In the middle decades of the 20th century, government officials broadened access to the courts, placing public law more at the center of traditionally private disputes. They professionalized and regularized criminal justice, which previously had been a somewhat, if not significantly, privatized domain. They expanded and intensified industrial and financial regulation and enacted laws and rules to structure and discipline myriad commercial transactions and relationships. They assumed greater responsibility for funding and directing major infrastructure projects. And, to pay for all of this, they imposed steep and relatively progressive taxes.

By the last decades of the 20th century, critics expressing frustration with what they characterized as government overreach forced the state to retreat. As a result, government officials endorsed and encouraged private arbitration; privatized policing and prison administration; deregulated banking, telecom, and other industrial sectors; sold and leased highway infrastructure to for-profit companies; and reduced and flattened tax burdens.

This rise and then retreat of state welfarism should come as no surprise. After all, one of the signature projects of legal liberalism has been to separate the public from the private (and vice versa) – and then find points along the public–private spectrum that best reflect our preferences for the right mix of state and market ordering. Hence, we oscillated from primarily a laissez-faire regime during the Lochner era to something approximating a welfare-state regime spanning the mid-1930s to the mid-1970s and then back to a more libertarian resting point starting in the build-up to the Reagan Revolution and carrying forward into the early years of the 21st century.

Though scholars, policymakers, and jurists are still processing this last and deeply consequential moment of deregulation and privatization, change is once again upon us. We’re seemingly poised for yet another paradigm shift. As my recent Columbia Law Review article shows, today we have government reclaiming some of its recently ceded ground, albeit with a twist.  Returning to the examples discussed above:

• Government is making civil adjudication more user-friendly, with some jurisdictions competing against private arbitrators by creating “fast-pass” public trials for those willing to pay a premium.
• The tide has now turned against prison privatization – and, while federal and state governments reassert fuller responsibility, we see some jurisdictions experimenting with VIP public jail facilities (with hotel-style amenities) for nonviolent offenders willing to pay extra for the upgrade out of gen pop.
• When it comes to social and economic regulation, government has likewise reemerged, by taking ownership stakes in failing financial institutions after the 2008 global financial crisis and by taking very seriously proposals to create public (that is, government-run) banks, possibly through the U.S. Postal Service. (Additional government takeovers, rather than old-school bailouts, may be in the offing as a result of the instant, pandemic-induced economic shutdown.)
• The privatization craze around highways has likewise died down, so much so that some states are buying back privately owned and operated roads. And, in yet another nod to government acting as a market participant, public highway administrators are reclassifying left lanes as premium, VIP lanes, no longer reserved for green-energy cars and carpoolers but rather open to those willing and able to pay sometimes quite steep surcharges.
• Given the enduring hostility to taxes, this rejuvenated, in many respects post-liberal government has encouraged “patriotic philanthropy,” essentially soliciting private charitable giving to fund state programs and initiatives.

My article aims to make sense of this reconfigured landscape (and the cultural, economic, legal, and political conditions that enabled it) – what I call public capitalism. It explains how public capitalism both reflects and helps accelerate the decline of modern legal liberalism. And it shows how public capitalism, by commingling sovereign power with commercial objectives, tools, and pathways, unsettles U.S. constitutional, administrative, and corporate law.

First, public capitalism is not just another shift along the public-private axis, another routine oscillation as each generation renegotiates its place within the western legal-liberal tradition. Instead what we find is government repositioning itself as a savvy market participant, as evidenced by the examples just discussed – again, using commercial rather than just its traditional sovereign levers to advance its various aims.

Second, public capitalism isn’t synonymous with neoliberalism. I understand neoliberalism as involving the valorization of market practices, goals, and theories to such an extent that the state not only promotes free enterprise but also reconstitutes itself along decidedly businesslike lines. Admittedly, under public capitalism, the state has expanded its commercial toolkit, using government market participation as an alternative to traditional sovereign command-and-control regulations and tax-and-transfer welfare programs. But that’s hardly the whole picture. Government market participation need not be in service of free, let alone freer, enterprise. It can, and is, used to achieve any number of market-correcting – rather than market-enhancing or reinforcing – regulatory aims, not to mention redistributive initiatives. Consider the public options discussed in such industries as healthcare and banking.  If anything, state commercial engagement of that sort seems more socialistic than neoliberal.

Third, there is a corresponding converse trend afoot. Some firms are going through a metamorphosis of their own. Mirroring the state’s crossing over into the realm of commercial engagement, these businesses are making sovereign-seeming interventions. Such apparent detours from the steady march of capitalism are most evident in the newest and biggest sectors of the market. Today we see social-media, high-tech, and gig economy firms undertaking initiatives that are more akin to governing and regulating than they are to ordinary commercial buying, selling, or trading.  Consider, for example, Facebook’s so-called “supreme court” and its proposed Libra currency.  This converse trend, too, may only intensify as we see the government (both federal and some states) fail, or fall short, in their immediate and long-term responses to the Covid-19 pandemic.  (These “private options” are what I’m currently research and writing about.)

What then can we say about public capitalism?  For starters, it appears that public and private are less fixed, less distinct, and (as a result) less relevant statuses.  Though the public-private divide dominated much of our thinking about modern legal liberalism (and drove conversations about privatization and deregulation), what may be of greater relevance going forward is the sovereign–commercial axis, as public and private actors are each showing themselves willing and able to intervene in the political economy as either sovereign regulators or market participants. Hence public capitalism requires us to think less about the legal status of actors – that is, either public or private – and more about the tools they wield, the pricing and valuation schemes they privilege, and the kinds of obligations they impose.

In this jumble, government and private actors and institutions toggle identities, orientations, and goals. They are thus able to transcend their classically liberal roles as either public sovereigns or private businesspeople. We, in turn, the subjects (and objects) of public capitalism, may find this reconfiguration empowering. We may be empowered to insist government be more commercially minded – and treat us as consumers. We may be empowered, too, to insist firms be more attentive to the commonweal – and thus treat us like citizens.

The downside, of course, is that such liberation may leave citizen-consumers unmoored. For generations, we’ve been immersed in the law and language of legal liberalism. As a result, we’re not well positioned to evaluate, negotiate, modify, or challenge various manifestations of public capitalism.

For the immediate moment, then, we can say the following: Public capitalism is about power, specifically the power to reconfigure institutional identities and transcend legal ones. Government market participation (like its private-sector analog) changes the nature of government and firms – and the interplay between the two.  The challenge going forward will thus be to ascribe meaning to public capitalism and to put that undeniable but undertheorized power to good use. Perhaps public capitalism is the vehicle that can pull us out of neoliberalism’s double doldrums: the worker alienation many feel in an increasingly hyper-capitalist economy, and the political alienation many feel in an increasingly plutocratic polis. Just as plausibly, public capitalism may exacerbate our dual dislocations.

Jon D. Michaels is Professor of Law at the UCLA School of Law. This essay is cross-posted from the CLS Blue Sky Blog and builds on his recent Columbia Law Review article We the Shareholders: Government Market Participation in the Postliberal U.S. Political Economy.