The decline of Western Civilization, whether in ethical standards, cultural vitality, family formation, or economic stagnation, has gone hand in hand with departures from a rules-based order. These departures are particularly obvious in the political realm, but they have also occurred in cultural mores and traditions. Cultural vitality and rules-based orders are intertwined and symbiotic. One does not simply cause the other. Clear rules create space for initiative, innovation, and improvement—while robust cultures create and refine their rules. 

F. A. Hayek was one of the preeminent theorists and defenders of the rules-based order in the twentieth century. His works, especially the Constitution of Liberty, explain in great detail how and why societies flourish when they are organized around clear rules that are predictable, stable, well-known, and equally applied to all people. These societies have liberty, which for Hayek means: “independence of the arbitrary will of another.” People can act according to their own plan as well as their own local knowledge of time and place. The exercise of this freedom drives the discovery of new and better ways of organizing our time and resources. 

But liberty under a rules-based order does not mean people have unconstrained choice. It does not mean people have unlimited resources or options. It does not mean people will always do what is right. Instead, promoting this “mere” or “negative” liberty creates an open playing field for everyone. Philosopher David Schmidtz points out that we should ask not whether a society is a perfectly fair race, but rather whether it is a good place to live. Hayek warned his readers in the 1960s about the problems that would emerge as the rule of law was abandoned in favor of engineering greater “equality”—virtue-signaling, political corruption, economic stagnation, and more.

 Collectivists of various sorts, from Environmental, Social, Governance (ESG) and Diversity, Equity, and Inclusion (DEI) enthusiasts to champions of industrial policy and protectionism, gain power by eroding the rule of law and the idea of a rules-based order. The rule of law contrasts with political power being exercised by the arbitrary wills of individual men and women. Instead of clear, impartial rules, collectivists of left and right offer social and political edicts: what kinds of people must be hired, which kinds of economic activity are “pro-social” and which ones aren’t, what political or religious beliefs are acceptable and which aren’t, which industries are worthy of “protection,” and which countries ought to be “punished.”

As a consequence, we have been witnessing the rise of the will to power as the organizing impulse of many postwar democratic societies. Due process, procedural justice, even robust conceptions of tolerance, are increasingly trampled underfoot to achieve the “right” outcomes or express the “right” loyalties. And so property destruction or theft is not all that wrong. Choosing people based on their race and sex is no longer discriminatory. Voting the proxies of other people’s shares under management based on your own social and political ends, rather than on the best returns, has become widespread. Allocating public money to one’s favored industries and companies is no longer favoritism. And tolerance should no longer be tolerated because the stakes of felt “violence” via other’s disagreement or disapproval have gotten too high. These are all symptoms of a society moving away from rules-based ordering.

For the past half-century or so, collectivist impulses were primarily the domain of the political left. But this has begun to change with more voices on the political right calling for government-encouraged labor organization, rewriting property rights, more restrictions on corporations for the “common good,” and active subsidizing of “strategic” industries.

The current cultural and political state of the United States feels disorienting in part because our lives are increasingly unmoored from stable predictable rules—including social mores that have historically been passed on through stable families and religious institutions. Nobel laureate Douglass North wrote: “Institutions reduce uncertainty by providing a structure to everyday life.” But as institutions like families, religious organizations, and the rule of law crumble, we find ourselves in a world awash with uncertainty. 

The chaos and conflict of our moment arise from the conflicting wills of individuals, and the various groups they either represent or reproach. We have “lost the script,” so to speak, and are left with a kind of nihilism where people grasp for whatever economic gain, reputation, or power they can while feeling no qualms about using public money and government coercion “to reward friends … and punish enemies.”

Although many people deride and denigrate “zombie free-market ideology,” these detractors fail to see that free markets are a pillar of rules-based societies. Defined and defended property rights, clear and just tax laws, constitutionally limited government—especially regarding regulations and handing out public money—these are crucial for creating a stable and productive environment free of corruption or politicization.

Consider how many hot-button economic topics on the right and the left depart from basic rules-based free markets. The push for ESG criteria for corporate performance introduces a new form of legal discretion, and potentially coercion, into the market process. Rather than basing their decisions upon long-term productivity and maximizing shareholder value, many business executives increasingly spend their time diverting corporate money and strategic planning towards “socially responsible” ends—as defined by other specific individuals and interest groups!

Besides distracting from the core strengths and purpose of business, ESG metrics substitute the will of some people, whether they be ESG rating organizations or, more significantly, the SEC, for the rule of law under which the owners and managers of a company can make their own decisions. DEI initiatives similarly overwrite the goals of business owners with the goals of activists. Business executives feel increasing pressure to follow arbitrary DEI guidelines and goals—replacing talent development and acquisition with various social justice platitudes. 

Both ESG and DEI are closely associated with “stakeholder capitalism”—a collectivist idea with deep roots in corporatist thought. Instead of clear property rights, where owners are accountable to customers for how they use their capital and how their business operates, the stakeholder model suggests that many people have a “stake” in the company—from suppliers to workers to neighbors to the environment: indeed, anyone who asserts a stake in the company. Any company that wants to survive obviously needs to reflect upon how their activities might affect the interests of those groups that exist within the community in which that company operates. Yet advocates of “stakeholder capitalism” have something else in mind.

They want stakeholders to be able to impose their goals on businesses rather than allowing businesses to make their own plans after incorporating stakeholder interests as they see fit. The political application of the stakeholder model involves taking ownership, authority, and ultimately value from some people—owners—and giving it to others—self-proclaimed stakeholders who happily exert social and political pressure to get their way. 

There can be no rule of law under a stakeholder model because determining which stakeholder interests are most important and arbitrating conflict between various stakeholders requires politicians and judges to exercise extensive discretion—creating fertile ground for corruption and arbitrariness. We can only protect property rights and sound business decision-making in a rules-based order.

We can also see departures from a rules-based society in the advocacy of industrial policy and protectionism. These ideas involve using legislation to extract economic privileges not accorded to everyone else. Do certain industries or regions of the country suffer from low wages? Just pass a law to fix it! Is the problem competition from abroad? Raise tariffs! Are families or communities harmed by a lack of worker “power?” Encourage and strengthen unions! Are we worried about short-sightedness on the part of business? Create special grants or loans or tax exemptions!

Implementing these kinds of laws involves replacing the bottom-up plans of individuals and free associations in the economy, especially business owners and privately-owned enterprises, with the top-down plans of government officials (invariably lobbied by special interests) in Washington, D.C. To that extent, it involves curtailing liberty rather than extending it, and thus represents a departure from a rules-based order, not an enhancement of it. 

History is littered with the failures, large and small, that come when the limited knowledge and limited benevolence of political actors replace the decentralized knowledge, feedback, and accountability faced by market actors (as Xi Jinping is discovering). The long-term consequences for the rule of law tend to be less noticed, yet they are arguably more damaging.

But greater liberty will not solve every problem. As Hayek noted, “Above all, however, we must recognize that we may be free and yet miserable. Liberty does not mean all good things or the absence of all evils.” More liberty does, however, allow individuals, families, and communities greater scope for addressing their problems. Understanding the importance of a rules-based order should humble any ambition to change the world. Then it should guide us as we build, or rebuild, institutions. It can also guide our personal conduct—helping us frame our activities within an existing order rather than falling prey to the Siren song of exerting our own will to exercise ever-greater political power. 

The rule of law, rather than the arbitrary rule of man, was—and I hope will remain—one of Western civilization’s crowning achievements. Liberty, and the rule of law that creates and extends it, has delivered unprecedented economic growth and human achievement where it has been tried. It has also fostered literacy, creativity, and hope. The deaths of despair, ennui, loneliness, and any other social ills we see today come along as we leave the rules-based order behind.

G.K. Chesterton quipped, “The Christian ideal has not been tried and found wanting. It has been found difficult and left untried.” One could say something similar to collectivists on the right and the left: The ideal of limited government, free markets, and the rule of law has not been tried and found wanting. It has been found difficult to implement and sustain, and therefore has been largely left untried.