Thursday, January 21, 2010

USA: Now with 50% more potassium

A few months ago, I posted a proposal to curb campaign spending in anticipation of a Supreme Court case that threatened to strike curbs to campaign fundraising. The results of that case are in, and it ain't pretty. In a 5-4 decision, the justices voted to overturn a 63-year-old law that limited corporate spending on campaigns.

This is a deadly blow to a democratic process that is already near a crisis point. Already, many Americans — myself included — see too much corporate power in Washington. The Supreme Court's decision takes away one of the few hurdles corporations faced in their attempt to control the government, and the precedent it sets puts most of the other hurdles in danger as well.

To make matters worse, since this is a SCOTUS decision, nothing short of a radical shift in the Court or a Constitutional amendment can change it. We're stuck with this new world order.

One of the core issues at question is whether corporations should automatically enjoy all Constitutional rights. It seems almost self-evident to me that they shouldn't; the government should serve people above all else, and the interests of humans and corporations are often at odds (see my first link in this post). There's a fundamental understanding that free speech is not absolute: you can't yell "fire!" in a theater, nor can you order a hit on someone and claim you were just talking. It would not be inconsistent to put even more stringent restrictions on purely (or even mainly) commercial speech, especially given that it's not clear whether corporations should enjoy any first amendment rights at all.

About three years before the first major campaign finance law was enacted, an American author coined the phrase "banana republic" to describe the gripping power that fruit companies has over Honduras' government. That phrase is now synonymous with corrupt and ineffectual governments under which the many suffer for the benefit of a few tycoons. Too bad for me, I don't like bananas.


  1. Well said, and I agree. But understanding that the majority ruling was delivered by seasoned law scholars, all (well, most) having a deep understanding of the constitution, I am trying to understand what might have driven them.

    No one says that free speech is unbounded. Regarding companies, it’s clear that companies are made of individuals and so “the company’s policy” is in essence the collective policy of the shareholders, and they should be free to express their views as long as these views are legal. Would it be acceptable, say, for Google’s CEO to express his support for Obama (as I believe he did)? Sure. Would it be OK for him to say that after polling internally, the majority of Google employees and its shareholders are favoring a given candidate? Sure, that’s free speech. Would it be acceptable for him to rally for a politician? Why not, it’s a free country. Should he be able to contribute his own money to a candidate?

    This last question is the crucial one IMO. Since Google’s CEO has a lot of money, he can theoretically make a huge donation, and that’s wrong. Why is it OK for me to contribute a few pennies for “my” candidate and it is wrong for Schmitt (or for Google) to contribute $0.5B? Because of the sums involved, not because of who made the donation.

    So I agree with the majority ruling that free speech also covers companies, and that they should be able to donate money to politics protected by the first amendments, but I don’t agree that it should be unbounded. Any contribution, whether from an individual or from a company, must be limited (and transparent). Otherwise, democracy is at danger, as you so eloquently write.

    The same applies to lobbing, BTW.

  2. If you want to make the argument that companies are purely an aggregation of individuals, I think you'd be hard pressed to explain why they deserve separate tax laws, the ability to buy and sell one another, and the ability to shield the constituent individuals from many liabilities, among other things.

    My point is that corporations are different than humans. They deserve rights, but not the same ones. In some instances (e.g. the ability to merge) companies have more abilities than people; in others, they should have fewer.

    In fact, there's already a precedent that corporations, and indeed their leaders, are subject to restrictions of free speech that individuals can't. Say the wrong thing as a public company, and the SEC can come down hard.

    Again, it comes down to whether you think the Constitution fully applies to corporations as much as it does to people. If it does, then should they be allowed to vote? (That's only half rhetorical; I've talked to people who say they should.) And if it doesn't, where does one draw the line of what applies to corporations and what doesn't?

    Remember also, and this cannot be understated, that corporations can amass much, much more power than people. If you give corporations and individuals the same speech rights, corporations will drown out individuals. It's completely valid for a government to pragmatically recognize this fact and account for it.

  3. Btw, the case at hand here didn't deal with donations. It dealt with corporations running their own political campaigns on their own dime, without restrictions. The analogy wouldn't be you and Schmitt both giving money, it would be you telling your friends that you like a candidate vs him putting a national ad campaign out for that candidate on Google's dime.

  4. Individuals acting in certain positions are subject to restrictions of their free speech. In your example, the SEC would come down hard on the CEO or CFO (etc.), plus it might fine the company. Likewise, a lawyer has certain restrictions (e.g., cannot disclose clients’ information w/o their consent) and the government will prosecute a lawyer who violates these restrictions, plus it might fine his law firm. Ditto many other professions and companies who employ these professionals.

    So in my (amateurish) understanding, the first amendment applies only to individuals, but it also protects the right of individuals to act as a group (or NGO, or fund, or lobby, or corporation).

    If, a year ago, it would have been found that, say, Google contributed illegally to a political campaign, the government would prosecute individuals in the company, plus perhaps fine the company.

  5. It all comes down to whether one believes that our democracy is of and for the people, and that corporations are merely convenient entities within that structure, or whether one considers corporations to be first-class entities within the democratic structure.

    I think this is something to be explored in a subsequent post...

  6. Looking forward for the post.

    Re “corporations are merely convenient entities within that structure”, note that international companies pose an even bigger challenge. For example, what if an American company (e.g., registered in NYSE and operating only in the US) is owned by Saudis? Should it be able to participate in US elections via large campaign donations? I believe you and I are in complete alignment about the answer to that question (actually I would replace the term “participate in” with “tilt”).

    Yesterday’s ruling was a grave mistake.