The development of an economic sphere had to wait until production and trade was freed from the constraints of feudalism. This began with the formation of independent city-states governed by princes of mayors. Serfs who moved off of feudal lands to city-states were free to produce and trade. Businesses were given a boost with the rise of banks. This stimulated inventions and origins of modern science during the Renaissance.

The economic sphere developed further with the Reformation and the development of the “Protestant work ethic,”1The relation of the Protestant work ethic to the massive economic development that took place in the West in the last 400 years was developed by Max Weber and R.H. Tawney around 1922. Max Weber, Religions-soziologie (The Sociology of Religion). J.C.B. Mohr, 1922, esp. Chapters 13-16 on religion and the economic order. R.H. Tawney, Religion and the Rise of Capitalism, New York: Harcourt, Brace, and World, 1926, based on lectures given in 1922. after Luther, Calvin, Wesley, and other Protestant leaders taught that work was “the glorification of God,”2Although in Ephesians and Colossians, Paul spoke of servants and slaves serving God through their work, the idea of everyone working in order to glorify God required an economy not based on slavery or feudalism. Paul lived in the Roman Empire with a large middle class before it declined into the Dark Ages of feudalism. John Calvin, in Institutes of the Christian Religion, book 3, chapter 10, section 6, stated “in following your proper calling, no work will be so mean and sordid as not to have a splendor and value in the eye of God.”

Then liberal democracy, especially in the United States, where there was greater freedom and to pursue economic self-sufficiency with widely available land, provided the opportunity for the development of a large middle class. The United States Declaration of Independence proclaimed a new cultural vision of “the right to life, liberty, and the pursuit of happiness.”These rights were embodied in the Constitution. In 1689, John Locke listed life, liberty, and property as fundamental rights. The US Founders replaced “property” in with “the pursuit of happiness,” but ownership of property is essential to that pursuit.  When the US Constitution was signed, most families were self-sufficient on farms, trades, or businesses, there were no corporations.3The American Revolution was fought, in part, to get rid of the Hudson’s Bay Company and the East India Company, which were given favored status by the King, who forbade competition from American family businesses. The Boston Tea Party was an act against the king’s tea monopoly. After the Revolution, those two English companies were declared illegal in the U.S.

The US Constitution was a political document, and the various religions espoused cultural beliefs based on Judeo-Christian teachings. At the founding there was no specific document or principles related to the economy. Except for the banning of foreign corporations, the economy was largely unregulated. However, the founders were concerned about concentrations of money affecting the government:

  1. Moneyed interests should be prevented from controlling legislation.
  2. The social and economic affairs were left to the states.
  3. The federal government would regulate cross-border trade.
  4. The federal government would be funded by excise taxes and fees for services.

Private ownership of property, freedom, and market economies enabled great production of goods and services, technological development, and wealth in the United States and Europe. Adam Smith, writing in 1776, the same year as the Declaration of Independence, wrote the seminal treatise on economic and market principles, many of which are still taught in Economic 101 classes today. Smith’s principles assumed everyone had equal rights to ownership and economic opportunity. And, when most businesses were run by individuals and families, with lots of market competition, early America approached economic democracy.

However, with largely unregulated state economies, the economic power of large banks, cartels, monopolies, corporations, and stock markets led to huge disparities in economic opportunity. Price gouging and unfair labor practices were widespread. Economic injustice developed alongside economic growth. Anti-slavery movements, trade unions, and economic ideologies arose to challenge these negative developments. Rather than fixing problems of injustice in the massively expanding economy. The retrograde ideology of Marxism-Leninism wanted to abolish a free economic sector entirely and return it to the government as in the time of feudalism.

Until the twentieth century, most people thought of two social spheres: church and state. The First Amendment of the US Constitution stated “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” It was not so clear about the economic sphere beginning to develop. The idea of three social spheres, with an economic sphere as important as cultural and political spheres, did not develop until the twentieth century. In 1917, Rudolph Steiner first promoted this idea in his book The Threefold Commonwealth.4Rudolph Steiner, The Threefold Commonwealth, trans. E. Bowen-Wedgwood, London and New York: The Threefold Commonwealth Publishing Association, 1922. Then in 1922, academics Max Weber and R.H. Tawney specifically discussed the relationship between religion and the socio-economic order. The economy had finally emerged as an independent social sphere.

While an independent social sphere by the twentieth century, the economy was organized in a feudalistic form, with large central banks controlling it with the collusion of governments. It had moved far from the nascent economic democracy in the time of Adam Smith. This feudalistic form was based on the emergence of poorly regulated and corrupted economic institutions with far more control of money and economic power than any individual or family business. This immoral collusion was legalized in 1696 with a government bailout of the Bank of England5 and continues to the present date with the TARP bailout in September 2008.6

Economic democracy has not yet developed in a world where banks create new fiat money by lending without assets to back it. This is a form of feudalism in which banks, rather than individuals control economic development and provide the new money to others at their discretion. In an economic democracy,7 new money might be available to everyone equally, like in a game where everyone starts with the same amount of money. Such a maturation of the economic sphere into individual control of economic destiny would satisfy both the concerns of economists like Frederich Hayek who believed ownership is the antidote to serfdom, and Karl Marx who envisioned ownership by the masses, but naively advocated an intermediate stage of government control.