Over a Candle

The Supreme Court has declared that campaign finance regulations restricting the ability of corporations and unions to donate to political campaigns violates free speech. On this ruling, corporations are treated equivalent to a person, with all the same constitutional protections.

With all the handwringing over the Massachusetts election, this decision seems much more dangerous to me. Political power ebbs and flows from one party to the other. I try not to get overly wrapped up in the yearly fluctuations in power. This decision, on the other hand, has the potential to completely upset the nature of elections in this country.

Treating corporations like people and defending their right to free speech warps our constitution. Corporations can clearly outspend most individuals, thus skewing political speech in their favor. Given the current trend in favor of short-term outcomes (rather than long-term concerns) that is so prevalent in the corporate world, this could have devastating effects on public policy, which needs to take the long-view into account.

What seems bizarre about this is that that traditional free-market defenders are lauding this decision. Milton Friedman, perhaps the greatest contemporary defender of the free-market, argued that corporations are to make money, not spend their money on behalf of social causes. His argument, in effect, was that corporations are in the business of making money. They should not spend their owners’ money on behalf of causes. While Friedman was concerned with keeping corporations out of the business of social responsibility, the reasoning seems to apply equally well to political spending. Corporations have no business spending the money of their stock-holders to support political candidates. If they have spare money lying around, it should be returned to the stock holders who are better positioned to decide how it should be spent, whether on elections or not, and if so, on what side of the election.

This whole discussion suggests, to me, a path forward. If corporations begin spending on elections, I would love to see a stockholder sue on the grounds that the corporation is betraying its fiduciary responsibility to its investors. I cannot say whether such a lawsuit would have any chance. There is quite a bit of leeway for business decisions. I imagine corporate officers could argue that their use of corporate funds on behalf of elections has a positive effect on the financials of the company. But it would be interesting to watch such a drama play out.

In any event, Friedman’s reasoning on the purpose of the corporation throws into doubt the free-market defense of corporate spending on elections. Indeed, it suggests that those lauding this decision are not really free-market proponents: they are merely self-serving proponents of flooding more private money into our already flooded elections. I’m not surprised by self-serving politicians. However, I’m very disappointed in the Supreme Court deciding corporations are deserving of the same protections as actual citizens. What’s next? Will corporations be allowed to vote?

This entry was posted on Friday, January 22nd, 2010 at 9:47 pm and is filed under Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.