Congress, only now it is the courts rather than the executive. An implicit constitutional judgment supports this two-step delegation of market coordination power, as well.

This brings me to a final point. Forbath’s and Moyn’s perspectives already have a great deal in common by implicitly rejecting the idea of a monolithic capitalism or a monolithic socialism in which essential economic or social forces outside contingent, contested legal and political structures determine outcomes. Moyn has pointed out that there is no monolithic capitalism governed by “economic laws” as opposed to historically contingent, human-made laws and other institutions. Forbath describes the other side of this coin when he says that under socialism, human conflict and power struggle will not magically disappear; participatory political structures—and law—will still be needed. Even some individually enforceable rights can help in the process of structurally transforming the political economy. Opposition to the reactionary rule of juristocracy and the rigidities of constitutionalism is essential, but legal contestation, judges, and constitutional judgments will not go away.