The Rule of Law During Times of Economic Crisis
63 Pages Posted: 27 Aug 2015
Date Written: August 26, 2015
It is trite to observe that every economic crisis is unique and calls forth unique government responses. Still, it is possible to generalize from prior crises to anticipate government responses to future crises. Understanding patterns in governmental responses to crises is especially pressing in that the United States faces a looming and entirely predictable fiscal crisis caused by the seemingly irreversible nature of spending on entitlement programs and exploding government debt. Yet government responses to prior crises are not uniform — the economic crisis associate with the Articles of Confederation and the crisis of the Civil War produced strengthened constitutional structures. The crises of the Great Depression and recent financial crisis, by contrast, resulted permanent disfigurement of the Constitution that has produced a massive growth in rent-seeking and crony capitalist structures. This article explores these different constitutional responses to economic and national security crises and attempts to identify which factors may be crucial in determining whether the inevitable fiscal crisis results in strengthened or weakened constitutional government and the rule of law.
Keywords: crony capitalism, Dodd-Frank, economic recovery, fiscal crisis, legal constraints, moral hazard, popular ideology, rent-seeking, rule of law, social elites, U.S. Constitution
JEL Classification: H53, H63, H87
Suggested Citation: Suggested Citation