Understanding the relation between society and state is crucial to understanding many other issues, and is essential to understanding the principle of subsidiarity.
It is recommended that you first read "The Principle of Subsidiarity".
The Relation between Society and State
When trying to understand the right ordering of society it is of fundamental importance to understand the distinction between society and state. How can each be defined? What is the relation between them? In general terms there tend to be two competing views about the relation between society and state, though for most people these views remain largely implicit.
Society as Fundamental
The first sees society as the fundamental reality, with its own proper forms of leadership. The state is a secondary reality, ordered to the good of society, necessary to compensate for the more serious defects in society's own leadership, and sometimes to take a more ordinary leading role because of some incapacity affecting society for the time being. But the state poses a significant danger, because in order to achieve its purpose it needs sufficient power, but such power can be misused. As people have always worried: "Who will watch the watchers?" It is critically important then that the society be able to keep the state within its proper bounds. As others have noted: "Someone with enough power to protect what you have also has enough power to take it away". This first view could be summed up as follows:
The state stands in a 'quasi-extrinsic' relation to society as a necessary but ambiguous partner in governance.
The State as Ordinary Leadership of Society
The second view sees the state simply as the ordinary leadership of society. This entitles it to simply take charge and direct all the elements of society as a manager directs a business. Smaller entities within society are not recognised as having their own originating principle, and their own right to exist and direct themselves, but are in principle subject to direction and reordering by the state. In practice the smaller constituent parts of society will often be left a fair amount of space to be themselves, but this is not because they have their own origin and constitution prior to and apart from the state. In principle they can be redirected and co-opted by the state.
The state is seen simply as the expression of the general will, so that nothing is outside the scope of the state, and all come under its direction in a straightforward and direct manner. Possible abuses of power are not seen as applying to the very notion of the state as such but are simply the kinds of things that have to be taken into account when establishing and sometimes reforming the various institutions of government. This second view could be summed up as follows:
The state is inside society, as its own ordinary leadership.
If the state is the solution what is the problem?
These two different views on the relation between society and state arise from two different views on human nature. The state is seen as the solution to two different kinds of problem.
A Universal 'Self-Replicating' Problem
On the first view, human nature has a fundamental flaw that keeps reproducing itself. It is a problem that arises in the human heart, and is not simply a result of poverty or lack of education, or lack of opportunities. There are many particular problems for which workable enough solutions can be found, but we can't make any of these solutions 'stick', as if we had solved them once and for all. The underlying problem that gave rise to them in the first place will always be present.
The problem that gives rise to the need for the state is of this fundamental kind, and since the state is also a human reality, it too is affected in its core by this self-replicating problem. So the very reason we need the state in the first place as part of the solution, also exists within the state, and indeed this problem is more dangerous there because of the greater power the state has. The first view is ever mindful that:
There is always a risk that the state will become a bigger problem than the ones it was established to solve.
For society the problem is like trying to hold a tiger by the tail. The state of its very nature is both a necessary solution to some of society's problems, and an ever-present danger in the midst of society, requiring constant vigilance to restrain its tendency to dominate instead of serve.
A Problem of Lack of Development
On the second view, there is no fundamental flaw in human nature, but only the particular problems that arise due to lack of development. Some of this lack of development is unavoidable, since we depend on the ongoing development of human knowledge and expertise to solve our problems. Although we might never expect to solve every possible problem, we could in principle, given enough time.
Some of this lack of development is avoidable, and requires solutions such as education and better systems to extend the available solutions to everyone. For the time being there are problems that could look as though the first view is correct, but in time even these seemingly fundamental and intractable problems will be overcome. The state needs to represent the leading edge of development, and take such measures as may be needed to implement these developments even against the opposition of less developed elements in society. The second view generally tends to think:
The state is the solution, not the problem.
Society's role is to try and change in timely fashion to keep up with the developments mandated by the state. The state has the powers it does in order to be the privileged means of 'leveraging' development so as to get the best possible outcomes for society.
Society, State and Subsidiarity
These two competing views have two quite different implications for subsidiarity.
Subsidiarity is Foundational
On the first view subsidiarity is foundational. For example, the first form of society is family, and family has rights and prerogatives deriving from its own nature. The constitution of the family is independent of the state and not subject in its nature to the laws of the state. Closely related to this are local communities and associations, which also have a right to exist in their own proper self chosen form. The fact that individuals in families and communities might break particular laws does not thereby render family and community subject to redefinition by the state.
Not only do the constituent parts of society have their own proper form, which must be respected by law, so does civil society as a whole. Whereas society has its own source of being, its own creativity and an open-ended character, the state is conditional and restricted to its limited purposes and means. Because of this, the first view holds that:
Subsidiarity is a constitutive principle of social order.
Within its own realm the state has some proper latitude in how this is implemented, but it may not implement measures which effectively contradict the principle of subsidiarity.
Subsidiarity is Incidental
On the second view subsidiarity is incidental. For various reasons the state might refrain from intruding into the affairs of constituent elements in society, but it does not have to do so as a matter of principle. This is a particular instance of the larger principle that there is no authority outside the state that can determine what the limits of the state are. The second view holds that:
Subsidiarity might be implemented in practice but is not required by principle.
There is no principle greater than the general will, and so subsidiarity can only be a practical principle adopted when it seems apt.
Conclusion
These two views of the relation between society and state are not 'ideal types' but are actual views that can be adopted and implemented in practice. They commonly tend to act as underlying intuitions or attitudes shaping the approach that people take. But they can also be clarified as systematic principles and implemented as a consistent program of action, in which case they lead to two very different outcomes.
It matters a great deal which of these two directions a society takes.