Neutral Institutions.

Considerations on Loyalty
Andrs Saj

Prepared for Trust and Honesty Project, Budapest Collegium Draft

Hungarian Academy of Sciences; University Professor, Central European University

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Introduction

Neutrality has become an important dimension or value of state activities, including civil service, government speech, science, arts funding, etc. Nevertheless, the theory of state neutrality (including that of neutral institutions and neutralization) is underdeveloped, with somewhat troubling consequences. Attempts to ensure government neutrality in crucial social areas has not brought systemic standards. The actual power of government in a neutralized environment depends on the nature of a given sphere of life and the resources available and permissible in a given constitutional arrangement. This paper argues that the modern state (as a body) pretends to be non-partisan or neutral in an increasing number of instances.1 Institutional arrangements are developed to make that claim credible. Given this trend towards neutralization, a discussion of loyalty to and trust in the modern democratic state shall not be limited to democratic political government structures. Neutral public institutions (including neutralized government institutions) are an increasingly important though neglected development of societal organization. The meaning of neutral and neutralization is ambiguous. It will be the task of this paper to review the various meanings and their core common sense. Trust in this case refers to trust in the state and its government in the psychological sense: reliance on the basis that one assumes fair treatment and (in the welfare state) basic state support. Loyalty is also used in a political psychology sense, as. commitment to an institution (or person) even where and when alternative options may appear preferable. 2 State neutrality and neutralization are situations where trust in, and loyalty to, state institutions and the state are not based on democratic participation or democratic legitimacy. 3 Quite contrary,
1

This assumption is based on Andrs Saj, "Government Speech in a Neutral State," Norman Dorsen & Prosser Gifford (eds.), Democracy and the Rule of Law. CEU Press, 2001, 369-389. The discussion of civil services and of neutrality in speech follow the ideas developed in that paper.
2

Here I follow Margaret Levi, A State of Trust, Badia Fiesolana, San Domenico, European University Institute, 1996 referring to Cook, Karen S., and Richard M. Emerson. Power, Equity and Commitment in Exchange Networks. 43 American Sociological Review 721-39 (1978).
3

Loyalty in this regard is described as the tie of presumptive obligation. [Stephen L. Carter, The Dissent of the Governed A Meditation on Law, Religion, and Loyalty, Harvard University Press, Cambridge, London, 1998, p. 4.] Fletcher distinguishes a special form of loyalty, notably group loyalty in political life, where a factor of ideological commitment [is added] to the emotion of attachment. According to him, political loyalties display intricate reciprocity. The leadership can act in reliance on their followers, and the followers acquire a sense of themselves as serving a goal larger than a single life. If they do not stand in a

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neutrality indicates the shortcomings of the model of political trust that is based on either democracy or primordial identity (though in certain circumstances it relies on a specific form of authority derived from the professionalism and expertise enabled by neutrality or neutral institutional settings). Section One will reconstruct meanings of the neutral state as it emerged in history, including noninterference into religion, war and the economy. The impact of equality will also be considered. These traditional aspects relate to the position of the state (government) vis--vis other social structures and other states. Section Two deals with autonomous social institutions that function as the result, or recognition, of institutional neutralization. Increasingly, in a complex modern society it is not the direct position of the state as an entity that matters for purposes of neutralization. Rather, the state as public power moves from certain public spheres and allows a certain autonomy for the regulated sphere, which is deemed neutral (not subject to direct governmental/political interference) for that very reason. The examples of science and higher education will be discussed in Section Two. Section Three addresses the specific organizational solutions used to neutralize the state. Here, neutralization is achieved through techniques that concern governmental structures. An examination of "neutral powers" and civil services is followed by an analysis of independent (expert) agencies ( organizational neutralization). The analysis refers to public media regulatory authorities and central banks. Section Four looks at the conflict between normative concepts of neutrality and the neutrality of the actual institutional arrangements. Not only do attempts at neutralization fail to meet the expectations of normative theories, but they also fail to satisfy their own promises of neutrality, professional efficiency and accountability. These shortcomings and contradictions will negatively impact the capacity of the neutral state to generate or maintain trust. Section Five offers some speculative remarks regarding the impact of neutral government institutions on public trust and loyalty. Neutralized spheres of public life remain subject to governmental and partisan influence. Nevertheless, the regulation of public life differs considerably from the use of democratically legitimized power and
personal relationship with the groups leadership, they are tied to the group by a shared understanding that they are members of the union or party, or citizens of the nation. [L]oyalty brings meaning to their lives. [George P. Fletcher, Loyalty: An Essay on the Morality of Relationships, Oxford University Press, New York, 1993, p. 33.] Needless to say, all these assumptions are to re-evaluated in the case of individual (citizen) loyalty to neutral institutions.

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authority. Hence new forms of trust and eventually loyalty to these institutions emerge, though "traditional" loyalty may suffer because of this. 1. State neutrality through non intervention 1.1. Religion The idea of state neutrality developed primarily in the context of state-church relations. Separation of church and state and the acceptance of the neutral state reflected and institutionalized the failure to structure social homogeneity around salvation. State neutrality in religious matters is the essence of the experience of fratricidal wars of religion. A minimum of social peace and homogeneity quintessential for the existence of the state could be achieved only by neutralizing the government in matters of religious (then fundamental) beliefs of the citizenry. The desire for state neutrality traces back to the period of religious wars during the Reformation. Initially, international treaties recognized that non-state religions (or at least some) would not be persecuted. (The first occurred in the Netherlands: the Union of Utrecht Treaty 1579, which granted freedom from the inquisition). Theologians and freethinkers argued that constraints in matters of faith could not bring salvation. Slowly the idea emerged that the state should exercise toleration with regard to religions given the nature of a state power that was increasingly seen as secular. John Locke offered the classic summary in his Letter on Toleration (1689).45 This toleration lead to noninterference. Though Locke does not take a position on state churches, given his view on the purely spiritual function of religion, he seems to accept total separation. The neutrality of tolerance is a matter of state competence in the sense that religion does not concern state business. In principle, the state may still take sides with one religion, without
4

John Locke, Four Letters on Toleration, London, Warwick House, New York, Bond Street.

[T]he care of the salvation of men's souls cannot belong to the magistrate; because, though the rigour of laws and the force of penalties were capable to convince and change men's minds, yet would not that help at all to the salvation of their souls.(7) In private domestic affairs, in the management of estates, in the conservation of bodily health, every man may consider what suits his own convenience and follow what course he likes best.(14) [N]either Pagans [in America], nor any dissenting Christians [in Europe], can, with any right, be deprived of their worldly goods by the predominating faction of a court-church; nor are any civil rights to be either changed or violated upon account of religion in one place more than another.(24) Neither the right nor the art of ruling does necessarily carry along with it the certain knowledge of other things, and least of all of true religion.(16) Toleration means that men are freed from all dominion over one another in matters of religion.(18) Princes, indeed, are born superior unto other men in power, but in nature equal.(16) [T]he church itself is a thing absolutely separate and distinct from the commonwealth. (13)
5

Locke excluded papists and atheists from those whose worldview should be tolerated. The reasons for such exclusion are acceptable even today, though Locke erred with regard to the factual basis of his conclusion. Following the prejudice of his times, he considered these groups to be dangerous to the state or to people of different beliefs.

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prosecuting or sanctioning other denominations, e.g., the government may declare the major festivals of a religion to be national holidays. Such state may still satisfy Lockes expectations of toleration, though it will not be neutrality in the sense of not taking sides. Of course, the religious struggles that lead to toleration cannot explain the secularization that later lead to the states indifference to religion. (One could say that state neutrality is toleration in a secular state.) Indifference or secularization as a source of neutralization is the result of changes in worldview (certainly not unrelated to religious pluralism). The advancement of learning and the increasing reliance on science and reason were important elements in the process of neutralization, in which social and political life lost "theological guidance." Carl Schmitt recognized with some resignation that life spheres are neutralized one after another, beginning with religion. 6 History is a history of the neutralization of the spiritual. The economy and science were the next to be neutralized, although the governments relation to these spheres might correspond to different understandings or patterns of neutrality. It took a long time to accept in practice the idea that the state should be neutral in matters of religion in the sense of complete separation (mutual non-interference). Only a few countries, including the United States, follow this model. Even in the United States, it was the delicate balance of religions that lead to the First Amendment, rather than a firm conviction regarding the nature of the state. State neutrality is not expressly recognized as a general constitutional principle, although it was a major trait of the self-portrait of the 19 th century liberal state. Moreover, in many liberal constitutional systems, government neutrality is textually institutionalized at least in the context of religion and churches. The non-establishment provision of the (United States) First Amendment and the provisions for the separation of church and state in many post-communist constitutions indicate the obligation of the government to abstain from matters of faith. According to an alternative formulation, government should not take sides among religions. The state maintains a certain distance from all religions, but how distant it is and whether the distance is equal to all, is a matter of contingencies. 7 In all practical forms of
6

The reconstruction of Schmitts theory is based on Carl Schmitt, Das Zeitalter der Neutralisierungen und Entpolitisierungen, 79-96, in: Carl Schmitt, Der Begriff des Politischen, Berlin, Duncker-Humblot, 1996 (1934).
7

Krystyna Daniel and Cole Durham, Jr., Religious Identity as a Component of National Identity: Implications for Emerging Church-State Relations in the Former Socialist Bloc, 117-152, in Andrs Saj and Shlomo Avineri (eds.), The Law of Religious Identity: Models for Post-Communism, Kluwer Law International, 1999.

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state neutrality, however, the minimum is that the state refrains from siding with one or another religious truth. The model of neutrality offered here is that of the neutrality of the outsider who avoids substantive involvement, and who refuses to become an arbiter or even umpire. The distancing and insulation of the state from religion was made possible by secularized modernization. Among the conditions of liberalism, neutrality applies to all beliefs. For Schmitt, the states neutrality in matters of worldview, as developed from confessional neutrality, means embracing the enemy: the nationalist inspired by national sentiment cannot be granted more protection than the enemy of the nation and that one who despises the nation.8 This cartoon neutrality drawn by Schmitt is pure falsification: in reality, the nationalist receives all the financial and moral support the government wishes to provide, especially in the case of a nationalist government. Strictly speaking, worldview neutrality is still limited to non-persecution. We will see below to what extent this satisfies more contemporary notions of state neutrality. 9 The prohibition to persecute the person who detests the nation follows from the states renouncement to follow a moral mission. Of course, there can be an ad hoc moral state goal as determined from time to time in the democratic process, but such goal would not require specific moral crusades against specific beliefs as such. (Harmful consequences of beliefs are a different matter.) A fair number of liberal (and less liberal) constitutions refer to moral goals (e.g., social justice). Such goals, however, are not to be interpreted as a mission. State neutrality as an express tenet of liberal constitutionalism remains more or less limited to religion. With regard to other patterns of behavior, including other forms of expression and beliefs, the fear of a salvation-triggered civil war was less compelling. While religion was historically too divisive to run the risk of state involvement, other personal concerns and beliefs were not held to be sufficiently central to provoke mass social resistance. Moreover, state neutrality may contradict other legitimate state goals and functions, such as national homogenization along non-religious lines. Neutrality may hamper such efforts. Of course, the closer attempts towards homogenization come to the idea of salvation, the more relevant neutrality concerns will become. In a secular world, creeds other than religious beliefs might become central (such as ethnic identity). Old arguments regarding toleration remain valid in these contexts. Governments, particularly
8 9

Carl Schmitt, op. cit. Guy Haarscher, La Laicit, Presses universitaires de France, Paris, 1998.

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to the extent to which they serve (or become the, at least temporary, tools of) political parties, may be inclined to convey ideological messages and beliefs. (In democracies where the constitutional or other institutional and social structures of separation of church and state are not well established, these messages may have religious connotations.) 1.2. Neutrality in international law A second, widely respected meaning of state neutrality emerged in international relations, again as a lesson of armed conflict. This meaning refers to the relation of neutral powers to belligerents. After centuries of uncertainty, the Second Peace Conference at The Hague10 settled the matter for some time. (It is questionable how neutrality is now relevant, given the subsequent changes in warfare. The Conventions proved to be hardly applicable in aerial warfare already in the first World War) The Hague Conventions V and XIII list the rights and obligations of both belligerents11 and neutral powers in war on land and at sea. According to the Convention [t]he territory of neutral Powers is inviolable. 12 The neutral power is obliged to assure its neutrality. However, it is not called upon to punish acts in violation of its neutrality, unless the breach of the Convention occurs on its territory. The neutral power is allowed to resist attempts to violate its neutrality even by force; however, it must apply restrictions and prohibitions impartially to both (or all) belligerents. The insulation of the neutral power is not complete. Chapter IV of the Convention prohibits the use of railway material coming from the territory of neutral powers, except when absolutely necessary. Likewise, according to the Convention Concerning Rights and Duties of Neutral Powers in Naval War (Hague Convention XIII), remaining in the ports or waters of a neutral power is not excluded, but it is limited to twenty-four hours. There is a strong emphasis on keeping the belligerent powers apart while they are on the territory of the neutral power. For example, [w]hen war-ships belonging to both belligerents are present simultaneously in a neutral port or roadstead, a period of not less

10 11

Signed - 18 October 1907; entry into force - 26 January 1910.

It would require a separate study to discuss the obligations (if such obligations indeed exists) of those parties towards whom the state or its entities are neutral. Consider for example the situation of churches. Are they required to reciprocate state neutrality? Or is it acceptable that churches make claims on the state, including the political process (how to vote?)?
12

Chapter I lists acts that are to be regarded as a violation of the neutral powers territory, like the erection of wireless telegraphy and similar apparati for communication purposes, the formation of corps of combatants or the movement of troops.

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than twenty-four hours must elapse between the departure of the ship belonging to one belligerent and the departure of the ship belonging to the other. The Convention does not only list obligations of the belligerent powers, but also the responsibility of the neutral power to maintain its own neutrality. For example, the neutral power is forbidden to supply a belligerent power with warships, ammunition, or materiel. At the same time, the neutral power may use force to impose requirements of neutrality on the belligerent power. In other words, state neutrality in war assumes a mutual but asymmetrical relation. When exercising its rights laid down in the Convention, the neutral power must be impartial, e.g., it must apply the same conditions to all belligerent powers. The concept of neutrality that emerges from the Hague Convention differs markedly from the one of tolerance in religious matters. Here it is the neutral state that is primarily protected from intervention. Further, the neutral state has a positive obligation to repel violations of its neutrality. In conditions of war, the state's position is one of isolation among equals, while the neutral state that does not interfere in religious matters lies above the denominations. 1.3. Non-interference into the economy In life spheres where the centrality of belief plays no role, government neutrality as a kind of lack of competence makes less sense. Nevertheless, beginning in the 19 th century, government neutrality went beyond religion and encompassed the economy and other selected neutralized social spheres, such as science and academia. 13 In these spheres, neutrality as non-interventionism is based on the inherent nature of government. Laissez faire economists argue on the grounds of efficiency in favor of state non-intervention. It is simply against the nature of the state to become involved in the economy. In American jurisprudence, this view prevailed in the 1905 Lochner case, where the majority of the U.S. Supreme Court found that an act of the state of New York limiting working hours for women and children was unconstitutional. The act violated the due process clause in the sense that it deprived these women of their liberty to contract. The regulation was, therefore, an unconstitutional use of the states police power.

13

See Kant, Die Streit der Fakultten, (The Contest of Faculties), in Political Writings. Hans Reiss, ed., 2 nd ed. Oxford, 1991(1798). It is quite interesting that academic freedom in Kant is justified pragmatically with the needs of the "lower" sciences (philosophy and natural sciences) to interact freely.

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According to Cass Sunstein, For the Lochner Court, neutrality . . . was a constitutional requirement. The key concepts here are threefold: government inaction, the existing distribution of wealth and entitlements, and the baseline set by the common law.14 Sunstein claims that the constitutional requirement of neutrality as inaction continues until this day, including such crucial communication-affecting decisions as Buckley v. Valeo and Bakke. The welfare state has undermined this fundamental aspiration to neutrality of the traditional liberal state. Laissez faire economists rarely claim that state intervention is immoral, although for 19th century lawyers state inaction formed part of nature. Non-interference into the economy is not based on moral considerations respecting the autonomy of a given activity (except, to a limited extent, private liberties and the existing distribution of entitlements). The government withdraws not only from production and the regulation of business; it also transfers its activities to non-governmental entities due to functional difficulties within the administration. Even after the state gave its night watchman role, neutrality remained a major concern, both within and outside the economy. Wherever the state intervened, it tried to do so without undertaking a morally partisan agenda. It followed universalistic, or at least, all-national and consequentialist policies. Economic or political (military) circumstances or electoral whim may require strong government participation in the economy: constitutions are, therefore, simply silent on the matter, or, as is the case with the German Basic Law, expressly authorize socialistic interventionism. 1.4. Equal treatment as neutrality The cult of equality that emerged following the French revolution and later towards the end of the 19th century created a different (and quite counterintuitive) expectation of state neutrality. The state is expected to treat all citizens equally, and specifically, it should not be biased on a partisan basis. While such treatment generally means equal the treatment of individuals (with variations including meritocracy), it takes a rather specific application with regard to equality among groups. Equal treatment may seem impossible where groups play a zero sum game for power. Given the quintessentially partisan nature of competitive party politics in contemporary democracies, the expectation of equality as to the results of elections seems unlikely.
14

Cass R. Sunstein, Lochners Legacy, 87 Colum. L. Rev. 873, 874 (1987). Ironically, the Supreme Court was accused, on the long run successfully, of not being neutral. Justice Holmes, dissenting, found that the majoritys decision is unconstitutional as it disregards the (economic) value neutrality of the Constitution: it adopts a specific social philosophy (laissez faire) in defiance of public opinion as expressed in legislation.

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However, as Carl Schmitt indicates using an example of Max Webers regarding public university appointments, such a biased impartiality (balanced partiality) means that competing parties should receive equal treatment in the sense of parity. This means that the state must be partitioned according to some principle of parity among the political parties or interest groups. The one group receives the privilege that it may regulate or control the part of the state that is important to itself, and it accepts through compromise that another interest group does the same with regard to another sphere. In Germany, all major churches received their share; in Austria, both the "reds and the "blacks received their fair share in civil service and state-controlled enterprises. In Italy, the public television channels (RAI) were divided according to political orientation. For Carl Schmitt, this approach meant that the state would become compartmentalized and unable to respond with a single voice to the enemy. Compartmentalization and the states withdrawal in favor of neocorporative arrangements may, however, be a way to preserve social peace and under specific circumstances may increase the efficiency of the state. 2. Autonomous Social Institutions (Science, Academia, University) It is revealing that in areas where governmental speech or partisanship are highly likely, special institutional neutrality emerges as a combination of civil service professionalism and decentralization. This tendency is noticeable in the various forms of broadcasting regulation, press subsidies and in the case of schools, or at least universities (which serve both higher education and science). The technical solutions vary. Here we look at the institutional neutrality of the communicative and knowledge-generating spheres, which is often constitutionally guaranteed. In many democracies, such guarantee is necessary due to considerable state penetration in financing and personnel (as teachers and researchers are a special category within the civil service, with specific obligations of loyalty). Communication within and, to a lesser extent, originating from public entities of knowledge production (e.g., universities, scientific institutions, the press) receives institutional protection because these entities perform special, information-related activities.15 The level of protection or special treatment may vary from country to country.
15

Schauer claims that U.S. "[u]niversities have generally been unsuccessful in gaining special rights under the rubric of academic freedom. Frederick Schauer, Principles, Institutions, and the First Amendment, 112 Harv. L. Rev. 84, (1997) 84-85. In Rust v. Sullivan the Supreme Court held that a university is a traditional sphere of free expression so fundamental to the functioning of our society that the Governments ability to control speech within that sphere by means of conditions attached to the expenditure of Government funds is restricted by the vagueness and overbreadth doctrines of the First Amendment. 111 S.Ct. 1759, 1776 (1991).

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From time to time, desperate efforts construct these institutions in such a way that renders them non-partisan and increases their neutrality both in terms of impartiality 16 and independence from the government.17 The more a self-regulating public body in a given neutral public sphere is shielded from partisanship, the more its decisions will appear neutral and less subject to political challenge. Decisions of independent self-regulating public bodies that affect communication (including resource allocations) and their statements are no longer considered government speech. According to the German doctrine, which expresses the trend the most clearly and authoritatively, the state is required to relate to science and the universities that institutionalize science in a valueneutral way. Such state behavior includes not only the guarantee of scientific (research) freedom but also the provision of the means that enable the work of science. 18 The state institutionalizes the protection of science through proper measures of organization and expenditure. In this process, the state is bound by constitutional principles: the organization must be structured in a way that enables the right to self-management for science and the academic community. The neutral obligation of the state includes the prohibition against establishing committed universities ( Tendenzuniversitt), i.e., a university that would satisfy specific social interests programmatically . Likewise, Justice Frankfurter (of which court?) held that a university ceases to be true to its own nature if it becomes the tool of Church or State. 19 Where knowledge plays a central role, it is not understood as something fixed and given but rather as a process that cannot take place under government-induced

16

Impartiality is the traditional value of judges and neutralization. Constitutional courts too rely on this judicial feature. The independence of the judiciary and the resulting impartiality serves as a model to independent organizations. Of course, courts do have discretionary powers, even where the rule of law applies. Here discretion is accompanied by a nearly total lack of external control. Where there is discretion without external control, there will be abuse. It is argued, however, that the discretionary power of the judge is used without power in the sense that it will not surpass the specific decision affecting the parties only. Legislation could (and will) do virtually anything in case it has uncontrolled discretion. If the people desire to give Congress the power to regulate industries within the state, and the relations of employers and employees in those industries, they are at liberty to declare their will in the appropriate manner, but it is not for the Court to amend the Constitution by judicial decision. * * * [T]he judicial power may be invoked to the end that the constitutional limitation may be maintained. Hughes, J. C. in Carter v. Carter Coal Co., 298 U.S. 238, 318-319 (1936).
17

Sometimes the review of a regulation affecting speech is limited to the analysis of the composition and situation of the independent body that makes allocative decisions. The German theory of art support states that here the government has broad discretionary powers, due to the openness of art. Arbitrariness is the limit. There is even more freedom of choice when it comes to acquisition of and subsidies to art. Here, the state is free to limit its discretionary powers through the establishment of expert bodies. Alternativkommentar, Bd. 1. 607 (Ladeur).
18 19

BVerfGE 35, 114. See also Alternativkommentar Bd. 1.559 (Denninger). Sweezy v. New Hampshire, 354 U.S. 234 at 262 (1957) (Frankfurter, J., concurring).

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censorship. Hence, there is a special justification for creating institutional autonomy for science. Although scholars (scientists) have long developed their own communities, these were private interactions that were not respected by the authorities and hadonly limited impact on the universities. Under the influence of enlightenment ideas, Frederick the Great authorized freedom of teaching at the Prussian state-controlled universities. Kant (Die Streit der Fakultten) offered a theoretical justification emphasizing the importance of a free academic community for the advancement of learning. While in Prussia independence from the state was at issue, in England autonomy had to be carved out from religion: Before the concept of academic freedom could gain general acceptance, however, it was necessary that education become secularized. It was not until 1826 that the first nonsectarian university was established in London. 20 In France, only under Villemain as minister of public instruction (1839-44) was a law assuring academic freedom established. Universities and science may serve society by achieving their own goals; this is possible only if the community itself is the only judge. According to John Henry Newman, The university is the place to which a thousand schools make contributions; in which the intellect may safely range and speculate, sure to find its equal in some antagonist activity, and its judge in the tribunal of truth. It is a place where inquiry is pushed forward, and discoveries verified and perfected, and rashness rendered innocuous, and error exposed, by the collision of mind with mind, and knowledge with knowledge. 21 The self-referentialism, the isolation from the state is expressed, among other ??, in the 1940 Statement of Principles on Academic Freedom and Tenure, still in force (where?): Institutions of higher education are conducted for the common good and not to further the interest of either the individual teacher or the institution as a whole. The common good depends upon the free search for truth and its free exposition. Academic freedom is essential to these purposes and applies to both teaching and research. Freedom in research is fundamental to the advancement of truth. Academic freedom in its teaching aspect is fundamental for the protection of the rights of the teacher in teaching and of the student to freedom in learning. (citation?) The insulation of universities and the academia later reached the level of formal recognition in liberal democracies in express constitutional provisions (such as the rather
20 21

Columbia Encyclopaedia, 6th ed., 2001. Academic Freedom. John Henry Newman, The Idea of a University, New Haven, Yale University Press, 1996 (1854).

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categorical Art. 5.3 of the German Basic Law) or by the extension of free speech, as in the United States. The above mentioned trends indicate that neutrality is understood here as the insulation of a self-regulating professional community . Of course, the isolation is far from complete. Academic freedom is undermined in matters of appointment and curriculum, and the state often tries to extend civil service obligations, like the loyalty oath. Further, university structures are often subject to external regulation and administrative review (e.g., Germany) and, above all, funding imposes substantive conditions. Research priorities, though often developed in cooperation with the community of scholars, are subject to politicians whims. Moreover, to the extent that autonomy is successfully guaranteed, notwithstanding normatively accepted intellectual freedom, freedom of debate and meritocracy, the internal power structures restrict genuine neutralization. Finally, although science and the scientific (or artistic) communities seem to have "natural boundaries" and the actors seem to be in the position to determine these boundaries, the actual demarkation remains a deliberate choice of those who control actual governmental and social power. For example, courts decide where academic criticism of judicial decisions ends, and where is it replaced by contempt of court. This ambivalence is reflected in the ambiguous constitutional position regarding neutrality in liberal democracies. The full precommitment (?) to independence and autonomy of universities and research is wanting. 22 How bureaucrats outside and inside universities structure higher education is decisive for the culture production within them (even if a constitutional court intervenes to protect the decisive role of senior professors). The results might be censorial or at least restrictive. Conflicting viewpoints in society are represented and reduced in the majority of the mass media, which are controlled by independent bodies, as ritualistic-symbolic disputes of the big political parties. . . . Deviant positions will be represented, . . . but only for the sake of increasing the amusement. 23 Michel Rosenfeld arrived at the same conclusion with regard to the (now abandoned) balance approach in the United States: the requirement of balance actually promotes conformity and non-controversy. . . . Any application of a 'reasonableness' standard to determine whether a given issue is

22

The same applies to neutral organizations, like broadcasting agencies or central banks. In the case of central banks, it is argued that total constitutional precommitment would prevent the possibility of crisis intervention by the executive where other than monetary policy considerations shall prevail.
23

Alternativkommentar, Bd. 1 420 (Hoffmann-Riem).

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controversial almost inevitably will make it impossible for administrators to avoid an inquiry into the content of broadcasting material. 24 Surprisingly, even in the U.S., where the Constitution is presumed to affect government behavior only, Congress and the judiciary are ready to take steps to protect or intervene into speech in non-governmental settings, at least where the space or institution was created by law or acts in its name . Decisions that affect speech, like library acquisitions by school boards and purely private parental library commissions, are subject to judicial review25 without any thought about the governmental nature of the school board. In addition, the way in which Congress established the National Endowment for the Arts rendered NEA decisions justiciable. The same is true in Germany, e.g., in the context of the Library Indexing Committee 26 or the Television Councils.

3. Neutrality from Within 3.1. Pouvoir neutre The rule of law as a fundamental component of the constitutional state has strong elements of neutrality, contributing to the depoliticization of the state. State actions as legal decisions follow pre-established rules; such rule obedience is seen as neutral. The state and its organs, the administration of justice and public administration are neutral, as they do not deviate from the norms. "Precommitted" here means neutral: the norm, the source of precommitment, is understood to be neutral from the perspective of the one who applies it. This formal approach results in the myth of the neutral state bound by law. Very often, in pure theories of law the objection of content bias of the laws is disregarded and only procedural fairness and equality of the parties in the legal process is considered. Of course, the idea of state neutrality through laws differed from the concept of neutrality within the state. This later idea of modern liberalism plays an important role in the writings of Benjamin Constant. Constant developed a concept of pouvoir neutre, in which the neutral power, as pertaining to a king (head of state), emerges in a constitutional monarchy to solve conflicts among the branches of power and social groups
24

Michel Rosenfeld, The Jurisprudence of Fairness: Freedom through Regulation in the Marketplace of Ideas, 1976 Fordham L. Rev. 877, 912 (1976).
25 26

Board of Education v. Pico, 457 U.S. 853 (1982). Mtzenbacher Case, BVerfGE 87, 130.

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.27 The ministers (the executive) are an active power with responsibility, while the king is inviolable and his neutral power is non-political. The opposite of neutrality is the active (political). The neutral power cannot annihilate the other powers; its role is to preserve the other powers. (Compare this with the concept of the French President as arbiter in the Constitution of the Fifth Republic.) The neutral power, above the common condition, remains uninvolved in the common agitation; he is impartial. 28 In the second half of the 20th century, a new institutional arrangement was developed to satisfy the needs outlined by Constant. An allegedly neutral power intervenes in the struggles of the political branches. Constitutional courts are presented increasingly in the legal and public imagery as non-partisan entities bound only by the constitution, solving partisan conflicts impartially. Looking at the political composition, activism, performance of these courts (or their equivalent supreme courts) reveals that here neutrality is confused (deliberately) with juridicization. It was not by accident that Kelsen argued in favor of constitutional courts only to the extent that these courts remain negative legislators. Constitutional courts, however, do not refrain from dictating legislation. Nevertheless, these courts contribute significantly to the appearance of neutralization. When the parliamentary political conflict is brought to the constitutional court, it will be discussed and handled in non-political terms of legal doctrine. Constitutional courts, even if they take sides or follow their own politics, operate according to precedents and legal arguments, certainly a logic alien to the idea of herrschen. Schmitt regrets that the state gives up its power to rule and dominate ( herrschen) once it accepts a neutral role. Neutralization is the lack of domination. To his mind, however, this is simply the transfer of the crucial sphere of politics from one dimension to another politics always retains its central position. To Schmitt, in politics only the relationship between friends and enemies matters. 3.2 The neutralization of the civil service The creation of a professional career civil service also contributes to the neutrality of the constitutional state. Neutrality here refers to the personnel composition of the state,
27

Carl Schmitt used this approach to justify the use of power of his client, Reichspresident Hindenburg, in his debate with Hans Kelsen. Kelsen argued that the powers claimed by Schmitt to the President shall be granted to a Constitutional Court.
28

Benjamin Constant, Principes de politique, Cours de politique constitutionnelle et collection des ouvrages publis sur le gouvernement reprsentatif , Paris, INALF, 1961 - Reprod. de ld. de Paris, Guillaumin, 1872, 19-21.

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which is made up of people who act as if they were neutral, that is sine ira et studio. Civil servants are unbiased, because of the neutral (non-political, professional, strictly public goal/public good-oriented) criteria of their appointment, carrier advancement and professional choices. The civil servant appears to be free from personal subordination and loyalty to politicians, and above partisan obligations. The state, to the extent that it is a sum of the activities of the civil service, may claim to be neutral. Organizational and legal guarantees lend credibility to this claim : such guarantees were elaborately provided in the Weimar Constitutions, and yet the Weimar civil service remained, to a great extent, loyal to the Emperor and his substitute (Hindenburg). Admittedly, where traditions and conditions are favorable, civil servants are capable of following the letter of the law, and hence act impartially and politically unbiased (organizational and personal interests aside). The internal life of modern government has been neutralized in most respects for pragmatic, not moral reasons. Certain life spheres are more resistant to political intervention, although not necessarily for liberal reasons, i.e., in the sense of freedom from the state. These reasons29 include, among others: - the neutralization of the civil service, - the cult of expertise where expertise requires independent organizations, and - decentralization. Civil service. Civil servants are loyal not to one or another party, but rather to the party in power and to the government as such. Public employees are neutral, therefore the government is neutral. The neutral image of government is built upon the silence of civil servants in public and in particular political matters. 30 Practical government neutrality is related to the modern understanding of civil service. Although public office can no longer be denied on the basis of political affiliation, as was the case in the 19 th century, the expression of political views in public employment may be restricted.31 The civil service is increasingly represented as being
29

I will not discuss the requirements of efficiency, though a non-bureaucratic professionalism is certainly required to solve a number of social problems and to produce creatively.
30

The party affiliation of employees cannot be a concern in their continuing employment; in exchange they cannot have opinions, at least not at their workplace. For them, the neutrality of government results in silence and non-partisan speech. Through the denial of speech, protection to civil servants, government and its organizations may emerge as neutral, non-party-partisan speakers.
31

McAuliffe v. City of New Bedford, 55 Mass. 216 (Mass. Sup. Ct. 1892) (per Holmes, J.). The civil service neutralization may mean today that political party membership for civil servants is prohibited. The

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impartial and non-partisan, a body which follows purely legal (neutralized) and professional considerations. In the United Kingdom, for example, public service was founded on a tradition of a permanent corps of politically neutral officers serving with equal commitment whatever party may be in political control. 32 The rules of conflicts of interest, restricting political roles and advocacy, were held as imposing a minimum (i.e., permissible) impairment on civil servants as long as participation was limited to only those types of activity which, on account of their visibility, would be likely to link a politically restricted post-holder in the eyes of the public . . . with a particular party political line.33 The image of civil service's neutral loyalty encompasses the loyal execution of instructions of political leaders and the faithful execution of laws, even if such loyalty implies the implementation of partisan politics. Decentralization also leads to increased state neutrality. Decentralization, however, is partly unrelated to the above-mentioned factors of government neutrality. For the purposes of the present discussion, it instead includes delegation and devolution. Decentralization is dictated by a variety of social needs. In the modern state, government and political power are less centralized. Centralized sovereign power is an image from Rousseaus theory of popular will or Carl Schmitts decisionism. In the modern state, there are a number of competing, parallel decision-making centers, and because of decentralization, many decisions are made at the local or intermediary level. Hence the state may speak with many voices and therefore, except in a few crucial cases, it is difficult to attribute to one or another voice full governmental authority. In many countries, judicial review (and the consequential lack of finality), federalism, and multiculturalism add to the trend. Of course, pluralism only functionally resembles government neutrality, in the sense that there is no one authoritative biased voice. Bias is plural. Limits to civil service neutrality. The depoliticization of public administration remains t uncomprehensive. The democratic process and its partisanship still prevails in fundamental matters like budgetary debates, the content of applicable laws and cases of pure power politics, as in international (foreign) relations. Here a crucial element of
European Court of Human Rights found such political rights restrictive prohibition necessary for European democratic societies (Ahmed, Rekvnyi).
32

Report of the Widdecombe Committee (1986), par. 6.180. As quoted in the Case of Ahmed and Others v. The United Kingdom, ECHR Judgment of 2 September 1998, Reports 1998-VI, par. 9.
33

Case of Ahmed and Others v. The United Kingdom, ECHR Judgment of 2 September 1998, Reports 1998VI, par. 63.

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political and even ideological bias may prevail even through the formally neutral activities of the civil service. Democracy remains an archenemy of neutrality in civil service, as illustrated by the spoils system that (in altered forms) remains inherent in modern democracy.34 Neutralization through professional civil service is further limited as, contrary to the promises of the rule of law, most administrative decisions, especially those that affect communities in a substantive way, remain discretionary. Such discretion is mildly tempered by professional expertise: interest group politics will be presented in neutral professional terms. In reality, public decisions are biased and partisan, following the needs of interest groups, even if actual decisions are compromises that take into account the interests of other parties. Not even judicial decisions satisfy the promise of neutrality of the "paragraph automaton." In the U.S. in particular, state judges are subject to ordinary democratic power politics, as they are elected according to political considerations. They thus must consider political and personal expectations if they wish to be reelected. These trends work against neutralization, though there arenew trends that might counter them. After all, if the law cannot determine a civil servants decision, this will not render it a political or politically-biased choice per se. Public bodies and administrative organizations still maintain insulating effects, allowing the civil servant to decide based on professional and expert consideration. Such insulation, therefore, helps to avoid the partisan bias built into the law. The civil servant who acts according the dictates of scientific management will be impartial and professional. Professionalism and impartiality offer neutrality. Further, to the extent decisions are based on technological or scientific considerations, they will have all the neutrality of science and technology. (It is not by accident that in the New Deal the representatives of scientific management in public administration opposed law-based restrictions which were openly held to be biased.) In the aftermath of WWII, and later during the Vietnam War and the 1968 rebellions, a new anti-authoritarian neutralization emerged. Public sentiment required that even in law one should respect peoples freedom to choose their own values. 35 Philip K. Howard summarized the judicial trend that seems to prevail since the 1970s: Justice is
34

Even in 1883, when the US federal public administration finally begun its professionalisation with the Peddleton Act, only ten per cent of public employees were career bureaucrats, while the rest remained political appointees.
35

Sandel, Democracys Discontent Cambridge, Mass., Belknap Press of Harvard University Press, 1996, 8.

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neutral, or it is not justice. 36 The Supreme Court of the United States is inclined to recognize neutrality as a fundamental legal value: One century ago, the first Justice Harlan admonished this Court that the Constitution neither knows nor tolerates classes among citizens. Plessy v. Ferguson (dissenting opinion). Unheeded then, those words now are understood to state a commitment to the laws neutrality where the rights of persons are at stake" (Romer v. Evans, 116 S.Ct. 1620). 3.3 Independent (Expert) Agencies State neutrality is increasingly provided by creating neutral (politically nonsubordinated) organizations within the public administration. This trend is rooted in the growth and cult of independent expert bodies. It goes further than civil service where only civil servants are expected to operate neutrally, but public administration organizations remain politically controlled, subject to political goals. In complex societies, many traditional governmental functions and spheres of governmental action were transferred to independent organizations, which were legitimated in terms of their expertise. Contrary to institutional neutralization, where experts are responsible for their own communicative sphere that performs a public function, the independent expert bodies (independent agencies) perform public functions (supported by government authority, in the name of the state)37. This form of neutralization relies on special techniques of organizing the public body, therefore it is called organizational neutralization. Besides the legitimization arising from expertise and independence, these organizations and institutions satisfy the need for mediation between the distant state and society. As Robert Nisbet and others have urged, the importance of mediating institutions families, churches, . . . etc. increases with the increasing scale of government institutions. The government-created mediating institutions may serve similar goals . . . And such mediating institutions not only serve the purposes of pluralism . . . they may also act as a buffer against the excesses of overreaching government.38

36 37

Philip K. Howard, The Collapse of the Common Good, New York, Ballantine Books, 2002 (2001), 40.

It is relevant that independent agencies were originally designed to be exempt from executive control. The Federal Trade Commission is one such creature. See Humphreys Executor v. U.S. 295 U.S. 602 (1935). This understanding differs markedly from the one voiced by the Council of Europe, which denies legislative oversight. Note that the characterization of agencies as executive or independent follows ad hoc political decisions. See Peter L. Strauss, "The Place of Agencies in Government: Separation of Powers and the Fourth Branch," 84 colum. L. Rev. 573 (1984). This ad hoc nature becomes even more obvious if one looks at the existing categorization in a comparative perspective.
38

Mark G. Yudof, When Governments Speak: Toward a Theory of Government Expression and the First Amendment, 57 Tex. L. Rev. 863, 912-917 (1979).

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Determining immune institutions or spheres of government neutrality is, however, left overwhelmingly to legislation that often follows a logic completely different from that of institutional neutrality. Quite often politicians seek to avoid responsibility. Public bureaucracies might resist the controlling interference of the political branch. In other cases, actors of the social sphere mounted sufficient resistance to government interference. (The abolition of formal, and to a great extent indirect, press censorship is a good example.) However, these choices are not accidental. Generally the withdrawal of the state from certain public domains is determined by major performance failures. 3.3.1 Broadcasting regulatory bodies Broadcasting regulation by independent regulatory agencies exemplify a relatively recent attempt to neutralize the state. Here, various institutional solutions guarantee the independent or otherwise neutral handling of broadcasting-related matters. 39 This is done "officially" in order to avoid politicization, or because the public interest cannot be served well in a partisan manner. The actual solutions include quasi selfregulation of the concerned, non-governmental bodies as decision-makers, political partition,40 and insulated independent governmental bodies. Further, as in the case of Britain, the official expectation is that the bodies selected by the executive will not be subject to pressure from it nor will they be politically committed to the government of the
39

For a review of regulatory approaches see Wolfgang Hoffmann-Riem, Regulating Media: The Licensing and Supervision of Broadcasting in Six Countries, New York, Guilford Press, 1996, 119. Although this paper does not address the reality of neutralization of the state, in discussing organizations for a fair and independent media sector, one should call attention to the possibility that such neutrality might serve non-partisan social domination or one that is not based directly on government support. Loyalty to the state differs under these circumstances: it will be loyalty to a state that accommodates domination. In this reading, neutrality creates the emotional opportunity of non-exclusion; hence the loyalty of the dominated towards the (neutral) state. Consider the following explanation: Commitment to public service modes of provision and high degrees of government regulation traditionally have characterized broadcasting policy in Europe. From the 1920s, PSB [Public Service Broadcasting] in Europe developed alongside the growing corporate state. Indeed, in Ireland, as in Great Britain, PSB anticipated Keynesian policies and Fordist 'accumulation strategies' that Western European governments formally adopted after World War II. PSB can be seen as one of the many government instrumentalities, such as mass education and the institutions of welfare, through which the capitalist state exercises its hegemony via what Bob Jessop has called a 'national-popular program,' [Bob Jessop, State Theory: Putting the Capitalist State in its Place, University Park, Pennsylvania State University Press, 1990, 98, 211] which he defines in terms of hegemonic projects. Jessop distinguishes between 'one nation' and 'two nation' hegemonic projects where one nation strategies aim at an expansive hegemony in which the support of the entire population is mobilized through material concessions and symbolic rewards (as in social imperialism and the Keynesian welfare state projects). Although this 'one nation' project is primarily ideological, it may also have some material base in structures of political clientelism and corporate welfarism. Through these discourses and structures, subordinate classes are integrated into a political and cultural consensus forged in the long-term interests of the ruling classes of particular countries. Desmond Bell, The Corporate State and Broadcasting in Ireland: a National-Popular Program, 11 Cardozo Arts and Entertainment Law Journal, 337, 346-347 (1993).
40

This was the case of the Italian public television (RAI), with one channel per major political party in Parliament. Interestingly, this arrangement is advocated currently in Hungary by the opposition.

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day, but will rather follow strictly professional considerations. In other models, professionalism is less expected, except regarding bodies that deal with allegedly technical matters. (Of course, the choice regarding the applicable industrial standard is not neutral-technological, but it will reflect interest groups politics. 41) The same applies to increasing the number of available frequencies. It is true that under ordinary circumstances these decisions are only indirectly political; they do directly affect economic interests. But in the context of broadcasting and information transfer, economic interests are intimately associated with political interests. Further, the apparently technical choice to open the airwaves to commercial or foreign broadcasters directly impacts the possibilities for government mind control. The enormous difficulties encountered in opening the market in India serves as on such example. 42 Such decisions for privatization are neutralizations per se, even if they allow for alternative biased voices. The various models show historical responses to very different social and political settings. Nevertheless, it seems that in this area, neutralization (relying on different organizational solutions) became the norm. Broadcasting becomes socially respectable because of the obvious (though deliberately not perfectly successful) effort to keep it out of strict governmental control. Recently, in Europe and Asia, privatization (in the sense of allowing private and international programs) did allow neutralization of the communicative sphere. Licensing offers a new opportunity for hidden political control. Of course, neutralization through independent regulatory agencies is one step away from institutional neutralization. As privatization indicates, the two solutions represent a continuum where actual solutions overlap. Broadcasting might be left to selfregulation, even where there are independent regulatory agencies. The industry defines broadcasting. There remains little need for neutralization, as the government is not directly present. A number of ways still allow the political establishment to influence the architecture of broadcasting, including political and governmental taboos, the exclusion of certain voices, and opportunities of access. The American understanding of broadcasting regulation is one of self-regulation. Formally, broadcasters depend on the incredibly sweeping power of the Federal Communications Commission (FCC), that in principle, and certainly subject to restrictions of administrative procedure and judicial
41

Even in Germany, where the media was not directly accessible to the political parties, the Social Democrats could delay the operation of private channels and structure the media landscape by resisting cable and supporting satellites. Allegedly neutral antitrust (competition) regulation is one of the ways to influence private media politically.
42

See Nikhil Sinha, Doordarshan, "Public Service Broadcasting and the Impact of Globalization: A Short History," 5 Cardozo J. Intl & Comp. L. 365.

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review, may do whatever it finds necessary, as public convenience, interest, or necessity requires, to license, supervise and regulate radio stations (Communication Act, 1934, 47 U.S.C. 303.)/ During the period of 1929-34, when the FCC was created, formal neutrality was not yet a major concern. Created under the spell of scientific management, the FCC was established as a bipartisan agency, though an independent one with unlimited mandate. The assumption was that such enormous power would be used according to professional criteria. The commission was, however, created at a time when the industry was already well established as a powerful force that could not be disregarded. The FCC, as formally determined by law, is hardly a neutral institution given the clearly political appointment of commissioners, though the regulatory procedures adopted by the Commission, allow for professional (industry) comments. This arrangement makes the body less political than its formal mandate. The built-in political bias was hardly ever used systematically for partisan politics, perhaps because of the overwhelming power of the industry that could not tolerate it, and/or because the existing arrangements were politically satisfactory for the major political parties who could get sufficient effective access. The neutralization was further reinforced by the attitude of the judiciary.
The historic aversion to censorship led Congress to enact s 326 of the Act, which explicitly prohibits the Commission from interfering with the exercise of free speech over the broadcast frequencies. Congress pointedly refrained from divesting broadcasters of their control over the selection of voices; s 3(h) of the Act stands as a firm congressional statement that broadcast licensees are not to be treated as common carriers, obliged to accept whatever is tendered by members of the public. Both these provisions clearly manifest the intention of Congress to maintain a substantial measure of journalistic independence for the broadcast licensee. * * * In this structure the Commission acts in essence as an overseer, but the initial and primary responsibility for fairness, balance, and objectivity rests with the licensee. This role of the Government as an overseer and ultimate arbiter and guardian of the public interest and the role of the licensee as a journalistic free agent call for a delicate balancing of competing interests. Moreover, the Commission [declines] to command particular action because it fell within the area of journalistic discretion.43

The judiciary upheld FCC regulations that required balanced (fair) access, increasing impartiality as a professional expectation. However, when the FCC abandoned its fairness rule, legal efforts to make fairness a legally-binding requirement failed as a constitutional requirement both in court in Congress. Fairness (as a form of internal neutrality) remains the professional standard. In Europe remains legally mandated: it is believed that broadcasters shall ensure that news fairly present facts and encourages the free formation of opinions (European Convention on Transfrontier Television).
43

CBS Inc. v. Democratic Nat. Committee , 412 U.S. 94. (1973), Burger CJ.

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The German model deliberately excludes government authorities from the operation of public broadcasting. Though a broad selection of social groups (from trade unions to churches) are represented in the governing bodies of the channels, political parties and representatives of government (political branches) are prohibited from participating. It is expected that the organization provides sufficient assurance that all socially relevant interests would have the opportunity to express themselves (First Television Case, Kommers, 1st 406.). Needless to say, it is the legislator who defines the socially relevant interests. (This selective corporativism 44 applies e.g. in the case of library commissions censoring books for the protection of the youth, see the Mtzenbacher case). The socialization of the media is justified as follows: Article 5 of the Constitution requires that this modern instrument of opinion formation should neither be at the mercy of the government nor of one single social group. (12 BVerfGE 205, 260 (1961)). The social pluralism approach applies to private broadcasters as well, which are therefore subject to structurally provided fairness. It should be added that the fairness and pluralism that is required in Germany is, first of all, dictated by another neutral institution, namely the Constitutional Court. Such a level of neutralization is a historical accident of military occupation (an interesting source of neutrality, indeed). 45 In Germany, intervention into the marketplace of ideas occurs within the context of the activities of presumably neutralized bodies. Governmental agencies and political parties may not interfere in broadcasting; 46 public and private broadcasting are supervised
44

Such corporativism would be unacceptable on constitutional grounds in the United States, where the Constitution mandates that any officer exercising significant authority pursuant to the laws of the United States [Buckley v. Valeo, 424 U.S.1, 126 (1976)] must be appointed by the President with the advice and consent of the Senate.
45

Peter Humphreys, "The Goal of Pluralism and the Ownership Rules for Private Broadcasting in Germany: Re-regulation or De-regulation?" 16 Cardozo Arts and Entertainment Law Journal, 527, 530. (1998): The accountability mechanisms for German public broadcasting are rather unique. They originated in the Western Allies policies, immediately after the Second World War, to ensure that broadcasting in (West) Germany should be decentralized and controlled pluralistically. The post-war German elites, too, accepted that broadcasting should be controlled in a way that safeguarded its independence from the state (the hallowed principle of Staatsferne, literally 'distance from the state'). They also accepted the fact that the mass medium should on no account fall under the control of any powerful social interest or interests. Formally organized as corporations under public law (Anstalten des ffentlichen Rechts), Germanys public broadcasting institutions are classic examples of distinctly non-state, non-market media. They have been controlled by internal broadcasting councils (Rundfunkrte)--or, in the case of the ZDF, by a television council (Fernsehrat). These internal regulatory bodies have each contained representatives of the countrys 'socially significant groups' (sozial relevante Gruppen): i.e., cultural bodies, churches, employers associations, trade unions, and so on, alongside directly political representatives. This kind of 'internal control' (Binnenkontrolle) of the broadcasters is designed to guarantee the balanced and diverse character-the 'internal pluralism' (Binnenpluralismus)--of their programming. The state in Germany only exercises a background regulatory role through the enactment and limited supervision of broadcasting laws. Yet, this activity too is decentralized; broadcasting legislation and supervision is covered by the 'cultural sovereignty' (Kulturhoheit) of the constituent federal states (Lnder) of the Federal Republic.
46

In Germany, there are a few important direct restrictions on government regarding speech, primarily due to Nazi abuse of the governments broadcasting monopoly for government propaganda.

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by delegates of non-governmental, socially representative bodies. The legislature of the German Lnder has the power to shape broadcasting by determining the social forces that may participate in the supervisory board. France represents the attempt to create an impartial, independent government agency to guarantee neutralization of the broadcasting regulatory sphere. 47 The Conseil suprieur de laudiovisuel has nine members appointed to one six-year non-renewable terms; one-third of the members are renewed every three years. Following the model of the Conseil constitutionnel, three of these members are appointed by the President, three by the President of the Senate and three by the President of the National Assembly. The political influence is clear, though cohabitation and staggering renewals may render the political orientations somewhat balanced. Members are subject to strict conflict of interest rules, including all elected positions. The CSA appoints the presidents of public broadcasting companies, grants and supervises private licenses, and advises the government on legislation concerning the broadcasting sector. A similar solution exists in Romania48 as well as in Poland, Hungary, etc. None of these countries was spared major scandals regarding the activities of the Council. Accusations include violation of conflict of interest rules, political rigging of licensing, and failure to intervene in the case of unfair political news (biased in favor of the ruling government). Notwithstanding these scandals and other obvious shortcomings, the European ideal is an independent broadcasting agency that is not responsible to any political branch.49 As is to be expected in any serious contemporary neutralization venture, the European standard requires that the regulatory authority operate in an effective, independent and transparent manner with professional expertise.50 The neutralization means the guarantee not only of the financial independence of the organization but also of the personal independence of the members of the authority so as to protect them against
47 48

The system goes back to loi du 30 septembre 1986. Romanian Law on Radio and Television Broadcasting.

The Law no. 48 / May 21, 1992 Art. 25. (2) "The members of the Council shall be warrantors of the public interest in the audio-visual domain of radio and television, and they shall not represent the authority by which they had been appointed. (7) The members of the National Council of Radio and Television shall be revoked by the appointing authority in case of infringement of the present law, or of commitment of criminal offences." The Act is supposed to be replaced in the process of the EU accession.
49

Recommendation Rec(2000)23 of the Committee of Ministers (Council of Europe) to member states

on the independence and functions of regulatory authorities for the broadcasting sector (Adopted by the Committee of Ministers on 20 December 2000 at the 735th meeting of the Ministers Deputies)
50

Considering that for this purpose, specially appointed independent regulatory authorities for the broadcasting sector, with expert knowledge in the area, have an important role to play within the framework of the law.

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any interference, in particular by political forces or economic interests. Dismissal is practically prohibited.51 Accountability is granted through transparency, which is provided by regular reports and duly reasoned decisions open to review by the competent jurisdictions and made available to the public: [Paragraph 26]: In order to protect the regulatory authorities independence, whilst at the same time making them accountable for their activities, it is necessary that they should be supervised only in respect of the lawfulness of their activities, and the correctness and transparency of their financial activities. With respect to the legality of their activities, this supervision should be exercised a posteriori only. The regulations on responsibility and supervision of the regulatory authorities should be clearly defined in the laws applying to them. Nevertheless, in England, it is judicially that the Radio Authority, an independent expert commission, should be left with a large measure of discretion, because the regulatory authority is likely to have particular expertise in the field. 52 This alleged neutrality helps to satisfy aspirations of market correction. The mandate to make such corrections was not granted to the winner of the democratic election but rather to a permanent body of government, i.e., the civil service, or to nongovernmental agencies representing expertise and society. 53 3.3.2. Central Banks This subsection will consider how organizational neutralization operates in one sphere of the economy. As in the case of the media, here we confront a social system that operates rather independently from the state. Nevertheless, the state has fundamental societal, as well as partisan, interests to interfere into these spheres. Such intervention must satisfy conditions of neutrality, though within limits (i.e. much less in the areas of redistributive politics). To illustrate the states attempt to satisfy the neutrality requirement, I refer to a relatively new phenomenon that emerged in the past two decades: the independence of central banks is a recent development in the process of state neutralization. Interestingly,
51

It is quite telling that an Council of Europe expert group criticized the draft Romanian law, which would submit the Broadcasting Council to parliamentary control to the extent that the repeated rejection of the council's annual report would give opportunity for parliamentary dissolution. Report of the Council of Europe Expert Mission 5-6 February 2002.
52 53

R. v. Radio Authority, ex parte Bull and another [1995] 4 All ER 481, QB (Kennedy L. J.).

One should add that this is no longer a centralized Prussian bureaucracy; it is now subject to politicaldemocratic and judicial control. Although one should keep in mind that the judiciary has no mandate, desire, or standards to review bureaucratic decisions shaping the public discourse, or the activities of nongovernmental public bodies, which bring corporative elements into the complex situation.

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the proliferation of the idea goes , hand-in-hand to some extent with that of impartiality in media regulation.54 (Kartellamt might be another example.) Allan Drazen55 argued recently that once one reflects the process of policymaking in a democracy, strongly independent monetary policy is not inconsistent with democratic control of policymaking. We further argue that the conflict between popular sovereignty and policymaker independence is not unique to monetary policy, but actually characterizes most policymaking in a democracy. Moreover, institutions we associate with democracies have been created specifically to address this conflict. In modern democracies, most policies are chosen by institutions with some degree of independence, that is, insulation from popular pressure. Although such policy-making institutions are not necessarily fully neutralized in the sense of being exempt from political (power) influence, at least they are insulated visa-vis the democratic process. Of course, such insulation may also allow elected officials and government bureaucracies to exercise influence, and in principle, to exert more political (including interest group) influence than in a transparent democratic setting. As Posen indicates, the concept of central banks as independent agencies is spreading around the world:

54

There were isolated special experiences (the US Federal Reserve in banking, a system established in 1913; the BBC and various British broadcasting regulatory authorities, as to broadcasting) to meet such requirements already before World World II. After WWII impartiality in institutional broadcasting impartiality emerged in Germany, partly through the decisions of the Constitutional Court, beginning in the nineteensixties; parallel to the independent activities of the Bundesbank, rooted in legislation of the 1950s; and gaining reputation a decase later. One could say that German institutional neutralization was the result of deliberate constitutional design that was not triggered t by simple failure of politicians. Political 'failure' means constant delegitimizing scandals and non-performance where outsiders and the public, and to some extent parliamentary opposition, successfully blames the political arrangements. One way out is neutralization. In Germany, there was a systemic failure, the Nazi regime that shaped public thought as an Urtrauma. Another example was the widespread impact of post-war inflation; in the media the systematic failure was Nazi propaganda. This is not to say that the political powers did not try to change these arrangements, as happened with Adenauers attempt to create a government-controlled national television. This was resisted by institutional actors. Overwhelming power politics considerations may still prevail against the independent institution, as is illustrated by Chancellor Kohls victory over the Bundesbank and the Council of Economic Advisors in the GDR Mark exchange case. Here, Kohls desire for the speedy reunification that promised his reelection prevailed.) In the third stage, ordinary political scandals were sufficient to move towards neutralization, which often was originally only a new attempt of the political power holders to exercise control. This was the case with the French Constitutional Council, which was designed by De Gaulle as his personal cannon aimed at the legislative branch. (The Council was composed of politicians loyal to De Gaulle.) Likewise, the French Audiovisual Council seemed to serve the government's specific interest in privatization of electronic media. Once these arrangements received legitimacy through increased independence, and resulting in a less biased performance, the conditions for model distribution (model imitation) were set. This begin probably around the late 1980s, partly through international organizations. To some extent, especially in the EU accession countries, the matter was one of simply following the model, without a specific neutralization process. The actual neutralization (and reversal) occurred once the institutional (formal) setting was present. (The Belorussian Bank scores very high on formal indicators of independence.)
55

Allan Drazen, "Central Bank Independence, Democracy, and Dollarization," 5 Journal of Applied Economics, 2 (2002).

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The worldwide trends towards central bank independence has shown no signs of abating over recent years, and seems itself to be independent of whether or not countries adopt inflation targeting or other monetary transparency measure Independent central banks have gained in stature around the globe as they have delivered low inflation, been perceived as necessary (in the EU and the accession countries, the Maastricht Treaty makes that necessity a legal requirement, as do some instances of IMF conditionality), and benefited from the erosion of support for elected officials economic authority (e.g. in Japan). Few legislative powers have been enacted to keep up with this trend, and transparency alone has not checked the exercise of central bank discretion beyond what accountability would ideally bear.56

The independence and neutrality of the central bank is certainly not a development that is required by any traditional separation of powers doctrine of liberal constitutionalism. In fact, it is not fully constitutionalized even in the former socialist countries where the formalization of such independence went perhaps further than elsewhere.57 One could say that such neutralization contradicts the traditional doctrine of parliamentary sovereignty in financial matters. On the other hand, as follows implicitly from Geoffrey P. Millers argument (see below), in a democratic (vote-maximizing) system it is a necessary precommitment. The most credible political precommitments of the political elite pertain to the constitution. The independence of a price-level controlling central bank imposes a certain limit on the revenue raising and spending power of the state. Precommitment is necessary because otherwise the incumbent party may engage in stimulative monetary policy in the period immediately before an election, in order to increase economic activity, raise employment, and create a strong, if temporary, sense of well-being among the voters.58 (The Hungarian government used a variation of this approach that systematically and deliberately underestimated future inflation; the revenues therefore were higher; this revenue could have been spent in a rather discretionary way by the cabinet.) In this paper, the ideal of central banks as a neutral institution is primarily based on the example of the European Central Bank (ECB). 59
56

Adam Posen, "Declarations Are Not Enough: Financial Sector Sources of Central Bank Independence," NBER Macroeconomics Annual 253., 20 (1995).
57

In the parlance of economists, this difference (i.e., whether independence of the central bank figures in the text of the constitution) is purely technical. Stable or permanent political precommitments are all considered contracts; constitutional transfer of authority is discussed in terms of "delegation contract." See Paolo Giordani Giancarlo Spagnolo, "Constitutions and Central Bank Independence: An Objection to McCallum's Second Fallacy," SSE/EFI Working Paper Series in Economics and Finance, No 426 (2001) http://swopec.hhs.se/hastef/papers/hastef0426.pdf.
58

Geoffrey P. Miller, An Interest-Group Theory Of Central Bank Independence, 27 Journal of Legal Studies 433, 436-7 (1998). See further Alex Cukierman, Central Bank Strategy, Credibility, and Independence: Theory and Evidence, Cambridge, Mass. and London, MIT Press, 1995.
59

Of course, the ECB is a special case, as its neutrality is enhanced by an international institutional vacuum. In a sense, the mutual mistrust among the member states resulted in unchecked powers of the ECB. Further, contrary to a national bank, there is simply no available institution that could have exercised governmental influence. Although the ECB is a special, perhaps extreme case of central bank independence, it is undeniable that the last two decades have seen a general movement towards the independence of the central bank. Not only the former planned economies accepted the independent central bank model, but even Japan

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The ECB is, of course, one possible model. The alternative is represented, among others, by the Bank of England (post-1997 reform), the Bank of Canada, the Swedish Riksbank, and the Reserve Bank of Australia. Here, the medium term inflation target is (still) set by politicians. That allows politicians to factor in other economic considerations (the considerations of ordinary interest politics). In this case, the neutralization facilitates an easier disguise of ordinary politics, as the executive determination of the target will be seen as the activity of the independent agency. Beyond the issue of target setting by elected officials, there seems to be some basic consensus in the economic literature (and increasingly in light of comparative legislation) regarding essential features for central bank independence. These features generally include independence in personal matters, financial autonomy, and policy. (The similarities with broadcasting regulation are remarkable.) [P]ersonnel independence refers to the influence that government has in appointment procedures. Various criteria are relevant here, like governmental representation in the governing body of the central bank, appointment procedures, terms of office and procedures governing dismissal of the board of the bank. It is somewhat exceptional that the Governor of the Reserve Bank of New Zealand can be dismissed if he fails to perform adequately the policy targets agreed between him and the Minister of Finance. The central bank's financial independence means that the government cannot finance its expenditure through credits (other than through the bank). Policy independence is related to the room for maneuver given to the central bank in the formulation and execution of monetary policy. 60 Though in terms of appointment the central bank is not fully depoliticized, the formal professional requirements (and perhaps informal pressures coming from the financial (banking) community reduce the political element. The decision-making is based solely on professional criteria within the neutral, statutorily-defined goals of the central bank. (Such goals are preeminently price stability, an allegedly "objective" expectation.) In reality, the central bank's policy-making power may considerably depart from the rest of the political system, especially if it has full authority over both goals and means. The decisions of the central bank are presented as purely professional, as if the means or even goals would be taken for granted or at least subject only to professional disagreements.
and England moved in this direction in 1997. One could say that the fullest recognition (and consequently the largest autonomy) is granted to the European Central Bank.
60

Jakob de Haan and Sylvester C.W. Eijffinger, "The Democratic Accountability of the European Central Bank: A Comment on Two Fairy-tales," 38 Journal of Common Market Studies 393, 394-395 (2000).

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The independence of the central banks gives rise to the standard concern of accountability. This concern is aggravated in the case of the European Union, where the democratic deficit of the ECB is even more pronounced than in the case of other institutions.61 The ECB has no parliamentary or governmental control, understandably, as there are no efficient EU institutions to qualify as legislation. Further, the appointment to the governing bodies is only very remotely connected to the democratic process.) Institutional neutrality and integrity are assumed to require non-interference, including a lack of accountability (as calling to accounts is presented as ex-post interference or preemptive action). Such conditions call for transparency, at the very least (for example, keeping meetings of the Federal Reserve Board accessible to the public). 62 Alternatively, decisions should requireexplanation, which, though not subject to further discussion, satisfies a specific expectation of accountability: to account is to explain. Transparency is, however, a very poor proxy for accountability, in fact transparency does not seem to have much effect on it. In other words, it will not result in any traditional form of external control that would undermine the independence and resulting neutrality of central banking. Transparency is merely a channeling of information that to some extent may help the bank to guide market behavior through signs other than the interest rate. Information, like the statements and targets of the board of directors, is disclosed to allow market actors to mimic the bank's future behavior. One may even suggest that voting divisions (and perhaps separate opinions) of the central bank's board of governors be published. 63 It
61

Any additional integration at the European level, and perhaps even the current level of integration, might be seen as puzzle of neutralization. Why would member state politicians agree to relinquish powers to a body that is allegedly independent of (most of) them . Are executives better off? Unlikely, as they control parliaments in any case. Certainly they are less accountable to public opinion, as decisions are taken elsewhere. Why does the public acquiesce? Perhaps because citizens feel that they already lack power. One may trust nonaccountable second-rate bureaucrats in Bruxelles more than one;s own elected representatives and accountable civil servants who are here face-to-face, as these latter are subject to interest politics. That decisions in Bruxelles are also subject to such interest politics is less known; it is more industry-wide interest politics that prevails there rather than that of local monopolists and politicians interested in vote maximizing and direct support of interest groups expecting some kind of quid pro quo.
62

The Board conducts its meetings in compliance with title 5, section 552b, of the U.S. Code, known as the Government in the Sunshine Act. Materials since 1996 are available online. As to the Federal Open Market Committeee, its transparency is provided at least since 1979: 12 CFR 261b; as amended effective February 26, 1979.
63

Since April 1998, the Bank of Japan publishes board votes, minutes and official forecasts.

The idea that internal divisions be made public is in line with what happens in common law courts and most continental constitutional courts. The French Conseil constitutionnel, the European Court of Justice and the Italian Constitutional Court are important exceptions. Continental regular courts hardly ever publish divisions behind the judicial decision. The standard argument is that tdisclosure of such division diminishes its authority. Of course, to the extent that there is appeal, to hope that justice speaks with one voice is illusionary, and one cannot expect that this will be seen as a source of legitimacy enhancing neutrality. On the other hand, it is true that visible divisions within constitutional and supreme courts are often interpreted as political. It takes much neutralizing (by scholarly writing) to reshape these divisions into doctrinal and

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is argued, however, that transparency might be counterproductive, as it would disclose internal divisions (and that therefore voting should not be disclosed). In reality, such disclosure undermines credibility based on the myth of professionalism. If there were alternatives other than the decision taken, then the bank's actions are not necessarily a professionally uncontested and, therefore, legitimate. Of course, this kind of legitimacy argument is not made; instead, secrecy is justified by the danger that the availability of information would diminish the impact of the banks measure. But the assumption of expert agreement64 is a central one in justifying the independence of central banks:
[W]what makes monetary policy different is the ability of different interest groups to agree on what monetary policy that is not short-sighted would look like. It is this second aspect, the ease of concurring in disinterested monetary policy, that is special. If policymakers were somehow able to constrain themselves to choose monetary policy always for the common good, there would be agreement: on the problem of inflationary bias [etc]. It is this characteristic, I argue, which explains why societies are willing to turn over monetary policy to an independent authority65

In reality, as David A. Levy argues, monetary policy formulation is far from scientific and objective.66 In any case, a clear commitment to targets increases the possibility for oversight. Such a rule-oriented system becomes allegedly less flexible in responding to economic events. Adam S. Posen adds, however, that the theoretical prospect that central banks might be unduly constrained by explicit inflation targets or other forms of disclosure, however, does not mean that they inherently must be or that they in fact have been so

precedential differences. This stylistic exercise is facilitated, however, by the political illoyalty of the supreme justices, who tend to break with those who appointed them. This might have to do with aggrandizement , the loss of control, or a lack of loyalty from the beginning (the appointee being a simple opportunist), or with the nature of interaction within the new organization. Whatever the motives, they contribute to the neutralization through independence.
64

Note that though Federal Reserve Governors are appointed by the president and confirmed by Congress, the regional Federal Reserve Bank presidents who serve on the Federal Open Market Committee are appointed by the board of directors, who are largely the choice of bankers (?). Here, we near the selfregulation of the life sphere, a different model of neutralization that is exemplified by science. It must be added that though this is a possible model, it is not the one that became predominant in contemporary central bank regulation.
65

Drazen, op.cit. p.8. To the extent that one can take this statement to be characteristic of the economist and economic policymaking community, it is easy to see that the same exclusionary professionalism serves as the basis of neutrality. Trade unionists (labor representatives) would probably take a very different view on the proper policy. But they are excluded from policymaking. Once the policy-making constituency is determined on the basis of homogenizing professional criteria, there will be an "ability of the different interest groups to agree.." Neutralization once again presupposes effective selection of "interest groups." Loyalty to social subsystems (as a result of the interaction of those involved: here, the banking and financial community) is a special problam that cannot be explained in terms of general loyalty to ones state or political community.
66

David A. Levy, "Does an Independent Central Bank Violate Democracy?" Working Paper No. 148, November 1995, http://www.levy.org/docs/wrkpap/pdf/148/pdf p. 5.

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constrained.67 Posens summary of findings on show that the nature of central bank decisions are far from guided by certainty, although political (partisan) bias is not among these uncertainties. Posens summary regarding the emergence of independent central banks contains many of the elements we have identified so far for neutralization: - the failure of politicians, and resulting distrust of such politicians by powerful economic interest groups; - the belief that the matter (price control) can be handled according to professional canons (see Drazen), which are only disrupted by political partisanship and external considerations (including conflicting economic and social goals, like fairness in income, poverty alleviation, economic growth, etc.); - the imitation/imposition of the "neutral solution" in an international system (meaning that the conditions for neutralization do not have to actually exist in every political system, where it occurs). The failure of politicians, however, insufficiently explains the resignation of political power. It is somewhat nave to say that there is a vested social interest in keeping inflation under control, that low inflation (price stability) is a quintessential public interest shared by all, and therefore intuitively, like with primary education, everyone should accept it. Such shared need (if it really exists) was present throughout in history, but it did not emerge like the acceptance of the need of public education or public roads (which, too, are highly problematic). Compelling as it may be, the normative justification for independent central banks as inflation control mechanisms does not explain why independent central banks are created in the first place. 68 Politicians follow short-term interests, their time span determined by reelection (their interest to save the stability of their monetary assets is secondary to the reelection interest). Short-term electoral interest very often pushes towards inflationary politics. Only recently (through globalization) did external banking interest emerged powerful enough to counter local populism efficiently by use of constraint. IMF and EU conditionalities cannot explain the endogenous emergence of central bank independence. Posen 69 (who Miller quotes and supports to some extent) argues that the financial communitys special interests explain the acceptance of price stability through the control of a neutral institution.
67 68 69

Posen, op. cit. 17. Miller, op. cit. 434. Posen, op. cit.

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The personnel penetration of the central bank by interest group staff (see also the composition of the US Open Market Committee, above) brings the central bank model closer to the self-regulating neutral sphere model. Here, like again in science, academia or the press, the profession staffs its own regulatory body: the rules of the professionals become neutral professionalism per se. One could add in support of Posens approach that it obviously has all the support public choice theory intuitively may offer. In more pragmatic terms: the negotiating partner of the banking groups is usually the Minister of Finance, who generally comes from this very same interest group. The main source of bureaucratic resistance to establish an independent agency might therefore be bypassed, given the ministerial backing. However, [t]here are a number of problems related to Posens approach. First,

it is not obvious that low inflation rates are always in the interest of the financial sector. For instance, the increase in nominal interest rates as a result of higher inflation may mask a larger spread applied by banks. Second, the empirical evidence that the financial sector is inherently inflation averse is not compelling.70
Why should governments (politicians) allow and even push towards the independence of the central bank? (Again, this willingness and advocacy is not without exceptions, and the independence in the statutes is not always accompanied with full respect. Governments may use various threats to force the banks to accept the governments position.) Yet it remains unclear why politicians and the political branches agree to relinquish their power. After all, the government will not be isolated or exempted from criticism if economic decisions are shared , invalidating even the "avoidance of criticism" argument. A number of explanations have been offered. One can always rely on Luhmanns theory of system differentiation, in which the monetary system becomes self-reliant because it is too complex to be guided externally. I am not aware of convincing data on what makes (this part of) the monetary system self-reliant. Further, it is not clear why the strictly political system actually accepts such developments, if they indeed exist.

70

Bernd Hayo and Carsten Hefeker, "Do We Really Need Central Bank Independence? A Critical Reexamination," WWZ-Discussion Paper 01/03, University of Basel, March 2001, 17 http://econwpa.wustl.edu:8089/eps/mac/papers/0103/0103006.pdf. Maier et al. (2000) show the Bundesbanks monetary policy was influenced by financial sector pressure. Though they do not make this argument, it can be interpreted as supporting Posens theory. Ibid.

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Miller offers a theory based on a public choice explanation of judicial independence as understood by William Landes and Richard Posner. 71
Landes and Posner argue that the independent judiciary benefits political interest groups because judges, being largely free from partisan political pressure, can interpret statutes in a way that reliably enforces political deals made by interest groups during the legislative process. Judges are more credible enforcers of political deals than members of the legislature because the latter will always be tempted to undo the ex post. It is in the interest of the interest groups and the politicians alike to maintain an independent judiciary, on this view, because impartial judges will tend to construe statutes in accordance with the original legislative understanding, and therefore the parties to the original deal (the private sector and the politicians) are willing to enter into longer-term arrangements. The role of an independent central bank in the economic system is in many ways analogous to the role of an independent judiciary in a legal system. Like the judiciary, the central bank is placed outside the direct play of political forces, although, like the judiciary, it can never be totally insulated from politics. The generally accepted purpose for placing the judiciary outside the arena of day-to-day politics--to guarantee an impartial interpretation of the law that is not swayed by short-term thinking or by political pressure--is quite analogous to the generally understood purpose for establishing an independent central bank--to place the conduct of monetary policy in the hands of an institution with a long time horizon that is not subject to short-term political influence. Given this comparison, it appears that the question of the determinants of central bank independence can be answered, at least in part, by analogy to that of judicial independence. 72

One could object to the comparison that judicial impartiality historically emerged as a need among parties, and was thus unrelated to the application of statutes, as statutes did not exist at that time, and norms did not result from interest deals to be credibly enforced. Further, it is not clear what kind of specific (even though tacit) deals are possibly renegotiated. Miller believes that an anti-inflationary, quasi constitutional precommitment by politicians
would be in the interest of politicians, ex ante, because, while they give up control over monetary policy, they get compensated in the form of larger payments for future deals. With an independent central bank in place, the risk of inflation will not reduce the amount that the interest group obtaining the deal is willing to pay the politician for future benefits. Because politicians have short time horizons, they prefer to capitalize their deals and obtain payment for future benefits in the present, given the fact that they may not be reelected. [The payment to which Miller refers is rent or its equivalent, namely] political support, campaign contributions, etc.73

If "payment" enhances the chance for reelection ,than the present payment argument makes less sense, except if it is actual payment means corrupt bribes. If an official cannot be reelected if he cannot mobilize populist measures (public spending, loans, services, etc.) because of the price stability commitment, he would need to maximize returns
71

William M. Landes & Richard A. Posner, "The Independent Judiciary in an Interest-Group Perspective," 18 J. Law & Econ. 875 (1975).
72 73

Miller op. cit. p. 450 Miller op.cit. p. 435.

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during his tenure in office. This caricature does not help in understanding the politicians interests in establishing the otherwise rational precommitment. My assumption is that historical (Burkeian) incrementalism might offer an answer: historical accidents (the Great Depression, post-WWII inflation in Germany) created a need for institutions that could move away from the executive. These historical accidents shaped the culture of the country: in some places, a culture of inflation was established. Such culture, of course, might change over time, but once the culture has shaped an institution, the institutional solution may survive the culture. If the institution performs well (i.e., there is little inflation), peoples trust will increase in the organization, even leading perhaps to popular support in a power struggle that the organization accidentally conducts against the political government. 75 Special interests and their own institutional interests, endorsed by the success of the institution, became sufficiently strong to maintain and develop the institution into an independent one. In a "culture of law," it follows that the autonomous operations of an institution are recognized as conventions; given such recognition, changes of the relevant set of rules become difficult. (See the case of the U.S. Federal Reserve as long as it performs relatively well, it is unthinkable to change it.) The full formal recognition of independence came only later. Once the model established itself, 76 it was ready for "spillover": where there was very high inflation (or some other major economic difficulty, as in Japan), the expected reaction of the average politician was to copy the existing institutional solution that had already gained a reputation of credibility elsewhere. (Such foreign recognition further increases domestic credibility).77 Finally, once the model became accepted (partly in light
74 75

74

Hayo and Hefeker discuss a historical feedback interpretation. Hayo and Hefeker, op. cit., 17.

See Helge Berger and Jakob de Haan, "A State Within a State? An Event Study on the Bundesbank," Scottish Journal of Political Economy 46, 17-39 (1999) on the Bundesbank - FRG government conflict.
76

The "establishment" concerned the traditionally low inflation in post-WWII Germany, attributed to the independent policies of the Bundesbank. As to professional corroboration, the matter is debated, though there is some evidence that in a stable, liberalized economy the independence of the bank is positively correlated with low inflation (Alex Cukierman, Geoffrey P. Miller and Bilin Neyapti, "Central Bank Reform, Liberalization and Inflation in Transition Economies - An International Perspective," Tel Aviv University, Foerder Institute for Economic Research Working Paper No. 19-2000 (2000) http://papers.ssrn.com/sol3/delivery.cfm/000730301.pdf?abstractid=237066. Hayo & Hafeker op. cit. argue that these kind of findings, assuming their validity, tell us nothing about causality.
77

I assume that there is a snowball effect of institutional credibility once it has established itself successfully. The establishment of the German Constitutional Court in the 1950s might offer a good opportunity for the empirical study of these phenomena. At the beginning, the Minister of Justice resisted the independence efforts of the Court and political parties had a long stalemate on the issue; the appointment stalemate did not serve the reputational interests of politicians, hence they compromised and learned how to minimize conflicts with the Court. First, after initial resistance, opponents might be co-opted or give up (move away). Secondly, reputation brings reputation and trust for the following reason: Behaviorally, the more trusting an individual is the lower the personal investment she will make in learning about the trustworthiness of the

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of the positive performance evidence), international institutions with strong leverage (as in country bail-out situations, see e.g. the loan conditionalities in the 1991 Argentina crisis) imposed the model matter-of-factly. 78 Some economists would support such approach. This understanding is in line with Keynes' (General Theory) understanding of efficient central banking. The power of central bankers to guide financial markets depends on the credibility of their actions (in my mind, a function of past behavior and performance and legal authority) and their reputation for competence.79 What explains the success of neutralization is once again rooted in an institutional inertia that results from limited interaction among the players (the political branches on the one hand and the central bank, supported by strong commercial banks and the profession, on the other). Miller indicates that independence is not the only credible option for precommitment.80 There are also alternatives based in private law based and, in particular, statutory indexing. In this case, politicians do not have to relinquish their control. But indexing is seen as less efficient as a precommitment (it is easier to disregard) and it limits the power of politicians to extract rent. Further, this has higher transaction costs, which affects all (as the nominal inflation remains and therefore all the related inconveniences would impact voters) and therefore is politically non-viable. 81 ***

trusted and in monitoring and enforcing his compliance in a cooperative venture. Margaret Levy. Once one (including politicians) has accepted that the institution works, the less investment there will be in learning about it. Cognitive dissonance reduction might contribute to it too: once one (and in paricular political actors publicly) makes a favorable statement, expressing her trust, it is difficult for the person who made the public statement to disregard such reliance.
78

Perhaps in Eastern Europe the IMF-imposed "conditionalities" were probably less demanding than those imposed on Argentina. See Joseph Halevi, "The Argentine Crisis," 53 The Monthly Review, 11 (2002 April) http://www.monthlyreview.org/0402halevi.htm. The EUs imposition is certainly total.
79

See Bibow, "On Exogenous Money and Bank Behaviour: the Pandoras Box Kept Shut in Keynes Theory of Liquidity Preference?" 7 European Journal of the History of Economic Thought 4, 532-568 (2000).
80

It was Milton Friedman, "Should There Be An Independent Monetary Authority?," quoted in Jrg Bibow, "Reflections on the Current Fashion for Central Bank Independence," Working Paper No. 334, 2001 http://econwpa.wustl.edu:8089/eps/mac/papers/0108/0108004.pdf, who argued that the constitutional rule regarding monetary policy should be that the definition of the price level and interest rate should be left to the markets. Neither elected politicians nor unelected bankers should be trusted with money: money is too important to be left to the central bankers. Given the success of special interest to hide successfully behind expertise, the opposite view prevailed. Though if some of the more cynical public choice theories are correct, the neutralization of monetary policy through central banks is just a way to allow financial market actors to prevail through their informal power to influence central bankers.
81

Hayo & Hefeker op. cit. argue that alternative monetary policy design instruments are available, are theoretically superior, and were successfully adopted.

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An Excursus concerning Other Phenomena of Neutralization, of Particular Importance for Loyalty in Transition Countries

As one cannot offer in these pages a fully comprehensive review of neutralization phenomena, here I would like to refer only to two instances that might be particularly important in Eastern Europe today. The first is the neutrality of international organizations that define domestic arrangements, or in other words "imposed neutrality." Quite often, such neutral decisions are created through delegated legislation, where political actors cannot agree but instead attempt to save face by delegating the substantive decision to an international expert body not subject to national state interests. (To some extent, even the European Central Bank exemplifies this trend.) Here, neutrality originates from the allegedly neutral position of the distant regulator. (Such assumption of neutrality is certainly acceptable from the perspective of domestic actors: none of them is involved.) Though such neutralization is present in many areas of life -- and increasingly crucial in globalization -- it is of particular relevance today for the EU accession countries. The second instance relates to the neutrality of secret services, which might be subsumed under the heading of civil service neutralization or even under the heading of independent expert agencies. However, as the history of the post-communist states over the last 12 years indicates, their ambivalence may undermine the neutralization attempt of the post-totalitarian state.

On the neutrality of imposed rules The EU accession process of Eastern European countries illustrates a new form of neutrality. The rules of the legal system are not presented as the result of (domestic) power (democratic) politics. These rules are not difficult compromises that have been worked out among interest groups, and thus appear to be neutral in the sense of natural disaster or Gods non-capricious punishment. As the issue of democratic deficit has arisen too often, I instead would like to remind of the bias of neutrality, as indicated by Stephen Holmes:
Accession means that Western Europe is exporting its own health and safety standards, product quality standards, environmental standards, and auditing standards to Eastern Europe. All of these may look neutral on their face, but in fact work prejudicially to favor West European producers, who not only have greater access to the kind of credit needed to make the necessary investments, but who are already substantially in compliance. Even after accession, EU officials will retain considerable discretion in drawing the distinction between permissible and

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impermissible subsidies. And what strong political constituencies or coalitions will prevent them from tolerating West European subsidies while outlawing East European ones? Such a biased practice, calculated to shift unemployment from west to east, would bear out the grim prediction of post-enlargement favoritism inside the EU, with two sets of member states operating under two sets of rules.82

*** Secret services Secret police and secret services (I will not distinguish the two) present a particularly interesting instance of state neutralization and trustbuilding. Even the Soviet communists learned (the hard way) that the secret services have to be "neutralized"; that is, they cannot serve a specific person or interest within the state. In a democracy based on competitive politics, where political parties take turns in power, it is far clearer that it is mutually advantageous not to use the secret services against each other. In principle, bipartisan (or multiparty) parliamentary committees exercise oversight, and public rules prohibit the political involvement of the services and servicemen. Ironically, the executive oversight, and (at least in Hungary) the actual control, is totally politicized: every election brings a new supervisory minister and new directors to the services. 83 This neutralization is quite interesting as it concerns the part of the state that is closest to arcana imperii. The services (and the army) allegedly serve the integrity of the state in the purest sense. However, the services' past record in democracies is not overly convincing. My favorite examples are FBIs Hoover spying on and destroying his personal enemies (or people whom he did not like); MI5 spying on the elected and democratically committed Prime Minister of Great Britain (see Peter Wright, Spycatcher) (see further the involvement of the Italian services in the Gelli conspiracy and the
82 83

Stephen Holmes, "A European Doppelstaat?," Manuscript on file with the author, 4-5.

To the extent that secret services trust-building and loyalty are really relevant in the study of public loyalty, one should probably study these issues in the context of the post-communist transition. It is argued that the Soviet secret services took over the state along (?) with Putin. Further, there are important variations between the former socialist countries: in Germany, the GDR secret service was allegedly eliminated. The same might be basically true in the case of the Czech Republic. Nevertheless, the services entered ordinary crime and encountered major political scandals. It is unlikely that the Slovak service was cleansed to the extent of the Czech (though it must have been reorganized), and it is clear that it served the political aims of Meciar with unscrupulous means. Only in the summer of 2002 was a law enacted that prohibited the employment of agents who served under communism. The law was vetoed on constitutional grounds (employment discrimination) by the president (a former member of the communist party) and at the extraordinary session of the Slovak Parliament the government could not mobilize enough votes to overrule the veto. No such rule was ever even contemplated in Hungary. In Hungary as well as Poland, only the political police (which spied on citizens) was allegedly dissolved as an organization. The Polish services were involved in major political scandals, and at least one scholarly study argues that it continues to serve communist or private interests. The Hungarian services, with the full support of all the political parties both in power and in opposition, managed to keep a low profile and never got involved in major political scandals, or at least these scandals were managed very well with the complicity of the press.

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blowing up of the Greenpeace ship in New Zealand, courtesy of French services). In other words, the services do take actions against politicians on a partisan basis and become involved in anti-state activities and terrorism. One could say that this is the consequence of neutralization: it shows how far an institution may go in following its internal interests and convictions. In the case of secret services, the loss of external control derives from the nature of the services, or as they like to present the nature of their work, the total secrecy and complete lack of insight and control is allegedly quintessential. (Here, secrecy is not about secret surveillance and covert operations. In a rule of law system, these matters are increasingly subject to external authorization, at least in the form of judicial or parliamentary rubberstamp). Allegedly the services protect their sources to the end. This according to the justification of the services -- is necessary to preserve the loyalty of their collaborators. But in the name of protecting sources, substantive information is also suppressed. The argument made in favor of non-transparency is that of professional requirements. This turns eternal secrecy and operational autonomy into a precondition for institutional success. This argument is also made in the context of central banks but only before actions are taken (and some level of signaling ex ante, or at least in terms of consistency-based predictability). There is a fundamental irony in the use of loyalty in the services. The services claim (demand?) life-long loyalty from their employees. The argument is the same as the one made for total secrecy: this is the only way to grant full protection. Recently, the Hungarian services were confronted with the need for transparency with regard to agents (though not activities) during the period of communism. The services embarked on an extremely successful public campaign, which complained that the possibility of disclosure would have an immediate deterrent effect on applicants to the service, if they would feel that their identity might be revealed at some time. A few months earlier in Poland, the services -- using the return of the socialists to power -- managed to change the law regarding the transparency of the past history of politicians. Here we have a rather paradoxical situation of institutional trust and trustworthiness. Is the allegedly insular and autonomous service to be trusted? Is it to be trusted for its "expertise"? But the only specific expertise they have is that they gather and keep information secretly. The only indication of their expert performance is that you dont know about it. (Occasionally they may prevent an attempted terrorist act, or bring down a foreign regime, but in principle even such factual successes will remain unknown Evidence from leaks are unconvincing, leaving the impression that a fortunate event is

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claimed ex post to improve the reputation of the service.) If political institutions were like humans, the uncertainty generated by an extremely powerful entity would yield trust: the powerless do not have alternatives and pessimism does not result in a better strategy to cope with uncertainty. Humans tend to venerate unpredictable irresistible forces (e.g. volcanoes) and quite often believe them to bebenevolent. Political institutions, however, are not powerless; in principle, the services are under civilian control and under the control of political bodies. In practical terms, the services do depend on appropriations. And yet political bodies nearly unconditionally trust (pretend to trust) the services and their information (as well as lack of information). (Dictatorships are generally more suspicious, as they tend to use parallel services that check on each other.) How might all this factor in into loyalty to the state? Of course, it matters to what extent the state is identified with its services. Once state power is identified or at least closely associated with secret police powers the standard assumptions of political loyalty that are made on the basis of the impact of democracy or even state-performance will not work. Even if the services maintain their required neutrality, this neutrality will impact differently on the public. 4. Shortcomings of State Neutralization 4.1. Normative and Empirical Concepts of Neutrality Neutrality is neither self-explanatory nor self-evident. 84 What is considered to be a neutral institution will not necessarily yield neutral results. What may seem neutral to some will be considered biased by others. Neutrality is a highly problematic and somewhat vague concept. After all, government neutrality may be satisfied sometimes by impartiality; it may also imply non-interference (laissez faire); sometimes it requires equality of chance (e.g., among parties in elections). The model of judicial impartiality is the basis of some expectations of neutrality. Indeed, the prevailing thin concept of (organizational, structural, etc.) neutrality centers on this ideal, assuming that once the structural preconditions of impartiality are satisfied, neutrality will follow. However, most instances of neutrality emerge in situations that differ from that of the judge. The judge stands above the parties, and in principle, has no stake in the decision he renders. Some models of neutrality are based, however, on non-interference -- a very special form of impartiality, indeed. In other instances, the state is not above the strife, though the
84

[N]eutrality itself is far from a straightforward concept. Certainly the recent debate has shown that it is not particularly amenable to uncontroversial logical analysis. Waldron, op. cit. 145.

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states interest, it is believed, is best served by following professional, unbiased rules (see central banks). Sometimes expectations of the neutral performance of one state body fails because the expectations are based on a different model of neutrality; sometimes the institution cannot simply deliver its promises. The examples we have discussed are structural, institutional, organizational, or legal-procedural attempts to neutrality. However, the perception of neutrality is not only based on guarantees of independence, integrity and procedural fairness. One should also look at the outcome of the action of neutralized entities. The decision, and not only the procedure, must satisfy certain criteria. The thick concept of neutrality assumes that decisions and perhaps, the consequences of decisions, shall be the subject of neutrality analysis; neutrality is substantive in the sense that the "result" should satisfy "neutral" criteria. Neutrality depends on the categories applied; categories that allow government bias and partisanship to prevail will satisfy no expectation of neutrality. The first choice (the first order problem) is a categorical one. The governments position must be categorical in order to remain neutral, although categorization itself is an insufficient condition of neutrality. According to Jnos Kis, 85 categorization satisfies the requirements of the neutral state as long as the categories do not discriminate among people, denying their way-of-life choices and, therefore, their equal dignity. Further, in order to remain neutral, allocative decisions within the category should examine the intrinsic values of the recipients using equal criteria of desert. This points to meritocracy. Finally, the meritocratic criteria shall be substantially related to the category. As Guy Haarscher argues, Now the word "neutrality" must be understood at least in the following contexts. First, it means that the State is not part of the ongoing debate in pluralist societies between different conceptions of the good life. Secondly, it is related to the idea of a State that does not make distinctions between citizens according to their so-called racial belonging (the US idea of a color-blind Constitution). Thirdly, it implies that the State must not be biased in favor of an ethnic group (often the majority group, using a dominant, sometimes official, language). And fourthly, it means that the State is not the instrument of special interests, a dominant class, etc. 86
85 86

Jnos Kis, Az llam semlegessge (The neutrality of the state) Budapest, Atlantisz, 1997.

Guy Haarscher, "Integrity and Neutrality of Legal Institutions," 9th Annual Conference on The Individual vs the State Institutional Independence and Integrity, Budapest, May 3-5, 2001 Central European University, http://www.ceu.hu/legal/Haarscher.htm

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In American legal thought, it is perhaps Herbert Wechslers attempt that has become the most influential in expecting neutrality from the Supreme Court. 87 Beginning in the 1950s, the American legal community expected that the Court's constitutional law decisions be accompanied by opinions justifying results on "neutral principles," "grounds of adequate neutrality and generality" that transcended the immediate result reached in a case. Wechslerian constitutional theory prevents political judgments from "turn[ing] on immediate result"88 by finding ways to infuse politics with constitutional principles. Wechslers neutrality program is intuitively attractive; it touches upon what makes the ideal of neutrality appealing (until the shortcomings become visible). It seems to satisfy a minimal morality, or as Michael Walzer puts it, minimalism in morality. 89 This is satisfied if the rule serves no particular interest, expresses no particular culture, regulates everyones behavior in a universally advantageous or clearly correct way. The rule carries no personal or social signature. Of course, the great trick of neutralization -- namely, that in the majority of cases the substantive analysis is replaced by fair procedures -- is often successful, and the conflict between the substantive departure from neutral categories is not visible or cannot be successfully argued. It may seem that the decision itself satisfies fairness, being predetermined by expertise and scientific wisdom. To challenge these visible features on the basis of substantive analysis is quite costly and the substantive analysis, given the uncertainties regarding neutral criteria, is uncertain and therefore unconvincing. Except for obvious bias indicated by violating conflict of interest rules, it is difficult to challenge an appointment in civil service or library acquisition on meritocratic or other valuerelated (even professional) grounds. (Lawyers often try to contest such decisions on grounds of procedural irregularities.) The institutional guarantees of neutrality (the way in which the decision-maker is sheltered from external influence) replaces substantive analysis, which in any case would be too costly . 4.2. Reasons for and limits to neutralization Carl Schmitt makes a particularly challenging comment regarding the impossibility of liberal neutrality. 90
87 88 89 90

Herbert Wechsler, Toward Neutral Principles of Constitutional Law, 73 Harv. L. Rev. 1, 15 (1959). Wechsler, op.cit. p. 12. Michael Walzer, Thick and Thin - Moral Argument at Home and Abroad . (Notre Dame) 1994. 7.

Carl Schmitt, bersicht ber die verschiedenen Bedeutungen und Funktionen des Begriffes der innerpolitischen Neutralitt des Staates, 97-101, 98 (1931), in Carl Schmitt, Der Begriff des Politischen,

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All forms of preference to the given form of state or the governing parties be it in the form of subsidies to be propaganda, through discrimination in the use of discrimination in the use of radio stations, official gazettes, through film censorship; by the restriction of party political activities and the violation of the party affiliation of civil servants in the sense that the governing party permits the civil service membership only in the government party or in parties not too distant; by banning assemblies of extremist parties; with the distinction between legal and revolutionary parties on the basis of their programs meaning outright and outrageous opposition to the constitution in the sense of a consistent rethinking of art. 76 [of the Weimar constitution].91

Contrary to Schmitts claim, partisanship in the allocation of civil service jobs has been declining over the past fifty years. 92 The neutralization of the constitutional state is dictated not only by the delegitimating effect of the spoils system of partisan politics. Where there are no shared values, as is the case in increasingly heterogeneous modern democracies, there is an increased need for values and cultural symbols that integrate local societies or the nation state. With the thinning of the nation-state in pluralist secular societies, traditional values cannot successfully mobilize the entirety. Moreover, only a few mechanisms could counter anomie. Further, the state can no longer pretend that it represents the community as a whole, or the public interest writ large. There were too many abuses of the concept and, given the increased social transparency and the enlightenment of the public opinion, political horse-trading is too obvious. The neutrality model is quite attractive for welfare state distribution. Governmental and professional ignorance, as well as the avoidance of responsibility among politicians and within public bureaucracies, dictates non-intervention. Neutrality helps to avoid situations that would de-legitimize or paralyze the state. State neutrality emerges as a value taken for granted which, according to Owen Fiss, might have some sway in the speech area too, where state neutrality is also assumed to be a good. We want the state to be neutral between competing viewpoints, or competing conceptions of the good life.93

Berlin, Duncker-Homblot, 1996 (1934).

91

Art. 76. reads as follows: "The Constitution may be amended by law. The acts of the Reichstag amending the Constitution can only take effect if two-thirds of the regular number of members are present and at least two-thirds of those present consent." Schmitts criticism regarding the partisan (neutrality violating) nature of the actions taken against extremist parties misses the point. Such measures do not violate per se the traditional understanding of neutrality within a democracy (or within any state see Locke on non-toleration of atheists, above).
92

I do not have data but I do have clear evidence from (?) the courts enforcement record. See the changes in the understanding of loyalty in Europe from the Glasenapp case to the Vogt case. ( Glasenapp v Germnay, ECHR Judgment of 28 August 1986, A104; Vogt v Germany, ECHR judgment of 26 September 1995, A323).
93

Owen Fiss, "State Activism and State Censorship," 100 Yale L.J. 2087, 2100 (1991).

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The neutrality of the state helps to avoid the imposition of identities by taking sides (e.g. for or against the poor, the childless wealthy, etc.); in this regard, neutrality is liberating. In economic policy, fiscally neutral tax is the ideal. 94 In the postmodern world of complex and uncertain identities, the government shares the cultural uncertainty that prevails in the post-modern society; it will be reluctant to impose views and solutions on society, as it seldom trusts the available solutions. As Sandel puts it, in these societies the point of justice is to respect peoples freedom to choose their own values. 95 To my mind much liberty is an Ersatz: there is no acceptable common good. Skepticism in the moral sphere likewise dictates that no public authority can dictate models of the good life. Indeed, the state is incapacitated to determine them. Skeptical liberalism suggests that political organizations may follow the dictates of fairness, but the state cannot provide mandatory ideals. However, once partisan positions and Weltanschaaung tend to be imposed from above, the state that operates under the assumptions of liberal neutrality, will advance techniques of neutralization, restricting partisan democracy. Such measures increase, in principle, its legitimacy and effectiveness (in the sense of reducing social conflict n and also in terms of the mistakes of partisan bias). We have identified a number of loosely-related historical and pragmatic reasons for neutralization. These include the need for social peace, the shortcomings of democracy, and the insufficient performance of an often-overextended state. In the specific context of speech, David Cole finds that strictures of neutrality and independence apply in these contexts because the internal functioning of each institution demands insulation from government content control. A spheres of neutrality approach would require that all public institutions operate with a degree of independence from government control.96 In Coles view, neutrality is needed where permitting content control poses a substantial risk 97 of indoctrinating listeners or skewing the public debate. The extent of the danger depends on the relation between the audience and the speaker or regulator and on the distribution of the communication channel or access. The speech-related concern is somewhat specific, as it concerns the specific impact of the product (communication). However, quite interestingly, most
94

Of course, the reality is quite perverse. What happens in the name of neutrality is that only the status quo is reinforced.
95 96

Sandel op. cit.

David Cole, Beyond Unconstitutional Conditions: Charting Spheres of Neutrality in Government-Funded Speech, 67 N.Y.U.L.Rev. 675, 682 (1992).
97

Ibid. 732.

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neutralized public spheres (other than the economy) concern the production of knowledge. Notwithstanding the clear social, political, economic institutional, etc. interests in neutrality, the contemporary world is not fully ready to endorse it. The resistance to neutralization arises from those who attach some kind of spiritual, ethnic, or other mission to democratic spoil; thus, it derives from the wish of herrschen. The neutralization or de-politicization of government is a matter of degree and blend. On the other hand, given that the democrat may not makehimself credible, or leaves herself open to spoil--exposing the loser to too much risk -- alternatives are neither democratic, nor subject to sufficient democratic (elected-political) control. These are presented (and hence legitimated) as areas outside power politics, spheres where there is no herrschen, no politics. Consider this at the level of language: politics is replaced with policies, government with governance. 98 In principle, decisions of neutralized public institutions should not be governed by partisan politics even where the political branch funding the institution has clear partisan preferences. The decisions should follow professional canons as applied within the specific functional context of the institution. 99 In order to preserve the image of state non-interference, one may notice a nearly desperate effort to insulate art funding and its procedures from partisan political considerations, by decentralizing decisions to panels of peers. 100 However, the neutrality model of the state competes with others, such as that of the nationalist partisan state and -- not only outside democracies -- the faith-protecting mission might remain prevalent in denominationalfundamentalist states. Even in art funding non-neutral, committed or parity-oriented normative concepts might prevail, not to speak of education, etc. Neutralization of government through the building of autonomous, professionallymotivated institutions and the delegation of decision-making to non-governmental bodies where the members do not existentially depend on the state, is valuable in most areas of cultural production. It helps at least to the extent that the arrangement prevents government from shaping the public debate. But there is a price. Neutralization through
98

In Anglo-Saxon countries which proudly claim a long established democratic traditions, the language a language that is the lingua franca! -- had a longer period for this adjustment. It is still difficult to translate policy into Hungarian, where szakpolitika i.e. professional politics is used.
99

However, for (as he was then) Justice Rehnquist, ideas are no more accessible or no less suppressed if the school board merely ratifies the opinion of some other group [of experts] rather than following its own opinion. Board of Education v. Pico, 457 U.S. 853, 909 (1982).
100

In Hungary, a National Cultural Fund was established with a similar structure. The cultural government found the panel decisions unacceptable and contrary to the governments cultural policy, which advocated a return to traditional Christian and national values. The Funds allocation mechanism was changed, bringing half of the Fund into the discretionary power of the Minister of National Heritage.

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insulation means that the constitutional protection against censorship may not apply within the institution. While governmental influences diminish, private censorship affecting public discourse may emerge. Unlike in the case of governmental regulation, free speech protection does not protect against restrictions inside private institutions, except if special rules apply. Public discourse might be hampered if school library decisions or speech in school is determined exclusively by dictates of institutional culture and functional considerations. These might become tyrannical if they are not responsive to speakers interests and if neutralization of the institutions creates a private or nonpublic sphere. Institutional neutrality may yield protection from government (political) intervention in decisions affecting the public. Let us take the example of acquisitions in public libraries. A librarian who excludes books denying the Holocaust violates the prohibition of viewpoint discrimination. However, viewpoint discrimination will not be an issue as long as acquisition practices are functionally neutral, i.e., as long as the librarian follows a neutral scheme of acquisition dictated by the needs of readers or other professional concerns. For example, she may prioritize factually uncontested books or books which are required for courses and exams. Unfortunately, the functional requirements analysis may be of limited help, as the whole idea of expert institutions, and in a broader context governmental decision-making bodies, is based on the assumption that these institutions are the best qualified to know what is dictated by the function of the institution they serve. The test used in the U.S. in the context of free speech -- whether there is an appropriate governmental interest suitably furthered by the differential treatment101 -- is somewhat circular, or at least it leaves undecided the proper level of scrutiny regarding appropriateness. In the days of laissez faire, if we can believe J.S. Mill, the harm principle determined the appropriate governmental interest for intervention. This relatively clear guidance is lost in a world where all sorts of claims are made on the state. It is highly problematic, and a source of easy abuse, if the governments choices remain within the domain of the discretionary dictates of state reason ( Staatsraison) or political partisanship. How is this bias in government to be reduced? The first step towards neutrality restricts discretionary power and makes decisions subject to review by non-partisan organs. The decision-making itself (though somewhat discretionary) allocates the decision to non-political public organizations. Institutional autonomy is a more aggressive though still partial solution to protect liberty (e.g. speech, religion, science) from partisan political influences. As mentioned above, it is not a perfect
101

Police Department of Chicago v. Mosley, 408 U.S. 92, 95 (1972).

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solution; the more the institution is autonomous, the more likely it will develop internal censorship and internal bias. Further, such arrangements may result in restricting or oppressing the political liberties of those inside the neutralized body. To what extent such a restrictive requirement may be imposed varies among liberal democracies. The European Court of Human Rights found such restrictions acceptable , as did the U.S. Supreme Court. The Supreme Court of Canada is less deferential to the neutralization of civil servants through speech restrictions. In Osborne v. Canada (Treasury Board), the court held that by prohibiting public servants from speaking out in favor of a political party or candidate, the law expressly intends to restrict expressive activity and is accordingly inconsistent with s. 2(b) of the () Charter. 102 In addition to internal censorship, there is a second cost element in neutralization: non-accountability. Institutional autonomy is valuable only if such autonomy does not bar the protection of individual liberty. Given the limited penetration into the autonomous (private) spheres of the constitutional protection of liberty, there might be a considerable price to be paid, as neither democratic accountability nor rights protection may be available against private tyrannies. The autonomy of universities (a sphere of free speech carved out from government intervention) offers an ironic illustration of this ambiguity. Universities (both public and private) exercise speech restrictions that resemble civil servants loss of speech rights, which was offered in exchange for job security. Universities have the right to deny positions on the basis of viewpoint discrimination. A historian sympathetic to Nazi ideology can be denied tenure. In France, scholars who refute the Holocaust were subject to disciplinary procedures and the dissertation of a revisionist historian employed as a researcher was rejected. In other circumstances, precisely because universities are autonomous, the general public protection to freedom of speech does not extend to the university, as it might be a violation of autonomy. In some of the cases, fortunately, this is countered by express constitutional provisions or interpretations that guarantee academic freedom. This problem of accountability is clearly presented in the case of media regulatory agencies and central banks. Institutional neutralization results in avoiding accountability and minimizing political responsibility. Institutional neutralization may contradict the requirements of state neutrality, as voiced in political philosophy. To the extent that the various procedural or substantive criteria reflect or influence public thinking, the
102

[1991] 2 S.C.R. 69

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neutrality of the state will loose credibility. Certainly, a non-governmental institutional decision-making environment renders the administration of meritocractic criteria more credible. Courts might be satisfied with the analysis of those structural organizational criteria. In Germany, for example, the Federal Constitutional Court emphasized the importance of such institutional-organizational guarantees, thereby avoiding substantive review of specific decisions. Generally, justices will not review the application of actual criteria. The neutral composition of the decision-making body is deemed to be a sufficient guarantee. A library commission composed of parents is assumed to be the best protector of the childrens educational interest, as long as the criteria applied by the parents strictly refer to the needs of the childrens moral and cognitive development and do not encroach upon the authors political viewpoints or morality. Review of a university disciplinary procedure that concerns academic merit (e.g. denial of tenure, etc.) is limited to the analysis of the board's composition and the observance of hearing rights. Such conditions vouch for the fairness of the decision. There is a justified presumption of some neutrality in the case of independent bodies. But the institutional arrangements do not make additional external (i.e. independent from the goal-setting, influencing government) supervision futile. The problem is that external independent supervision may undermine the autonomy of the institution, though, being ex post and not necessarily sharing the interests of the goal-setting (political) body, the danger can be limited. Given institutional censorship and thepolitical dependencies of allegedly neutral institutions, some level of substantive judicial review103 is often recommended, especially if the decisions affect fundamental rights. In the case of broadcasting authorities, today it is generally accepted that the independence of such bodies should be granted by judicial supervision (to the detriment of any parliamentary control). With growing juridicization, perhaps similar suggestions will be made with regard to central banks (when their accountability deficit becomes more pronounced). The difference is, however, that central banks hardly ever touch upon fundamental rights, as we understand those rights. 5. Trust and Loyalty in the Neutral State As mentioned above, neutrality does not pertain to the hard core tenet of liberal constitutionalism. Together with other fuzzy concepts (impartiality, integrity, autonomy,
103

Mark G. Yudof, "When Governments Speak: Toward a Theory of Government Expression and the First Amendment," 57 Tex. L. Rev. 863, 912-917 (1979), argued that neutrality is not a feasible requirement in funding and it is not for the courts to exercise review of speech-affecting spending. Cole, op. cit. 714, fn. 155, finds Yudofs position insufficient as the fact that selective government speech is sanctioned by the legislature provides no guarantee that it will not skew the intellectual marketplace or indoctrinate the citizenry.

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etc.), it does play a considerable legitimating role, promising some actual decisionmaking advantages and allowing spheres of life to avoid the totalitariansim of the political. Neutrality, however, may have its moral hazard, as exemplified by the concept in international law of state neutrality as "guaranteed non-interference," which resulted in indifference in the face of genocide.104 The problem of intervention became one of the great puzzles of contemporary international relations. Such neutrality may de-legitimize (missing object). Parallel situations exist in neutralized domestic politics: should e.g. the state interfere into racist speech or take active preemptive steps against allegedly extremist parties? Further: should an independent broadcasting agency sponsor "culture" (public service programs) if it wants to remain loyal to neutrality? The boundaries of neutrality are not predetermined; they are subject to external political and other (e.g. interest group) pressures and their boundaries shift over time. The most spectacular examples concern state-church relations 105 and privatization. The French concept of laicite, which emerged in the 1905 legislation that denied all government support to churches, especially in education, was replaced following street demonstrations in the Fifth Republic without ever recognizing that one cannot call support and nonsupport equally laicite. Or if both fit into laicite, than the concept itself is too open and lacks substance. A final interpretation of the change is that the concept was reshaped in line with the times (and political pressures that new policies try to contain and accommodate, rather than crush, as the Republicans once tried). The French example indicates that neutrality had to open up itself to accommodate equality concerns. This reshaping means that equal treatment penetrated and throw into confusion the concept. What used to be equal distancing is understood today as equal support without any involvement. In a way, the model of belligerent neutrality a highly controversial and fuzzy concept on its own right106 -- became applicable. As mentioned above, the 1907
104

See Detlev F. Vagts, The Traditional Legal Concept of Neutrality in a Changing Environment, 14 Am. U. J. Int'l L. & Pol'y 83, 84 (1998).
105

The differences are spectacular even synchronically: one should only look again at the various understandings of church-state relations in advanced democracies.
106

It was argued recently that, given the "moral grounds" of international law, neutrality is not observed if the power not intervening in the conflict disregards the behavior of the belligerent parties and turns its back to violations of human rights, humanitarian law or the law of war. See Egon Guttman, The Concept of Neutrality Since the Adoption and Ratification of the Hague Neutrality Convention of 1907, 14 Am. U. J. Int'l L. & Pol'y 55, 58 (1998); Seymour J. Rubin, The Washington Accord Fifty Years Later: Neutrality, Morality, and International Law, 14 Am. U. J. Int'l L. & Pol'y 61, 80-81 (1998) (noting the quandary of choosing "evident and accepted" standards in dealing with morally conflicted situations). The moral attack on neutrality, as is well-known, has been intensified by recent disclosures concerning the European neutrals' continuing economic relations with the Nazi regime during World War II. On these topics, see Jean Ziegler, The Swiss, the Gold, and the Dead, 13, 18, 133 (1997) (asserting de facto integration of Switzerland into the Greater German [Reichsdeutsch] economic area between the defeat of France in 1940 and 1945). Ziegler's book is a blistering indictment of his country's government, and of the Swiss banking community, for

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Hague Convention required that the neutral party should remain uninvolved in the armed conflicts of others. At the same time, the neutral party could maintain certain relations, as long as these relations applied to all belligerent parties. The geopolitical status quo will turn this equal distance-equal relations into unequal relations. If all Swedish iron was contractually committed to Germany during WWII, it made little difference that Sweden, in principle, was open to deliveries to Britain (a technically unlikely solution). 107 Likewise, neutrality in the above sense, e.g. equal support to churches in accordance with their "size" or (much worse) historical-national importance, increases the bias in favor of the status quo. Of course, the neutrality of various distributive criteria differ. A state subsidy according to actual parental choice of denominational schools is different from one that grants education subsidy according to statistical data regarding "believers" or in line with the historical importance or values of a church. The first criterion is neutral in the sense that relates to the goal of support (for education) and not to one's worldview (though the educational choice of the parent is directed by his or her worldview.) Perhaps more important for the specific concern of this study, namely the loyalty implications of neutralization, is that whatever happened, it happened within the concept(s) of neutrality. Neutralization means that the changes which affected to operations of the contemporary state were presented as changes that did not violate neutrality (autonomy) requirements or increased institutional autonomy, etc. In other words, the appeal of neutrality as a means of legitimacy was left unchallenged. The regime on which critics base their criticism -- the non-satisfaction of neutrality requirements rather than the futility of neutrality was, and remains, the position of the revolutionary regime denial in the Leninist-Schmittian tradition (not that this latter position is unlikely to be intellectually well-founded). Of course, neutral arrangements, as a guarantee of professionalism, increase trust to the extent that people are conditioned to trust professional expertise. Further, to the extent that neutrality implies impartiality, we have an additional element of trustworthiness, one that cannot develop in obviously partisan (interest) politics based on
providing the gold- laundering services that helped to finance the Wehrmacht and gave Germany access to internationally disposable foreign exchange to buy strategic raw materials. See id. at 48-49. See further Brian F. Havel, "An International Law Institution In Crisis: Rethinking Permanent Neutrality," 61 Ohio State Law Journal 167 (2000).
107

See Krister Wahlb ck, Neutrality and Morality: The Swedish Experience, 14 Am. U. J. Int'l L. & Pol'y 103, 107 (1998). Much of Swedish economic activity was not in technical violation of the international law of neutrality. See id. at 107.

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unprincipled logrolling.108 The practical and political difficulties of such participationbased institutional trust-building are formidable. Once the trust in (and loyalty to) institutions that offer participation diminished, it was nearly inevitable to switch to some alternative of non-participatory legitimacy bases. 109 In a way, this lies at the heart of Madisons dream of constitutionalism, which sought to find governmental neutrality against the factionalism that is transferred through the branches of power. His approach was a different one, where factional units and jealousy of the separate branches of government push the state machinery into some kind of non-partisan equilibrium. To the extent that the state machinery is the easy prey of (intolerant or simply interestmaximizing) majorities, neutralization is a reasonable alternative. The shrinking of the state is a complementary measure to solve the problem of diminishing trust. Diminishing over-commitment110 may increase credibility. Complex organizations like the modern state, with pluricentral commitments and subject to short-term perspective due to democratic politics, have inherent difficulties in keeping commitments. One way is to delegate the whole commitment-making process to
108

This was easier in the second half of the 19th century, when the press had greater difficulty in generating publicity. It was easier in Gladstones days to keep the appearance of non-interest politics, partly given that only a rather homogeneous elite was represented in Parliament.
109

Given that all the development occurred in a democratic setting and in societies that held democratic values high, there are trends to build democratic/participatory elements into the neutral institution. This, however, is highly problematic and may result in additional conflicts without increased neutrality or rights protection. Student and staff representation in faculty bodies (influencing academic appointments and curriculum) and patients rights representatives are two examples. For the complexity of the issue and the effects on neutrality of democratization or opening, see the German and French constitutional decisions regarding faculty councils (finding unconstitutionality in the defense of academic freedom). Note that at least in Germany the justices were closely related to academia.
110

Overcommitment might be the structural problem of the welfare state in democracy, or simply part of state failure, characteristic, among others of emerging democracies. Democracy pushed the state to promise services, which it could not efficiently deliver. To cut back, however, is extremely unpopular. Welfare is seen as an entitlement or acquired right, and hence diminishing overcommitment is a breach of government promise (commitment). See for example the 1995 public debate in Hungary about the austerity package, named after Minister of Finance Bokros. I have argued against the absurdities of this theory elsewhere but I have to admit that the irrationality of the political argument or the internal weaknesses of the legal doctrine of social entitlements makes little difference in terms of public attitudes. However, to my knowledge, the rolling up of preexisting welfare in Finland did not result in serious social resistance, and it was not much of an issue in Sweden. That "acquired rights" become politically burdensome is shown in a recent statement of Hungarian Prime Minister Medgyessy (the successor as Minister of Finance when Mr Bokros was ousted). He argued that universal child support would continue as it is an acquired right even for the financially secure who do not need it. In the context of privatization, an interesting form of neutralization emerges in Eastern Europe. Government (public) functions and assets are transferred to non-governmental public foundations or corporations (legal entities), including to a great extent to churches (for the utmost glory of neutrality). This public management is much heralded as increasing social participation and limiting political partisanship. In reality, the governing boards are composed of cronies or politically reliable cadres (replaced to the extent possible by the next government). As non-governmental, private entities carrying out public functions, the entities are not subject to standard supervision; indeed, this is seen as political interference into independence. All that enables asset stripping, with predictable impact on the trustworthiness of independent public foundations.

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institutions that are beyond the reach of ordinary politics (the political, i.e. the most timesensitive aspect of the state). As mentioned, such decommissioning may take the form of institution neutralization or that of privatization. 111 In both cases, the mistrust of government, which might prevail in certain societies and is identified with specific state agents, will diminish. The insufficiencies of a privately-provided service, even if it is state-sponsored, will not be attributed to the state. Neutral institutions (or some types) and the state, to the extent it proves itself as a neutral set of institutions, satisfies a normative expectation of trustworthiness as identified by Margaret Levi: Institutional trustworthiness implies procedures for selecting and constraining the agents of institutions so that they are competent, credible, and likely to act in the interests of those being asked to trust the institution. Institutional neutralization will not necessarily result directly in increased loyalty, that is, one will not rely on the neutral institution in the case of alternatives, especially against ones own interests. On the other hand, as the belligerent neutrality model indicates, neutrality is not loyalty-building: loyalty is unlikely to a party that is deliberately (and not even fully convincingly) uncommitted, who stands outside the conflict. Historical record (the little of which I know) does not indicate that neutrality in war (or conflict) increased trust. Neutrality has specific dangers in loyalty-building, because of its uncertainty. As in the example of Hindenburg, it is very unlikely that the head of state can be seen as impartial as soon as he becomes involved. Modern monarchs remain neutral because they do maintain their distance (non-involvement as Constant dreamed about it. Juan Carlos is the borderline case.) Such non-involvement, however, results in loyalty to the irrelevant (though I do not deny the importance of the symbolic). The example of the judiciary only apparently contradicts this position. Courts are designed to remain outside conflict, they are indeed above the parties and have (at least in the "ordinary" cases) no stake in the outcome. Courts are far better insulated in ordinary conflicts than other neutral institutions or allegedly neutral powers. If one follows Russell Hardins concept of trust,112 namely, that A trusts B because she presumes it is in Bs interest to act in a way consistent with As interest, than there is neither much chance of nor much need for trust in neutral professional institutions (including courts). An
111

Margaret Levi argues to the contrary: The privatization of social services and the consequent nonuniversalism and non-standardization in provision (Smith and Lipsky 1994) is likely to increase distrust in government as an institution that enforces impartiality.
112

Russell Hardin, "The Street Level Epistemology of Trust," 21 Politics & Society 505-29 (1993).

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academic community will act according to the institutional interests of the academia and not according to mine, though I might be a member and may share in abstracto those interests and values. The health care system (including rationing) is accepted, and I trust my physician because of his expert knowledge. It is true that what is this knowledge offers might serve my best interest. I cannot accept that the health care systems rationing serves my interest and queuing as a patient (hence bribery), though it may serve my interest as a taxpayer. I may trust the health system for its fairness, but I will not rely on it if I have to wait six months for a cancer operation. Even if I trust the system I will not be loyal, I will cheat, or I will go to an alternative service, if it exists and I can afford. A patients loyalty makes little sense in the health care system. To the extent that trust is about the performance of obligations, i.e. one performs it because it does not assume (?) the power of enforcement or sanction, reciprocity institutional neutrality gives little direct orientation. One will not perform her obligations towards an institution because that institution is neutral: neutrality per se is not a guarantee of future reciprocation, though neutrality might be relevant in the context of information regarding trustworthiness. Acceptance into the neutral professional community has informational value to the extent that it guarantees some trustworthiness or lack of bias (partly because of the nature of the control exercised by the neutral institution). The information is not about trustworthiness in the sense of obligationperformance, though institutions themselves may have a record of obligationperformance that might increase trust. Here, the institutions obligation is that of performing a public duty; hence we face certain difficulties with the traditional personal models of trust where the obligation is towards the interested person. A person who utilizes a neutral institution often has only second-hand information about its reputation. This serves confidence in the institution but not trust in the person who is supposed to perform, though the two are related. Evidence suggests that state neutrality emerged as an alternative to democratic/participatory legitimization and trust-building, after the failure of democracy as spoils-oriented interest politics. However, the prevailing view is that, notwithstanding the shortcomings of democracy, the fundamental features that are generative of trust are in place: Recurring, competitive elections in which the outcome is never an absolute certainty are another signal that the state does not rig the game (Przeworski 1991). Citizens feel that they may lose on some issues but win on others, and that they will always get the chance to try again on

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those questions about which they feel strongly and with some probability of success. The effect is trust in the institution combined with the continuing rehearsal of the same issues over and over. Thus, in the United States, abortion, states rights, and many other questions keep coming up again and again. This, I suggest, is a sign of strong institutions in which the population has a deep trust. 113 The lessons of neutralization point to a different reading. Neutralization is partly related to the state's agnostic attitude to complex social phenomena and partly to the legitimacy crisis of the democratic spoils system of interest politics. Scientific detachment and professionalism, hence impersonal predictability, are the source of trust as credibility. The continued rehearsal of competitive elections and the reopening of issues contributes to the sense of division, heterogeneity, and conflict. The feeling of never-ending conflicts increases the feeling that matters are handled unprofessionally and the alternative should be a professionally-determined "final solution." The unfinished business of interest politics, it is believed, can be countered by the neutrality of professionalism. The fact that citizens have a better (rather high) chance of participating in decision-making might appear as counterproductive, as it leaves matters unsettled and uncertain. The greater the choice, the less the acceptable solution. Increased choice does not yield trust where acceptance is based on the professionally-certified solution. If one physician proposes surgery and another suggests herbal remedies, the choices do not really help the patient. Of course, to the extent that promises of professional neutrality are not met, the system may loose all its trustworthiness (though A has no reason to assume that institution B will not follow As interest, B will lack the capacity). Such loss is preprogrammed, given the imperfection of neutralization and the actual built-in political and other bias and influences. However, as these expert systems are designed not to react to external criticism, the loss of trust will not influence the neutralized system. It is unlikely that such impersonal institutions will generate loyalty. To the extent that the state is legitimized as neutral it will loose loyalty. Neutralization of the state may impoverish the public sphere. Where neutral policy is opposed to interest politics, politics will become the area that does not require professional knowledge. The neutralized aspects of the state will be subject to efficiency considerations and distant or sheltered from public criticism. The general public will be considered incompetent. Neutralized spheres of the state are presented as entities that follow professional, scientific considerations. The moral criticism of citizens, allegedly the only acceptable critical
113

Margaret Levi, "A state of trust," European University Institute. Robert Schuman Centre, EUI Working papers of Robert Schuman Centre, 23, 12 (1996).

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capacity of the layperson, is therefore seen as inappropriate. The neutralized sphere is not simply not morally-oriented, but it is above moral evaluation or criticism. Secret services are the utmost example of this development. Lack of the moral dimension and moral sentiments undermines loyalty. Neutralization, by definition, tries to maintain distance. Believers would insist that the state should participate in their festivities a challenging expectation for government officials serving state neutrality. 114 Professionalism, because of the language of communication, civil service for reasons of insulation, keep the public at distance. Is loyalty possible towards institutions that do not allow identification for outsiders? 115 Does institutional neutrality require the loyalty of outsiders? Introduction......................................................................................................... 2 1. State neutrality through non intervention........................................................4 2. Autonomous Social Institutions (Science, Academia, University)...............10 3. Neutrality from Within..................................................................................14 4. Shortcomings of State Neutralization...........................................................39 5. Trust and Loyalty in the Neutral State .........................................................47

114

At the time of finishing this draft, the bishop who delievered the sermon on Saint Stephens Day (Hungarys most important saint, the founder of the state) reprimanded those atheist government officials who failed to attend the mass. He accused them of misunderstanding state neutrality.
115

Loyalty to such institutions by those who are part of the institution or organization is a different matter and should be discussed separately.