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1. Over twenty years ago, Professor Charles Reich wrote:3
One of the most important developments in the United States during the past decade has been the emergence of government as a major source of wealth. Government is a gigantic syphon. It draws in revenue and power, and pours forth wealth: money, benefits, services, contracts, franchises, and licenses. Government has always had this function. But while in early times it was minor, today's distribution of largess is on a vast, imperial scale.
The valuables dispensed by government take many forms, but they all share one characteristic. They are steadily taking the place of traditional forms of wealth — forms which are held as private property. Social insurance substitutes for savings; a government contract replaces a businessman's customers and goodwill. The wealth of more and more Americans depends upon a relationship to government. Increasingly, Americans live on government largess — allocated by government on its own terms, and held by recipients subject to conditions which express "the public interest."
The New Property, 73 Yale L.J. 733, 733 (1964).5
Professor Reich defined the main features of this emerging system of government largess, which he termed a "new feudalism," as follows:6
(1) Increasingly we turn over wealth and rights to government, which reallocates and redistributes them in the many forms of largess; (2) there is a merging of public and private, in which lines of private ownership are blurred; (3) the administration of the system has given rise to special laws and special tribunals, outside the ordinary structure of government; (4) the right to possess and use government largess is bound up with the recipient's legal status; status is both the basis for receiving largess and a consequence of receiving it; hence the new wealth is not readily transferable; (5) individuals hold the wealth conditionally rather than absolutely; the conditions are usually obligations owed to the government or to the public, and may include the obligation of loyalty to the government; the obligations may be changed or increased at the will of the state; (6) for breach of condition the wealth may be forfeited or escheated back to the government; (7) the sovereign power is shared with large private interests; (8) the object of the whole system is to enforce "the public interest" — the interest of the state or society or the lord paramount by means of the distribution and use of wealth in such a way as to create and maintain dependence. . . .
Id. at 770.8
To protect individuals from an "all-pervasive system of regulation and control," Professor Reich urged that "those forms of largess which are closely linked to status . . . be deemed to be held as of right." Only in this way, he argued, would it be possible to create "a zone of privacy for each individual beyond which neither government nor private power can push. . . ." (Id. at 785.) In a memorable conclusion, he declared, "[j]ust as the Homestead Act was a deliberate effort to foster individual values at an earlier time, so we must try to build an economic basis for liberty today — a Homestead Act for rootless twentieth century man. We must create a new property." Id. at 787.9
Does the expansive use of the third party beneficiary idea, in cases like Holbrook, belong to the general movement that Professor Reich describes? To what extent has the idea retained its contractual character in the process of its expansion?10
3. Social contract theorists seek to explain the obligations of citizenship in contractual terms. Not all of them, however, view the relation between citizen and state as itself a contractual one. Hobbes, for example, vigorously denied this could ever be the case. According to Hobbes, the covenant that establishes the commonwealth is one made by each citizen with each other; the sovereign himself is not a party to the contract but is merely the agreed-upon agent or bystander to whom each of the citizens promises to relinquish his private right of self-protection (together, presumably, with whatever instruments of violence he happens to possess). The sovereign is, in other words, a third party beneficiary of the contract the citizens make with one another. One rather disturbing consequence of this view which Hobbes did not flinch to draw — is that the sovereign, being a contract beneficiary, may enforce the contractual obligations of the citizens, but, since he is a non-party, owes them no such duties in return:11
Because the Right of bearing the Person of them all, is given to him they make Soveraigne, by Covenant only of one to another, and not of him to any of them; there can happen no breach of covenant on the part of the soveraigne; and consequently none of his subjects, by any pretense of forfeiture, can be freed from his subjection.
Leviathan, ch. 18 (M. Oakeshott ed. 1946).
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