AMERICA’S ECONOMY/ Two Principles for Reform: Limited State and Subsidiarity

Once, however, governments and courts expand their economic remit beyond these areas, their effectiveness is much more questionable. Indeed, the evidence is overwhelming that when governments seek to “spread the wealth” or “end poverty forever” through welfare programs, they distort (and often suffocate) the usually far more effective role long played in this area by strong families, intermediate associations, religious organizations, and other private actors.

If this is true, then part of the debate about the economy that will shape the 2012 elections should be about identifying principles we can use to distinguish the state’s proper economic responsibilities from activities that others should fulfil.

One such principle might be called the “Adam Smith” principle. Though often caricatured as an eighteenth-century Ayn Rand, Adam Smith thought long and hard about the government’s appropriate economic role.

Broadly speaking, Smith held that the government’s general responsibilities embraced foreign policy, national defense, the administration of justice, and public works. Each of these responsibilities has an economic dimension, especially the last two. Beyond these areas, Smith was willing to contemplate limited interventions in certain spheres of the economy and in particular circumstances. Nevertheless, he generally considered these to be the exception rather than the rule.

No doubt, some will regard this view of government’s primary economic functions as excessively minimalist. That, however, may underscore just how habituated we have become to the state’s excessive intervention into many spheres of life. Moreover, when we consider the legitimate government functions identified by Smith, we realize that activities such as the administration of justice (understood as the application of the rule of law through courts and maintenance of public order through the police function) for all 310 million Americans can hardly be dismissed as small undertakings.

Still, as Smith himself acknowledged, there will be exceptions. But how do we prevent the exceptions from becoming the rule and thus a rationalization for endless economic intervention by the government? Part of the answer lies in a second principle: the much-misunderstood idea of subsidiarity.

Subsidiarity may be summarized in the idea that “higher” organizations (such as governments) should normally not directly intervene in the life of “lower” communities (such as families, businesses, and churches). Subsidiarity thus assumes that the best people to address economic and social problems are usually those closest to the difficulty. Intervention by higher bodies is permitted, however, when (1) a “lower” community has proved itself manifestly incapable of addressing problems that properly fall within its sphere of responsibility; and (2) other communities closer to the problem are unable to resolve the difficulty.