The author argues that Hegel in his early manuscript The German Constitution and in the later Elements of the Philosophy of Right develops the theory of the ethical (sittlicher) state. The argument consists of four distinctive claims. First, that the ethical state is - in the words of Charles Taylor - a politically organized community: a community of not only governmental officials, but also of patriotic ordinary citizens. Second, that the ethical state must also be an institution of political power, whose purpose is to realize the necessary or the substantial will. Third, that the ethical state is not a paternalistic or machine-like hierarchy, but affords room for spontaneous activity of its citizens. The fourth claim is that the ethical state holds sacred both political power and the freedom of the individual. The freedom of the individual can be limited only in some special cases. This reading of Hegel's theory of the state challenges wide-spread criticism of Hegel's political theory as, e.g. put forward by Karl Popper in his book The Open Society and Its Enemies. Popper understand the state only in a narrower sense of institution of political power, whose purpose is to secure freedom and the rights of citizens, and not as politically organized community. He thus misinterprets Hegel's second, third and fourth claim. It is argued that Popper's and Popper-inspired criticism of Hegel's political theory expresses a one-sided perspective of an atomist liberal tradition, which demonizes the communitarian tendencies of the western political thought (Plato, Aristotle, Rousseau, Hegel).