Our Commercial Republic

The Locke Foundation

The dominant theme in John Locke’s seventeenth century work is that improvement in the human condition is both possible and desirable. Locke presented a view of human progress and the transformation of nature that was unknown to the ancients. He argued this improvement could best be achieved by challenging the existing economic system of mercantilism and feudalism and the notion that monarchs had the divine right to rule. What joins commerce with republicanism is the rule of law, which, in turn, rests on the centrality of contracts and consent.

Locke envisioned the essential unit of analysis to be the autonomous individual in a state of nature free from social restraints and governmental regulations. Locke, however, portrayed this natural position as one of abject poverty. Nevertheless, since God gave the world to man to enjoy and improve, the rational and industrious who take care of themselves by using the useful arts and sciences are to be held in the highest regard. Through the privatization of God’s gift of common property—a sort of contract with God – individual liberty and the general well-being are advanced.
Locke undermined primogeniture in the economic world and also the divine right of kings in the political world. Legitimate government only existed by the consent of autonomous individuals who willingly surrendered the right to adjudicate disputes and relinquished the power necessary and proper to make laws for the well-being of the community. The rights of the people did not come from the government; rather the powers of the government were a conditional grant by the people. All the more reason, then, to separate the powers and limit the reach of government to specified objects with the people retaining control over the vast areas of their life. Thus the birth of the commercial republic.
The Smith Foundation Adam Smith also focused on improving the human condition by increasing the wealth of the nation. Poverty was to be solved by increasing production, which depended on the productivity of labor, which was strongly influenced by the division, or specialization of labor that depended, finally, on the extent of the market. Humans not only have a natural inclination to self-preservation; the butcher, the baker, and the brewer also have a natural inclination to “truck, barter, and exchange” beef, bread, and beer with other humans. No “human wisdom” or governmental planning is needed to create this cooperative outcome.
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Adam Smith also focused on improving the human condition by increasing the wealth of the nation.
For Smith the practical arts and sciences enhances the natural progress from a primitive agricultural community to a “civilized and thriving country.” In such a society, the government is not extensively involved in the day to day operations of production nor the proto-crony capitalistic granting of special privileges to a few companies. The presumption is that individuals know what is in their best interests and that a concern with self-interest is not the same as personal greed or self indulgence. A commercial society requires its habitants to adhere to the values of hard work, thrift, and moderation. On the other hand, there is a strong presumption from the critics of a commercial republic that selfless and enlightened administrators can determine the level and kind of production necessary for an efficient economy and better society.

The Federalist and the Commercial Republic

According to the Framers, a republican form of government is where a) a scheme of representation takes place in contrast to both a monarchy and a pure democracy; b) there is a separation of powers between the legislative and executive branches; c) the judiciary shall be independent of the political branches; and d) the legislative branch shall be bicameral. There is also e) a provision for frequent elections by the people with room for debate about the mode of election, the length of term of office, should the terms be staggered, and who can vote and who can run for office.

Federalist No. 10 and Federalist No. 51 incorporated Locke’s defense of private property and Smith’s extended market in their defense of a commercial republic: the purpose of government is the protection of private property and the well-being of the nation depended on the presence of economic, political, and religious liberty. These liberties required the encouragement of a variety of opinions, passions, and interests, which in turn depended on the encouragement of a commercial society in an extended territory. Similarly, the competition of the separate branches and different levels of government helps secure “republican liberty.” Furthermore, religious liberty is strongly influenced by the competition between a vast number and variety of religious sects. The rule of law in politics is better than the rule of man. That is the key to the modern case for a republic. Similarly, the rule of law of demand and supply in economics is better than the rule of “enlightened administrators.”

Federalist papers
Federalist No. 10 and Federalist No. 51 incorporated Locke’s defense of private property and Smith’s extended market in their defense of a commercial republic: the purpose of government is the protection of private property and the well-being of the nation depended on the presence of economic, political, and religious liberty.

The Constitution Establishes Our Commercial Republic

Article I, Section 6 indicates that “Senators and Representatives shall receive a compensation for their services.” This underscores the commercial nature of the republic. The Constitution also provides safeguards against the corruption that goes along with money. (See Article II, Section 1, Article III, Section 1 and Amendment XXVII.) In addition, Congress has the power to grant temporary patents “to promote the progress of science and the useful arts.” And there are specific restrictions on Congress and the States with respect to granting “titles of nobility.” There is no provision for primogeniture in the distribution of property and the divine right of kings in politics is replaced by the consent of the governed through regular elections. In short, we are a commercial republic.

Among the 18 clauses in Article I, Section 8 outlining the powers of Congress, the first eight and the eighteenth establish the constitutional foundation for a commercial society.
Congressional action under the Articles of Confederation was impeded by the unavailability of a regular source of funding and borrowing. Thus the new Constitution grants the power to tax and borrow in order to support the general welfare and common defense as well as the power to regulate interstate commerce. But what tax and borrowing policy can’t be justified in the name of the general welfare or common defense? Whether these clauses are loosely or strictly interpreted has had a huge impact on our kind of commercial republic. For example, the New Deal and Great Society programs in the twentieth century and the Affordable Care Act in the twenty-first century owe much to a broad constitutional interpretation of these clauses. (See, for example, FDR’s 1932 Commonwealth Club Speech and Lyndon Johnson’s Great Society Speech at the University of Michigan in 1964, and Ronald Reagan’s response at the 1964 Republican National Convention.)
What does the Interstate Commerce Clause mean and has its meaning changed over time? Is it possible to draw a clear line between intrastate and interstate commerce as the Supreme Court in the New Deal era attempted to do? What exactly is commerce? What does regulate mean? Again, the New Deal, the Great Society and Obamacare programs relied on a very expanse rather than a restrictive interpretation of the meaning of this clause.
Six of the eight restraints on Congress in Article 1, Section 9 and six of the 16 restraints on the state governments in Article 1, Section 10 are related to a commercial republic operating within a federal framework. For example, Congress is forbidden from laying “a tax or duty…on articles exported from any state,” and Congress shall give no preference “by any regulation of commerce or revenue to the ports of one state over those of another.” The states are also forbidden from coining money, emitting “bills of credit,” or “impairing the obligation of contracts.”

Constitutional Amendments and the Progressive Challenge

There are 27 amendments to the Constitution, 20 of which are the result of decisions made during the three main “eras” in American public policy: ten from the founding, three from the Civil War era, and seven from the Progressive era of the twentieth century. Five out of ten of the Founding amendments, one out of three of the Civil War amendments, and four out of seven from the twentieth century deal directly or indirectly with a commercial republic.

The most important foundational amendment is the Fifth, which states that no person shall “be deprived of life, liberty, and property, without due process of law; nor shall private property be taken for public us, without just compensation.” There are all sorts of questions that have emerged. What is private property? Do the rules of due process change over time? Who determines “just compensation?” What burden of proof must the government meet to warrant the takings of private property “for public use? “Do the different claims of private property and public use actually put commerce and republicanism on a potential collision course? The important point is that this amendment reinforces the attachment of the republic to a commercial society where to take away private property has to be done according to the rule of law.
One of the most controversial aspects of a commercial republic is the possibility that there may be no limits on what people can own and trade. Can a person own another person and then sell them on the open market? A strong argument can be made that free labor and slave labor are inconsistent with each other; a commercial society and a feudal/slave society cannot subsist together. The Thirteenth Amendment removes the tension by eliminating slavery from the United States.
The 44 words in Section 1 of the Eighteenth Amendment are intended to introduce a remarkable change in our commercial republic. In popular terminology, this section prohibited and criminalized the purchase and consumption of alcoholic beverages.
Americans, for most of their history, accepted that the Constitution limited the reach of the federal government to few and defined objects leaving the rest of public policy to state and local governments or to the private commercial sector. An important feature in Section One of the Eighteenth Amendment, therefore, is that it introduces the proposition that we as individual Americans are not free to engage in the commerce of certain beverages. A politically decentralized and commercial nation overwhelmingly accepted the argument that drinking was a moral issue beyond the scope of the market and vital for the well-being of the republic.
Temperance movement  3
The 44 words in Section 1 of the Eighteenth Amendment are intended to introduce a remarkable change in our commercial republic. In popular terminology, this section prohibited and criminalized the purchase and consumption of alcoholic beverages.
What was not anticipated was the endurance of entrepreneurial politics in American life. Section I does not mention the words, “purchase,” “consumption,” and “alcohol.” What is there is the phrase “intoxicating liquors.” What are “intoxicating liquors?” This ambiguous language is not accidental; it reflects the persistence of entrepreneurial politics in America. The Twenty-First Amendment that overturned the Eighteenth Amendment confirmed that we are indeed a commercial (federal) republic.
The progressives also relied on a loose interpretation of Article I, Section 8 to regulate the relationship between capital and labor or what they called “the social question.” They provided a significant challenge to the traditional understanding of the role of government in a commercial republic. They introduced three new cabinet departments: the Agriculture Department, the Labor Department, and the Commerce Department. The roles of these departments have expanded over the last hundred years in an effort to control rather than encourage the operation of a commercially based republic. For the progressives, equality replaces liberty as the central concern of both economics and politics. And this challenges the very nature of our commercial republic.

Explore Readings

Law of Demand
As prices decrease, the quantity demanded increases or as prices increase, the quantity demanded decreases.
Natural rights
Rights which belong to us by nature and can only be justly taken away through due process.
Inalienable rights
Rights which belong to us by nature and can only be justly taken away through due process.
Liberty
Except where authorized by people through the Constitution, government does not have the authority to limit freedom.
Popular sovereignty
The power of government flows from the people.
Separation of powers
A system of distinct powers built into the constitution, to prevent an accumulation of power in one branch.
Checks and balances
Powers distributed among the branches of government allowing each to limit the application of power of the other branches and to prevent expansion of power of any branch.
Federalism
The people delegate certain powers to the national government, while the states retain other powers; and the people, who authorize the states and national government, retain all freedoms not delegated to the governing bodies.
Justice
Fairness or reasonableness in the way people are treated or decisions are made.
private property
The natural right of all individuals to create, obtain, and control their possessions, beliefs, faculties, and opinions, as well as the fruits of their labor.
limited government
Citizens are best able to pursue happiness when government is confined to those powers which protect their life, liberty, and property.
representative government
(or republican government) Form of government in which the people are sovereign (ultimate source of power) and authorize representatives to make and carry out laws.
republican government
(or representative government)Form of government in which the people are sovereign (ultimate source of power) and authorize representatives to make and carry out laws.
civil discourse
Reasoned and respectful sharing of ideas between individuals is the primary way people influence change in society/government, and is essential to maintain self-government.
Constitution
The fundamental principles by which a state or nation is governed. The United States Constitution, written in 1787, lays out the roles and powers of each of the three branches of government (legislative, executive, and judicial), the protections of due process and rule of law in the states, a republican form of government, and the manner in which to amend the document.
Thomas Jefferson
Jefferson was a Virginia plantation owner who was the principle author of the Declaration of Independence. Jefferson served as a legislator and governor in Virginia, as well as an ambassador to France, Secretary of State under George Washington, Vice President under John Adams, and the third President of the United States. During his political career, Jefferson founded the Democratic-Republican Party with James Madison, and he bought the Louisiana Purchase from France. After his presidency, Jefferson started the University of Virginia near his home, Monticello.
Bill of Rights
The first ten amendments to the Constitution, ratified in 1791, which limit government power and protect individual liberties, including the freedoms of speech, press, religion, petition, and assembly, as well as protections against cruel and unusual punishment, unreasonable search and seizure, and other due process rights.
Second Amendment
Ratified in 1791, it protects citizens’ rights to create a militia and to bear arms. “A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.”
Due Process
The government must interact with all persons according to the duly-enacted laws; applying these rules equally among all persons.
Equality
Every individual is equal to every other person with respect to natural rights and treatment before the law.
Consent of the governed
The authority of the government must come from the people through elections and through the people’s interaction with government.
Individual responsibility
Individuals must take care of themselves and their families, and be vigilant to preserve their liberty and the liberty of others.
Rule of law
Government officials and citizens all abide by the same laws regardless of political power.
Declaration of Independence
The document written in 1776 by the Founders to send to Britain’s King George III in which independence from Britain was declared and the reasons for the separation were explained.
Articles of Confederation
The first national government document developed in 1781 by the Founders. The Articles created a federal legislative branch, but there was no executive or judiciary. The states retained most of the governmental powers.
Founders
The group of people who wrote and influenced the Declaration of Independence, the Articles of Confederation, the United States Constitution, and the United States Bill of Rights. These men were instrumental in establishing the nation and its governmental documents and practices.
Federalist Papers
A series of 85 essays written to convince the people of New York to ratify the Constitution. The authors were James Madison, Alexander Hamilton, and John Jay. These documents are considered to be the most authoritative explanation of the political theory of the Constitution.
First Amendment
Ratified in 1791, it protects the freedom of speech, the freedom of religion, freedom of the press, freedom to assemble, and freedom to petition the government. “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.”
Law of Supply
As the price drops, the quantity supplied also drops.
Fourth Amendment
Ratified in 1791, it protects citizens’ rights against unreasonable searches and seizures of property and explains that warrants must be issued with probable cause. “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”
Fifth Amendment
Ratified in 1791, it protects the right indictment by a jury, against double jeopardy, self-incrimination, loss of life, liberty, or property without due process, and just compensation for private property taken for public use. “No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”
Tenth Amendment
Ratified in 1791, it states that the powers not enumerated or delegated in the Constitution are reserved for the states and the people. “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.”
Eighth Amendment
Ratified in 1791, it protects against excessive bail and fines and cruel and unusual punishments. “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.”
Ninth Amendment
Ratified in 1791, the listing of certain rights protected by the Constitution cannot be used to deny rights not enumerated in the document. “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.”
Alexander Hamilton
One of the Founding Fathers of the United States, Alexander Hamilton served as General Washington’s chief of staff, promoted the ratification of the Constitution in the Federalist Papers, and founded the nation’s financial system and first political party.
James Madison
Madison was a Framer who was instrumental in writing the Constitution and Bill of Rights. He is known as the “Father of the Constitution.” Madison partnered with Alexander Hamilton and John Jay to write the Federalist Papers in support of the ratification of the Constitution. He also served as a member of the Virginia House of Delegates, the United States House of Representatives, Secretary of State under Thomas Jefferson, and the fourth president of the United States.
George Washington
First President of the United States, George Washington served as commander-in-chief of the Continental Army during the American Revolution and was one of the Founding Fathers of the United States.
John Locke
An English philosopher and physician, John Locke was one of the most influential Enlightenment thinkers and is known today as the Father of Classical Liberalism.
Continental Congress
The Continental Congress, comprised of delegates from 12 of the 13 American colonies, represented the colonists during and after the American Revolution. The Continental Congress issued the Declaration of Independence and ratified the Articles of Confederation.
King George III
King George III was the King of Great Britain at the time of the American Revolution. His actions towards the American colonies, outlined in the Declaration of Independence, spurred the American Revolution.
Great Depression
Spanning ten years from 1929 to 1939, the Great Depression was one of the longest-lasting economic downturns in the history of the United States affecting the U.S. and most of the world.
Preamble
An introductory statement, preface, or introduction.
Tyranny
Cruel and unfair treatment by people with power over others.
Tyrannical
Using power over people in a way that is cruel and unfair.
John Adams
Before becoming the second President of the United States, John Adams served as the country’s first Vice President under George Washington. Adams was an advocate of American independence from Britain and a Federalist.
John Jay
Founding Father John Jay was one of the signers of the Treaty of Paris and served as the first Chief Justice of the United States. He was also one of the authors of the Federalist Papers.
Third Amendment
Ratified in 1791, it protects citizens against the quartering of soldiers in private homes without their approval. “No soldier shall, in time of peace be quartered in any house, without the consent of the owner, nor in time of war, but in a manner to be prescribed by law.”
Sixth Amendment
Ratified in 1791, it protects the rights of impartial jury trials, the right to be informed of the accusations against you, the right to be confronted by witness, and the right to be assisted by counsel. “In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the state and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the assistance of counsel for his defense.”
Seventh Amendment
Ratified in 1791, it protects the right of jury trials in law suits dealing with more than twenty dollars and protects against reexamination of the trial in any court if decided by a jury. “In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the United States, than according to the rules of the common law.”
Alexis de Tocqueville
French political thinker and historian, Alexis de Tocqueville is best known for his works Democracy in America and The Old Regime and the Revolution. He visited the U.S. in the 1830s and wrote admiringly about many aspects of American law and society.
Democracy in America
Written by Alexis de Tocqueville after visiting the United States, Democracy in America contains de Tocqueville’s analysis of and reflections on the United States’ democratic system and society. The first volume was published in 1835 and the second in 1840.
Magna Carta
Written in 1215, it is the oldest document in the British and American heritage of rights. Contributed to the adoption of the First, Third, Fourth, Fifth, Sixth, and Eighth Amendments of the Bill of Rights, and speaks of these rights as ancient.
Two Treatises of Civil Government
Written by John Locke in 1690, the Two Treatises of Civil Government criticize absolute power for kings and outline Locke’s suggestions for a more civilized society based on natural rights and the social contract.
Thirteenth Amendment
The Thirteenth Amendment to the Constitution abolished slavery and involuntary servitude, except as punishment for a crime. “Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction. Section 2. Congress shall have power to enforce this article by appropriate legislation.”
Framers
The group of people who actually attended the Constitutional Convention and participated in writing the Constitution.
Fourteenth Amendment
Ratified in 1868, it states that all people born or naturalized in the United States are citizens and ensures that “No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”
Sixteenth Amendment
Ratified in 1913, the Sixteenth Amendment gave Congress the ability to collect income taxes. “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census of enumeration.”
Eighteenth Amendment
atified in 1919, the Eighteenth Amendment introduced Prohibition, the period of United States history when the manufacture, sale, and transportation of alcohol was made illegal throughout the country. “Section 1. After one year from the ratification of this article the manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes is hereby prohibited. Section 2. The Congress and the several states shall have concurrent power to enforce this article by appropriate legislation. Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by the legislatures of the several states, as provided in the Constitution, within seven years from the date of the submission hereof to the states by the Congress.”
Twentieth Amendment
The Twentieth Amendment was ratified in 1933, and it establishes procedures for presidential succession and the start and end of federal officials’ terms of office. “Section 1. The terms of the President and Vice President shall end at noon on the 20th day of January, and the terms of Senators and Representatives at noon on the 3rd day of January, of the years in which such terms would have ended if this article had not been ratified; and the terms of their successors shall then begin.
Twenty-First Amendment
In 1933, the Twenty-First Amendment repealed the Eighteenth Amendment, ending Prohibition. “Section 1. The eighteenth article of amendment to the Constitution of the United States is hereby repealed. Section 2. The transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited. Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by conventions in the several states, as provided in the Constitution, within seven years from the date of the submission hereof to the states by the Congress.”
English Bill of Rights
Passed by the British Parliament in 1689, the English Bill of Rights limited the power of the British monarch, outlined the rights of the Parliament, and guaranteed Protestants the right to bear arms.
Parliament
The legislative body of the United Kingdom (known as Great Britain or England during the Founding era).
Benjamin Franklin
One of the Founding Fathers of the United States, Benjamin Franklin was a statesman, author, publisher, scientist, inventor and diplomat. He served in the Second Continental Congress during the American Revolution and helped draft the Declaration of Independence. In addition, Franklin helped negotiated the Treaty of Paris which ended the Revolutionary War and later served as a delegate to the convention that produced the U.S. Constitution.
Suffrage
The right to vote.
Republic
A government in which the power belongs to citizens through the right to vote.
Fifteenth Amendment
Ratified in 1870, it states that the right could not be restricted based on “race, color, or previous condition of servitude.” “Section 1. The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any state on account of race, color, or previous condition of servitude. Section 2. The Congress shall have power to enforce this article by appropriate legislation.”
Seventeenth Amendment
Ratified in 1913, the Seventeenth Amendment introduced direct election of Senators. “The Senate of the United States shall be composed of two Senators from each state, elected by the people thereof, for six years; and each Senator shall have one vote. The electors in each state shall have the qualifications requisite for electors of the most numerous branch of the state legislatures. When vacancies happen in the representation of any state in the Senate, the executive authority of such state shall issue writs of election to fill such vacancies: Provided, that the legislature of any state may empower the executive thereof to make temporary appointments until the people fill the vacancies by election as the legislature may direct. This amendment shall not be so construed as to affect the election or term of any Senator chosen before it becomes valid as part of the Constitution.”
Nineteenth Amendment
Ratified in 1920, the amendment stated that a citizen’s right to vote must not be restricted based on gender. “The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any state on account of sex. Congress shall have power to enforce this article by appropriate legislation.”
Direct Democracy
Direct democracy is a political system in which the people vote directly on policies or laws, as opposed to voting for representatives who enact laws on their behalf.
Arbitrary
Not planned or chosen for a particular reason; done without concern for what is fair or right.
Judicial Review
The process by which courts analyze the constitutionality of an act of government.
Majority rule/minority rights
laws may be made with the consent of the majority, but only to the point where they do not infringe on the inalienable rights of the minority.
Fiat
An arbitrary order or decree.
Property
Something that is owned by a person, business, etc. This includes possessions, beliefs, faculties, and opinions, and the fruits of one's labor.
Democracy
A government in which the power is held by the people.
Electoral College
A body of electors chosen by each state to vote for the president and vice president of the United States.
Virtue
Conduct that reflects universal principles of moral and ethical excellence essential to leading a worthwhile life and to effective self-government. For many leading Founders, attributes of character such as justice, responsibility, perseverance, etc., were thought to flow from an understanding of the rights and obligations of men. Virtue is compatible with, but does not require, religious belief.