Wednesday, April 08, 2009
Undermining contracts, undermining trust
An interesting recent NYT piece noting that "Contracts are everywhere under assault." The AIG contracts looked so outrageous that Congress thought nothing of deciding to mess with them. Union contracts with the auto industry are in danger. One can understand the impulse, perhaps, but the Constitution forbids the government to impair the obligation of contracts for good reason (although bankruptcy laws, enacted in the early 1800s and more controversial at the time than the history books tell us, for precisely that reason, do undermine contracts already). Contracts and agreements are the sinews of trust among people who may not have the bonds of kinship or clan to fall back on, and therefore an important underpinning of a civil society. If contracts are subject to revision by force by a third party that wasn't even part of the original agreement, it's hard to have a functioning market economy. Undermining contracts is hardly a way to facilitate an economic recovery.