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Citizens United: Corruption Disguised as Capitalism

Posted by Larry Doyle on August 1, 2013 10:04 AM |

Follow the money.

The Citizens United decision allowing for corporate and union funding for the public support or denouncement of political candidates evokes strong reaction from those on both sides of the debate like few other topics.

Are we to believe, though, that the right of corporations and/or unions to speak out does not also come with a payoff tied along with it? Come on, really?

Is this what our founding fathers intended in promoting freedom of speech? I think not. Why is it that some individual entities’ freedom of speech carries more weight and substance than others? Simply because they can provide payoffs to our pols and demand the same in return?

No doubt. Money talks…

Luigi Zingales,  the Robert C. McCormack Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business, weighed in on this critically important topic recently at Project Syndicate:

Whether you like the political consequences of the Citizens United decision or not, it has its own logic. And that logic applies outside of the United States as well, and can lead to similar consequences everywhere: an enormous increase in the largest corporations’ political power. Will parliamentarians become mere spokesmen of corporate interests? Is there any mechanism within the US Constitution, or other constitutions, to prevent this?

A logical implication of the view that corporations are “people” is that shareholders should learn about the political spending carried out by the companies in which they invest. Disclosure may help democratize political donations, preventing them from having an undue influence in elections. If I appoint an agent to manage my money, shouldn’t I want to know how much he spends on political donations in my (alleged) interest? And wouldn’t it be preposterous for any rule or regulation to prevent me from finding out?

But this is exactly what is happening. Not only do companies refuse to disclose to their shareholders how much they spend on political campaigns; they also are lobbying hard to prevent any rule that would require them to do so. The US Chamber of Commerce opposes all such proposed rules as “politically motivated,” because the pressure to require disclosure of election-related corporate spending does not come from institutional investors, but from government pension funds controlled by elected officials.

But conservative groups are shortsighted in their opposition to mandatory disclosure of such information. They believe that it would weaken Republicans and benefit Democrats, and they are right: there is no doubt that the left stands to gain more in the short term from such a requirement. But the biggest winner would be democracy. The current political game in the US is one in which both Republicans and Democrats compete for corporate money, which they then deploy in expensive campaigns to preserve or increase their power.

The winners are not the Republicans or the Democrats, or even the companies that fund them. The winner is a corrupt form of capitalism that is undermining the US economy, making it less productive and undermining people’s sense of fairness.

I doubt that a mandatory disclosure rule alone could fix the problem. But it would be an important step in the right direction. More important, actively blocking that step forces the political system toward a precipice from which democracy cannot return.

Not unlike the dynamic at play in the Prisoners Dilemma, while both large corporate and union interests write the massive checks to promote their individual interests, our democracy as a whole suffers.

Why is it that the power of incumbency is so strong and that our elected representatives get so wealthy? They trade the power of their seat for the corporate and union payoffs.

The resulting cesspool in which our nation swims is killing us. This needs to change if we hope to recover as a nation.

Can you say ‘term limits?’

What do people think?

Larry Doyle

Please pre-order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy, that will be published by Palgrave Macmillan on January 7, 2014.

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I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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