How did modern liberal states emerge? Francis Fukuyama calls this the problem of “getting to Denmark.”Economists have traditionally focused on the question of how sustained economic growth got started. Political scientists, on the other hand, have focused on questions of democratization and political stability. Both of these are critical components of liberal states. But there is one factor that social scientists have neglected: religion.
This neglect is easy to understand. In the developed world religious liberty is so ingrained in formal and informal institutions that it rarely emerges as a newsworthy issue. This was not always the case. Religion was so central to premodern societies that it is difficult to fully understand the transformations associated with modernity without attending to it. Religion was used to justify the categories in which government and society more broadly used to structure everyday life. Women versus men, nobles versus commoners, guild members versus non-guild members, Muslims versus Christians, Christians versus Jews. All of these categories—as well as the different statuses associated with them in law and in culture—relied to a varying degree on religion to legitimize their use.
If we are interested in the rise of liberal societies and liberal principles such as freedom of expression, then we have to understand how society came to adopt new political and economic institutions that were largely separated from religious doctrines. That is, we need to explain the rise of religious freedom.
The emergence of religious freedom in the West was not the product of ideas alone. The mid-20th century historian of religious freedom Roland H. Bainton observed that “the best things on religious liberty were said in the sixteenth century but not practiced until the nineteenth.” What he meant was that during the 16th century there were many statements in favor of religious liberalism despite an intensification of religious persecution and violence. Writers including Sebastian Castellio (1515–1563)—who condemned the burning of Michael Severtus by Jean Calvin—and Anabaptists such as Felix Manz (d. 1527) and Balthasar Hubmaier (1480–1528), both of whom suffered death for their beliefs—articulated arguments in favor of religious pluralism. But they were largely ignored by their peers and had no influence on policy. It was only in the 19th century that some measure of religious freedom was attained in Europe.
Religious freedom should be sharply distinguished from the practice of toleration. Today what the word “tolerance” refers to is better called permissive individualism, that is,the idea that we have no right to judge or condemn individuals for their lifestyle choices so long as those choices don’t impose harms on others. But the original Latin meaning of tolere, which persisted all the way through the 17th century, is to bear something that one strongly disagrees with. It was a practical rather than a moral principle, and it was contingent and subject to revision. In our book Persecution and Toleration, we use the term “conditional toleration” to emphasize the difference between toleration and genuine religious freedom.
Why does this distinction matter? Too often historians praise societies that didn’t actively persecute religious minorities as “tolerant.” But the absence of persecution does not imply that individuals were free to worship as they liked or, indeed, to pursue economic or social betterment. The assumption that dissent could invite repression was sufficient to create a climate in which potentially subversive thoughts were not freely expressed. In our reading of the historical evidence, neither ancient Rome nor the Islamic or Mongol Empires had religious freedom. They often refrained from actively persecuting religious minorities, but they were also ruthless in suppressing dissent when it suited their political goals. Religious freedom is a uniquely liberal achievement, and liberalism is an achievement of post-1700 modernity. What explains it?
Personal Rules versus Identity Rules
In Violence and Social Orders, Douglass North, Barry Weingast, and John Wallis distinguish between personal rules, identity rules, and general rules. Personal rules involve treating people differently on the basis of their individual characteristics. This works when social cooperation is limited to a small number of individuals, say a band of ten or twenty. Members can trust one another because the chances of future interactions are high. Consistent with game theoretic reasoning, this very often leads to sustained cooperation.
Personal rules have a serious shortcoming, however. They are of limited use in dealing with strangers. As the scale of society increases and the complexity of social interactions grows, personal rules cease to be sufficient. With the shift to settled agriculture after 8,000 BC, political organizations became larger and states oversaw the introduction of more sophisticated legal systems to prevent theft, fraud, and uncontrolled violence. For most of history, and in much of the developing world today, these laws have taken the form of identity rules.
Identity rules depend on the social identity of the parties involved. This could refer to an individual’s clan, caste, class, religious affiliation, or ethnicity. Examples from historical legal systems abound. Aristocrats faced different rules from commoners. Slaves faced different rules from freemen. The Code of Hammurabi, for example, prescribed punishment based on the relative status of the perpetrator and the victim. Identity rules were common historically because governing individuals on the basis of their legible social characteristics was cheap. As religious identity was particularly salient, many identity rules treated individuals differently on the basis of their religion.
Religion was an especially important component of identity in the large agrarian civilizations of Europe and the Near East in a time before nationalism and nation states. Shared religious beliefs and religious identities were seen as crucial to maintaining social order. Religious differences were extremely destabilizing because they were associated with a host of deep societal cleavages.
In an environment where a common religious identity undergirded not only the institutions of the church, but also those of the state and civil society, both religious freedom specifically, and liberalism more generally, were unthinkable.
For instance, in medieval and early modern Europe oaths sworn before God played an important role in upholding the social order. These were thought so important that atheists were seen as outside the political community, since as John Locke put it, “promises, covenants, and oaths, which are the bonds of human society, can have no hold upon an atheist.”
A shared religious identity was also crucial for guild membership. Guilds in Christian Spain excluded Muslims. Guilds in 14th century Tallinn excluded Orthodox Christians. Jews were excluded almost everywhere. In parts of Europe converts from Judaism and even their descendants or remote relations could not be guild members. In a world governed by identity rules, an individual’s religious identity determined what economic activities were open to them. The question is: How did we move from a world of identity rules to one of general rules?
General Rules and State Capacity
The eventual abandonment of identity rules in favor of general rules in Western Europe is intricately bound up with the development of state capacity. State capacity refers to the ability of a government to enforce rules and raise taxes. Identity rules are a cheap, but ultimately limited, way to do both these things. In contrast, it is expensive to implement general rules that are uniformly applied to individuals regardless of their personal beliefs or family background.
As an illustration, consider how early modern governments often used Jewish communities as a source of tax revenue. Usury restrictions made lending by Christians very costly. However, rulers could grant monopoly rights to Jews to lend without violating their religious principles. In turn, the rates of interest charged by Jewish lenders were high, and the profits were taxed away by the very rulers who granted these rights. Finally, the specialization of Jews as moneylenders exacerbated preexisting antisemitism among the Christian population. This in turn made it relatively easy for rulers to threaten Jews in case they didn’t intend to pay up.
So long as rulers relied on Jewish moneylending as a source of revenue, Jews were trapped in this vulnerable situation. Their position could improve only when states developed more sophisticated systems of taxation and credit.
As suggested by the above example, low state capacity and a reliance on identity rules are self-reinforcing. States that rely on identity rules face less incentive to invest in the fiscal and legal institutions that would increase state capacity. This, in turn, makes them more reliant on identity rules and less able to enforce general rules.
Furthermore, religion is a convenient source of legitimacy for weak states. This gives rise to a partnership between state and church. While there are many forms that this partnership can take, a common one involved the state enforcing religious conformity in return for support from the religious authority.
In Persecution and Toleration we provide a detailed historical narrative that discusses how events like the Black Death and the Reformation disrupted the medieval pact between the church and state. This narrative focuses on the political and institutional consequences of these shocks.
Following the Reformation, we document how religious violence was most extreme in states like England and France where the state was relatively strong. It was in these states that these conflicts first undermined the old church-state partnership. As this partnership weakened, new sources of legitimacy had to be sought. In contrast, Poland, where state capacity was low, saw little religious persecution despite the spread of Protestantism.
It took repeated failures to reimpose the old partnership between church and state before rulers gave up trying to eliminate religious diversity. In France, for instance, Louis XIV’s attempt to eradicate Protestantism by expulsion failed, and during the 18th century French Protestants gradually secured a degree of recognition, culminating in the Edict of Toleration of 1787. In England, while formal laws against Catholics and nonconformists remained on the books until the 19th century, the 18th century also saw a marked decline in religious tension and violence.
In our argument it was not that the Wars of Religion simply exhausted confessional and doctrinal disputes. Rather there was a transformation at the institutional level. The leading European states shifted away from identity rules towards more general rules. This shift was related to 19th-century historian Henry Sumner Maine’s discussion of the passage from status to contract: Status was imposed and ascriptive. Contracts, in contrast, are the outcome of voluntary choices. Status-based rules are invariably identity rules. Contracts provide the foundation for a system of general rules.
Moving from a fixed status to a contractual society helped set in motion a range of developments, including the growth of markets and a more extensive division of labor. But it had the unintended consequence of diminishing the political importance of religion, and this made liberalism feasible for the first time in history.
Throughout our book we stress that there is no necessary relationship between state capacity and liberalism. Powerful states have been and still are capable of repressing minorities, of course. The horrors of the 20th century were conducted by all-encompassing Leviathan states. But liberalism is fragile and highly vulnerable in the absence of a powerful state.
Readers of Cato Unbound might find this argument uncomfortable. After all, it places a lot of explanatory weight on the rise of state institutions and stands in contrast to much scholarship in the libertarian tradition. However, we see it as building directly on the insights of the most important classical liberals, including Adam Smith and F.A. Hayek, who emphasized the importance of strong but limited states in providing the institutional framework in which markets and liberalism can flourish.
Modern States and Liberalism
What does our argument imply about the fate of liberal societies today? While the far left has never accepted liberal values such as freedom of expression and freedom of religion, antipathy towards liberal values is now evident in mainstream progressive publications as well. Liberalism is indicted because it is perceived as legitimating inequality and failing to endorse social justice.
Similarly, writers from the right such as Patrick Deneen and Yoram Hazony critique liberalism for destabilizing the family and the foundations of social order. They construct a strawman version of liberalism based almost entirely on John Locke’s account of the social contract. As these writers would have it, liberalism is based on the idea that society is justified because rational self-interested individuals came together to form a society for mutual self-betterment. This legitimates a society where individuals become atomized and dislocated, unmoored from tradition, religion, and family.
This essay is not the place to fully engage these misconceptions. But it is important to note that we think the core characteristics of a liberal society are the rule of law and reliance on general rules. It does not require belief in the realism (or even usefulness) of social contract theory. Nor does it require us to believe that human beings correspond to the model of Homo economicus.
Liberalism is valuable because it is the only form of social order we know of that is consistent with a high degree of autonomy and human dignity. By documenting the vital role played by the strong states in adopting liberal institutions, Persecution and Toleration sheds new light on how we think of the prospects of the liberal order in the future.
In parts of the developing world, where states are weak and religious and ethnic identities remain strong, the future does not look bright for religious freedom or liberalism more generally. Globalization and the spread of Enlightenment values were once thought likely to lead to liberal democracy becoming the default mode of government. This no longer seems so. There is simply little evidence that liberal ideas alone will sway governments to adopt general rules and the kinds of institutions required to upload a liberal social order.
By contrast, in the developed world where states are relatively strong and liberal ideas already have legitimacy, there remains room for optimism. Though liberal values appear in retreat today, the costs of reverting to a world of identity rules would be very costly. Understanding the origins of liberalism allows us to take some measure of those costs.
 Historians, on the other hand, have rediscovered the importance of religion in recent decades. Conflicts like the English Civil War (1642-1649) that were once studied through the lens of class analysis are now viewed as religious struggles.
 Roland Bainton, The Travils of Religious Liberty. Westminster. 1951, page 253.
 See for instance, Maria Rosa Menocal, The Ornament of the World: How Muslims, Jews and Christians Created a Culture of Tolerance in Medieval Spain. Little Brown, 2002 for the claim that Islamic Spain was pluralist and tolerant. Similar claims are made for the Mongols by George Lane, Daily Life in the Mongol Empire, Westport, Conn.: Greenwood, 2006. A recent book that promotes the notion that the Romans were comparatively tolerant despite their persecution of Christian is Catherine Nixey, The Darkening Age: The Christian Destruction of the Classical World. MacMillan, 2017.
 John Locke, Letter on Toleration, 1689; 52.
 Sheilagh Ogilvie. The European Guilds: An Economic Analysis. Princeton University Press. pages 103-104. We discuss this in Johnson and Koyama, pages 56-57.
 See Patrick J. Deenen. Why Liberalism Failed. Yale University Press and Yoram Hazony, The Virtue of Nationalism. Basic Books. 2018.