The Rule of Law

The problem of balancing governmental power with individual freed, of course, is nothing new. When King John met England's nobles in 1215, they pledged him fealty—but only after the king agreed to be bound by limits on his power. For generations, historians have worked to disentangle the long roots and lasting impact of the Magna Carta, but two things are clear. One is that the uneasy pact forged at Runnymede helped establish the base for the modern state (Strayer Reference Strayer1970). The other is that the rule of law emerged as the guide for setting the balance between governmental power and individual liberty. Kings (and later queens) found power useful to work their will. Citizens sometimes found the exercise of that power overbearing and expensive. From habeas corpus to free trade, John and his successors agreed to accept legal limits on their power.

The rule of law thus became enshrined in English common law. In practice, the rule of the sword often pushed it aside. Kings took centuries to get used to the idea that they were not fully sovereign and that the sun did not revolve around them, but the principle endured and became the foundation for modern government. Indeed, the story of the rule of law is the story of struggle and conflict (Clark Reference Clark and Jayasuriya1999). In part, the rule of law seeks to define and protect the basic rights of citizens against the risks of a too-powerful government (Weingast Reference Weingast1997) even though claims for its historical impact have been much exaggerated (Shklar Reference Shklar, Hutchinson and Moynihan1987). It helps frame a system where everyone knows the rules and where the rules apply to everyone (Carothers Reference Carothers1998). And in part, the rule of law creates the foundation for administrative accountability. Since government in action so often is the action of administrators, the rule of law provides the mechanism for constraining how administrators exercise their power. It tells them what they can do and what will happen to them if they step beyond their boundaries (O'Donnell Reference O'Donnell2004).

This basic outline, of course, is far clearer than it ever was in practice for King John or for the sovereigns who succeeded him. The rule of law, however, provided at least a basic blueprint for the role of governmental power and it played an important role in shaping the thinking of the nation's founders. In Common Sense, Thomas Paine wrote that “a government of our own is a natural right,” with that right protected by the law, because

The rule of law was central to the nation's founders as they tried to create their new government. Citizens could establish that government because they would also bind its power.

The Articles of Confederation proved a clumsy first effort. But the Constitution that followed is a web of crosscutting restraints on government and the basic strategy for administrative accountability in American government: give the government power but set legal bounds to limit the danger in its use. In the United States, the founders did not trust a single bulwark. Multiple backstops, through separated institutions sharing authority, provided the extra insurance that the wary founders needed (Neustadt Reference Neustadt1960). It was an unsteady deal. In the nation's first decades, officials created a national bank only to close it, then to try again and close it again. Hamilton's powerful argument for government's help in promoting the economy repeatedly encountered a hurricane of citizen opposition.

The conflict became razor-sharp during the Progressive Era. Facing the problems posed by rising corporate power and the enormous potential of the industrial age, the Progressives faced a dilemma. They were convinced that stronger government, with new programs and stronger agencies, could drive the country forward. But they also knew that citizens would be nervous about a more powerful government, for the shadow of the American Revolution's battle against George III's tyranny has never been far from the country's consciousness. How to grow the government without creating bureaucratic tyrants? For the Progressives, the answer lay in the rule of law. As a political scientist, Woodrow Wilson famously sketched the solution:

Wilson, along with his fellow Progressives, contended that government administrators could be empowered to do government's work without threatening individual rights because the rule of law would hold them accountable. Delegation of power to administrators from elected officials and hierarchical control through authority controlled the use of power within administrative agencies. Separating politics from administration was their strategy for an effective administrative state in a modern democracy: politicians would keep the reins of policy, and administrators would carry out that policy within the bounds elected officials set (Goodnow Reference Goodnow1900; Wilson Reference Wilson1887).

The Progressives' reliance on the rule of law was an elegant solution to a very tough problem. As they peered into the twentieth century, they concluded that government would have to become far stronger. Squeezed on the one hand between the risks of growing corporate power, with railroad barons and captains of industry flexing their muscles, and on the other hand the unquestionable opportunities of the gilded age, they found in the rule of law a way to fit old theories to the new prospects. The rule-of-law formulation was not the last word for the Progressive movement, any more than it was for King John, but it established the license for the expansion of government in the twentieth century while holding it accountable.

The Challenge of Politics

Of course, big problems soon strained this neatly formulated approach. The Hoover administration fumbled its response to the stock market crash and critics vehemently complained that Franklin D. Roosevelt's New Deal was an unconscionable (and unconstitutional) overreaching. The rule of law had real appeal, in part because its roots reached back centuries and in part because it provided a tightly logical answer to the nation's pragmatic problems. But it inevitably collided with politics, as John Gaus reminded everyone: “A theory of public administration means in our time a theory of politics also” (Reference Gaus1950, 168). Not only did the rule of law fit uneasily between the twin pressures of governmental power and individual liberty. It rested on the inescapable reality, captured so well by Gaus, that administration is—as it always has been and always will be—about politics. Political pressures had maneuvered King John into putting his seal on the Magna Carta, and they have continued to swirl around the rule of law since.

In his 1936 essay “The Responsibility of Public Administration,” Gaus noted that cracks had appeared in the rule of law from the earliest times. He described a replica for consistency of a Babylonian monolith, which has on its face a carving of the Code of Hammurabi from 2000 B.C. Above the code is a relief of Hammurabi receiving the command to establish a just law from the sun-god, Shamash. That, Gaus pointed out, established the “earliest conception of political responsibility”: “Somewhere in the wisdom of God was to be found the absolute code, the fixed standard, which the ruler was to follow” (Reference Gaus, Gaus, White and Dimock1936, 27). However, he continued,

There lies the puzzle at the core of administrative accountability and the rule of law. It's hard to best the provenance of an accountability system that flows from the mouth of God. But it's also impossible to translate, with complete transparency and total predictability, the rule of law into administrative action. As administrators interpret the rule of law, as they must to bring it to life, the law loosens its grip on their rule. Gaus concludes that “neither the electorate nor the legislature can express in concrete detail the specific policy which it desires the administrative organization to enforce” (31), so administrative discretion is the inevitable result of any administrative act. Indeed, the dilemma of building sufficient capacity to allow Congress to oversee executive branch action is a puzzle that has echoed through the American Political Science Association lectures given in his name (Rosenbloom Reference Rosenbloom2001; Frederickson Reference Frederickson1999).

What solution does Gaus offer? If forces external to the administrator cannot adequately shape the exercise of discretion, then democracy must necessarily rely on the administrators' professional norms (Reference Gaus, Gaus, White and Dimock1936). Gaus's argument helped set the stage for one of the most trenchant battles of public administration, the Reference Friedrich, Friedrich and Mason1940 debate between Finer and Friedrich on whether professional training or external controls could best hold administrators accountable. The battle built on the rule of law, as Finer made the case for the long tradition of administration held accountable by legal standards. But Friedrich echoed Gaus in making the inescapable point: if the law cannot fully control administrative action, then how can administrators be held accountable? For Gaus and Friedrich, the case for relying on professional norms was the inescapable conclusion. They argued that government had to rely on what it had.

Blended Accountability

That resort to pragmatism beyond legal strictures was perhaps inevitable, but it also set the stage for a fierce debate about administrative theory and practice. The Magna Carta was important because it established the premise that law could limit the king's power, but the Runnymede meeting did not erase the enormous pressures on the exercise of political power before or after. The United States relied on the rule of law to define and protect individual rights, but few rights have ever been absolute and the debate over how to shape them has always involved substantial cross-pressures. As governmental programs became more complex in the first half of the twentieth century, and especially as public programs embraced partnerships with other governments and with the private sector, strains on the rule of law rose to the breaking point. Gaus argued:

The New Deal, in particular, not only reinforced the challenge of politics in accountability and pushed more reliance onto the professional norms of administrators. It also brought more players from a wider variety of organizations into the pursuit of public policy. World War II, as it spawned a massive network of private contractors to help the war effort, accelerate the trend. These steps, in turn, had two effects.

First, it made it far more difficult to rely on any single rule-of-law standard to guide administrative action. The beauty of delegated discretion within authority-driven hierarchy is that administrative decisions could be directly tracked from policy makers to those who carried out the decisions through a rule of law. Bringing multiple organizations, each operating within its own legal tradition, into close partnership made it far harder to establish and enforce a single rule of law to guide that partnership. Like many binary star systems, in which stars orbit around each other, there is a complex interaction and exchange of forces but neither star's gravity controls the other.

Second, the great variety in cultures that shape the behavior of each organization makes it hard to ensure that any single set of professional norms can shape administrative behavior. The federal government has a different culture than its state and local partners, and the cultures of each government agency often have surprising variations. Professionals in the government's private and nonprofit partners often live by far different cultures that stretch far beyond the typical profit and public good motives presumed at the core of their missions. Community-based organizations are very different than international environmental protection organizations, and they differ tremendously from defense contractors and road builders.

It is one thing to chart the basic forces in law and culture that shape behavior and the tactics for enforcing accountability. It is quite another to determine how these forces combine to ensure that public programs, in the end, serve the public interest. The rise of multiple tools of public action, from grants and contracts to regulations and tax incentives, create very different strategies and tactics for public programs (Salamon Reference Salamon2002). These multiple tools, in turn, have different legal and professional structures. That makes it difficult to assert a single rule of law to define and enforce accountability. And it makes it even harder to find a robust but focused strategy of any kind to make accountability work. The rule of law, of course, was always an approach more powerful in theory than in practice, because of the pragmatic cross-pressures it faced. But the rise of multiple tools of government action undermines the theoretical crispness. It frames the puzzle of how, if no single model is likely to work, modern government can best frame a system of blended accountability.

Direct Administration

As Michael Lipsky pointed out in Street-Level Bureaucrats, many front-line government administrators work with modest oversight (at most) by their supervisors (Reference Lipsky1980). Teachers are usually alone while teaching in their classrooms. As they maneuver to pluck stranded sailors from marooned boats, Coast Guard helicopter crews rely on themselves and their experience. Garbage collection crews work in public view but are out of sight of their forepersons. As Lipsky found, much front-line administration works with service providers out of direct supervision by the supervisors, which makes authority-based control difficult to pursue.

Consider the case of the May 2008 beating of three men by Philadelphia police. Two days before, a city police officer had been shot and killed, and the department had launched an extensive search for his killer. In the midst of that search, a man was shot and killed in a separate incident, and a retaliatory drive-by shooting later wounded three people. Several officers witnessed that shooting and gave chase. Other members of the force joined them, eventually stopped the suspects, and pulled them from the car. Five officers beat and kicked the individuals before dragging them off to waiting police cars. In other cases, the incident would either have attracted no attention or would have ended in a flurry of countercharges. This time, however, a local television news helicopter happened to be overhead and filmed an 11-minute video, which captured the beating and which was replayed on CNN and on television stations around the country. Faced with the video, the newly elected mayor and his newly appointed police commissioner took quick action to fire the cops.

The action was a rare case of tough accountability for street-level bureaucrats. It normally is hard, if not impossible, for top administrators to know enough about the behavior of their subordinates to hold these administrators accountable. Information asymmetries confound and cloud the accountability for much of direct administration. Superiors can't hold their subordinates accountable if they don't know what the subordinates are doing—or if they have to rely on whether news helicopters are circling overhead at key moments.

Mediated Administration

For the last generation, public administration has recognized that much governmental action does not occur through hierarchical authority (Mosher Reference Mosher1980; Salamon Reference Salamon1981; Reference Salamon2002; Kettl Reference Kettl1988; Reference Kettl and Salamon2002). The rise of this government by proxy—contracts, grants, loans, tax preferences, and other indirect tools of government—settled slowly into the field. But with the indisputable rise of these strategies, a new form of mediated public administration arose—the reliance on intricate, non-hierarchical relationships inserted between those who made policy and those who carried it out.

This mediated administration poses three big challenges for accountability. One is its sheer size. Although many citizens, reporters, and even public officials continue to think about government administration in the traditional hierarchical sense—a kind of vending machine into which citizens insert money and from which services are dispensed (Kettl Reference Kettl2009)—a large, growing, but not accurately measured degree of government policy implementation occurs through these proxies. As a result, public perceptions about government often do not match the way much public administration actually happens. A second challenge is that, because of this mismatch of perception and reality, policy makers and citizens sometimes seek accountability through mechanisms, especially hierarchical authority, which doesn't match these tools, which are neither hierarchical nor authority based. A final challenge is that government must create an accountability system for these indirect tools, which is effective and can coexist in a political world that often does not understand them.

There is, fortunately, a single, straightforward answer to all of these challenges. Most of these tools rely on market-based exchanges, for which there is a well-established rule of law. Government might pay a private shipbuilder $8 billion for an aircraft carrier, and legally enforceable contracts can control each step. Government does not need hierarchy or authority if other control mechanisms work well. But we have seen enormous accountability problems in the government contracting system. Tales of contracting waste, fraud, and abuse provide regular fodder for television news magazine shows. The U.S. Government Accountability Office has assembled a list of 28 high-risk areas—programs especially susceptible to waste. Nearly all have substantial contracting components.

The problem is not the lack of an accountability framework. The public law of contracts is well established and robust. Rather, the problem lies in the difficulty of enforcing contract law. Too often, government does not have the capacity to specify what it wants to buy or to judge the quality of what it has bought. Consider the case of the Marine Corps's new “expeditionary fighting vehicle.” The Corps invested 10 years and $1.7 billion into the new amphibious system, but it breaks down on the average of once every four and a half hours. It leaks and is hard to steer, even though the contractor, General Dynamics, received $80 million in bonuses for its work. The Pentagon contracted out much of the design work as well as the vehicle's production. The vehicle fell woefully short of its goals, in part because the system was so complex and in part because the Marine Corps simply lacked the capacity to adequately oversee its design and production. As a result, it might have to start over with a fresh design and a new system (GAO 2008; Merle Reference Merle2007).

It's a case of moral hazard on steroids. The law is clear. If the government knew enough to enforce the law—to be a smart buyer so that it knew what it wanted and could judge what it got—accountability would be straightforward. Without sufficient capacity to write and monitor its contracts, however, the gap in mediated administration between government's expectations and performance has widened. As GAO delicately put it, in a conclusion echoed throughout its work on government administration, “DOD was ill-positioned to determine whether investments in services were achieving desired outcomes” (GAO 2007). Market discipline cannot ensure accountability if the market is undisciplined.

Privatized Administration

These issues create cascading problems of accountability. We have a clear rule of law for traditional administration, but we have information asymmetries that make it hard to enforce that law. Moreover, as mediated administration has increased, administration through traditional hierarchical authority has diminished. We have a clear rule of law for mediated administration, but we have moral hazards that make it hard to enforce contract law. Thus, we have a rule of law for much of administration, but problems in enforcing that rule of law undermine accountability. These are the core puzzles of the governmentalization of the private sector.

But we also have a significant and growing area of administrative and policy action where we have no rule of law at all. These are areas where private forces shape public action: pressures toward the privatization of the public sector, which are growing and causing serious problems for democratic accountability (Ingraham Reference Ingraham2005). We have laws but administrative challenges in enforcing them for direct and mediated administration. We have little law and even bigger administrative challenges for privatized administration.

Consider the role of bond rating agencies like Moody's, Standard and Poors, and Fitch Ratings. These private sector companies review the financial condition of borrowers and rate their creditworthiness. They are old and distinguished firms and they have played a critical role in the financial markets for a very long time. There are standard protocols by which the rating firms asses the financial condition of borrowers, and the multiple firms provide redundant checks on the system. Despite these safeguards, however, the rating firms missed the building financial crisis of the 2000s. Some private companies they rated highly turned out to be built on junk bonds. The companies were able to continue to borrow until some collapsed and others required a massive infusion of government funds to prevent the financial catastrophe from spreading. In just a few days in September 2008, the government's commitment to plugging the financial dike exploded, from a few tens of billions of dollars to well more than a trillion dollars. The federal deficit increased from a bit more than $200 billion in fiscal year 2007 to untold hundreds of billions in the years rolling forward.

The rising government spending, of course, is the product of public decisions reached through the standard governmental process. But overpowering forces from the private sector made those decisions inescapable. In the 2008 presidential campaign, John McCain and Barack Obama sparred over congressional pork, where the trough contained less than $20 billion. The fallout from private-market decisions created a call on the federal budget of 50 times that—or more—with huge impacts rippling through state and local government budgets and throughout the international financial world.

In addition, how much state and local governments pay to borrow funds in the capital market, for everything from long-term obligations for new convention centers to short-term obligations to meet payrolls, is determined by their creditworthiness, as determined by the bond rating agencies. These governments have no alternative but to cultivate the rating agencies, for without them they could not borrow and without borrowing they could not operate. But private decisions determine the cost of public borrowing and, therefore, the drain on public budgets. So governments have found that private organizations play a major role in determining the cost of some of their biggest and most important financial decisions. The financial crisis that exploded in late 2008 grew out of risky decisions by highly priced executives who operated within the boundaries of the law—but the laws fell far short of what was needed to protect the public interest and in international arenas there was often no rule of law at all.

The 2008 financial meltdown is ample demonstration of the importance of privatized administration, but there are many more examples as well. Walmart has joined the Global Food Safety Initiative, in association with European food producers, distributors, and sellers, to establish mutual agreements on food safety. They have set standards, apart from the regulations of any government, and have agreed not to buy any food that does not meet those standards. The American Health Care Association, a private group, sets standards for nursing home care. Any nursing home that does not meet these standards cannot stay in business—or receive government funds. The International Organization for Standardization, a European-based private-sector consortium, has set criteria for processes ranging from environmental quality to customer service. Some American governments have submitted themselves to the organization's review to obtain private certification for their public standards. The Chicago Board of Trade has established a private market for sulfur dioxide emissions, to help private companies meet government pollution standards. The role and importance of these private sector players in shaping governmental action is large and growing.

Larry Lynn has long focused on the search for the “constitutional legitimacy of state action” (Reference Lynn2007). In much of this bubbling arena of privatized governance, there is no constitutional legitimacy because it is largely extra-constitutional. This system of “blended power,” as Jody Freeman calls it, has neither a clear rule of law nor a clear alternative for accountability (Reference Freeman2003, 1, 339). Private entities are developing government-like regulatory strategies in place of governmental action, private decisions are inescapably shaping key public policies (especially mega-budget decisions), and private players are devising governance strategies apart from governmental action. This is happening in ways profoundly reshaping the nature of government and creating deep challenges to accountability, all apart from a rule of law.