What is the purpose of the law under capitalism?

“If physical force is to be barred from social relationships, men need an institution charged with the task of protecting their rights under an objective code of rules. This is the task of a government – of a proper government – its basic task, its only moral justification and the reason why men do need a government. A government is the means of placing the retaliatory use of physical force under objective control – i.e., under objectively defined laws. “ — AYN RAND “The Nature of Government” (CUI)

Laws are written rules of conduct, enforced by the state, on how people (whether private citizens or public servants) should behave around each other.

Under capitalism, the guiding principle of all these rules of conduct is for the individual to respect the rights of everyone by violating the rights of no one. As the initiation of physical force is the only way rights can be violated, this means to never start or threaten physical force (or its corollary fraud) against anyone (except in self-defense against the use of force.)

To place the use of force under objective legal control — that is, under clearly defined laws based on the principle of individual rights — those who make up society delegate to the government their power to defend and retaliate against those who initiate force. This point is eloquently made by the philosopher Ayn Rand:

“The retaliatory use of force requires objective rules of evidence to establish that a crime has been committed and to prove who committed it, as well as objective rules to define punishments and enforcement procedures. Men who attempt to prosecute crimes, without such rules, are a lynch mob. If a society left the retaliatory use of force in the hands of individual citizens, it would degenerate into mob rule, lynch law and an endless series of bloody private feuds or vendettas.” [1]

Observe that laws apply not only to private citizens but more importantly to the government machinery that enforces those laws. Historically, it is statist governments that have been the greatest violator of individual rights. Under capitalism, to ensure that no dictator — whether a single demagogue, a political pressure-group, or the democratic majority of the moment — may usurp the powers of government, and turn its machinery upon its citizens, every aspect of government action is codified, and carried out, according to objectively defined laws.

In a capitalist society, it is the actions of government officials — and not the actions of citizens — that are regulated, so that the rights of the individual may be protected.

As long as the individual is not violating the rights of others, the state’s policy is laissez-faire — to leave them alone.

[1] AYN RAND “The Nature of Government” (CUI)


Recommended Reading:

Tara Smith, “Objective Law,” A Companion to Ayn Rand: (Blackwell Companions to Philosophy) 209
“What is Objective Law?” By Harry Binswanger, Capitalism Magazine
Chapter 4: Objectivity, in Leonard Peikoff’s Objectivism: The Philosophy of Ayn Rand

What is the purpose of the constitution under capitalism?

The supreme legal document of a capitalist society is the constitution — a citizen’s protection not only against private criminals but public ones as well. A written constitution objectively defines the nature, scope, and limitations of government powers serving as the individual’s protection against the government.

It is important to note that “the Constitution is a limitation on the government, not on private individuals—that it does not prescribe the conduct of private individuals, only the conduct of the government—that it is not a charter for government power, but a charter of the citizens’ protection against the government.” [1]

[1] Ayn Rand, “The Nature of Government”

What is a constitutional republic?

“A republic if you can keep it.” — Benjamin Franklin

A republic is a representative form of government based on federalist principles, operating under a rule of law with a constitution that divides political power among the various branches of government (legislative, executive, judiciary), providing further checks and balances on the use of political power, in order to protect the rights of the individual.

“In the compound republic of America, the power surrendered by the people is first divided between two distinct governments [federalism], and then the portion allotted to each subdivided among distinct and separate departments [division of powers]. Hence a double security arises to the rights of the people.” [1]


  • [1] James Madison “The Structure of the Government Must Furnish the Proper Checks and Balances Between the Different Departments” Federalist No. 51.

What is federalism?

Federalism is the principle of dividing political power vertically between central (federal) and local (state, municipal, county, city) governments, where each level acts as a counterbalance to the power of the other.

What is the separation of powers?

The separation of powers is the principle of dividing political power so it does not rest with one individual or faction.

The purpose is to centralize power only so far as necessary for the government to carry out its purposes — the protection of individual rights; and to decentralize it as much as possible keeping as much power as possible with the individual. Such power can be divided vertically (federalism) and horizontally (dividing the government into separate branches).

What are the branches of the central (federal) government?

The federal (central) government consists of three branches: the legislative branch (congress, senate) proposes and makes laws; the executive branch (president) carries out and executes those laws; the judicial branch (supreme court) judges legal cases according to the law.

What are checks and balances?

Each government branch has additional powers to act as checks on the powers of other branches in order to balance power equally among the branches, i.e., “Ambition must be made to counteract ambition.”

“Ambition must be made to counteract ambition. The interest of the man must be connected with the constitutional rights of the place. It may be a reflection on human nature, that such devices should be necessary to control the abuses of government. But what is government itself, but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.

“A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions. This policy of supplying, by opposite and rival interests, the defect of better motives, might be traced through the whole system of human affairs, private as well as public. We see it particularly displayed in all the subordinate distributions of power, where the constant aim is to divide and arrange the several offices in such a manner as that each may be a check on the other that the private interest of every individual may be a sentinel over the public rights. [1]

Examples of such checks and balances include the president’s power to veto congressional legislation, and the supreme courts power to judge legislation as unconstitutional.


  • [1] James Madison “The Structure of the Government Must Furnish the Proper Checks and Balances Between the Different Departments” Federalist No. 51.

Why is political power regulated?

Under capitalism, it is the actions of the government that are regulated so that the rights of the individual are protected.

Political power is the power to legally use force,i.e., the police power to kill. Given the inherent dangers such power poses, the use of such power is expressly limited to enumerated powers and regulated according to a rule of law. Each and every action by the government must be justified to show it is not violating the rights of the individual.

Under capitalism, all government actions by public servants are held as presumed guilty of violating rights unless the government can either show it is acting in accordance with the law and/or where discretion is involved can show probable cause for its actions. In such cases, it is up to the state to provide evidence that it is following the law.

Conversely, under capitalism, all individual actions by private citizens are held to be presumed innocent of violating rights unless the state can provide proof beyond a reasonable doubt that the citizen was disobeying a law (violating the rights of other individuals), and/or physically interfering (either directly or indirectly) with the state’s ability to protect the rights of others. (The use of physical force by individuals in their private capacity is also regulated — for example when a private citizen uses a gun in self-defense.)

Under capitalism, it is the actions of the government that are regulated so that the rights of the individual are protected.

What is a democracy?

Pure democracy is collectivist mob-rule.

A pure democracy is a collectivist form of government where the majority rules over the minority, i.e., mob rule, i.e., submitting moral right to political might.

Historically, democracy is one of the greatest dangers to the rights of the individual. To quote James Madison writing in The Federalist Papers:

“[I]t may be concluded that a pure democracy…can admit of no cure for the mischiefs of faction … [as] there is nothing to check the inducements to sacrifice the weaker party or an obnoxious individual. Hence it is that such democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths.” [1]

Under capitalism, no individual, nor any group of individuals, whether they be a minority (aristocracy, oligarchy) or a majority (democracy), can violate the inalienable rights of any other minority, including the smallest minority that exists — the individual.

Under capitalism, the constitution is so designed to limit the power of the faction in power to use the powers of the government to violate the rights of the minority: the greatest minority being the individual.

Capitalism limits the democracy — the majority of the moment — to a useful purpose: the electing of individuals to various positions of public office. Other than this limited aspect, the power of the majority is severely limited, and even the power to vote is limited, i.e., the indirect use of the electoral college to have the states select a President as opposed to direct voting on a nationwide scale Capitalism in this sense only supports a limited “democracy,” but not a pure unlimited one. (Colloquially, democracy is used to mean universal suffrage and the right to vote for ones political representatives which leads to conceptual confusion of mixing freedom of universal suffrage with its antithesis, mob rule.)

A capitalist system is a constitutional republic and not a democracy. It is a federal system with a division of powers, and checks and balances so ordered to protect the rights of the individual, from private criminals and democratically elected public officials who profess to speak for the “public good.”

For those who are confused by the issue, the essential point is this: is it right for another man to enslave, rape, rob, and murder another? Capitalism says never; democracy says yes — if the majority wills it.

[1] James Madison, The Federalist Papers