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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

April 3, 2014 at 10:37 AM

McCutcheon, corruption and the economy

Combined with Citizens United, the Supreme Court’s 5-4 ruling on McCutcheon v. Federal Election Commission is the most aggressive and far-reaching piece of judicial activism in modern American history. It will ensure the country’s transformation into an oligarchy where wealth controls politics and policy.

This is actually very bad for most business and capitalism as a whole.

By striking down aggregate limits on contributions, it means individuals can give as much as $5.9 million to candidates and parties. More important, it reverses the longstanding legal precedents that limited money in politics as a way of preventing corruption.

Under Chief Justice John Roberts’ new interpretation, “corruption” only means a clear quid pro quo attached to contributions. And it will make it nearly impossible for any law regulating contributions to pass constitutional muster with the court.

The ruling comes in an era with inequality not seen since the Gilded Age and growing. When more and more sectors are highly concentrated with a few big players, often acting in concert, who write or heavily influence any regulation that pertains to them.

We already have the government that big money buys. McCutcheon ensures that it will be immune from laws to roll back a situation that to people of my generation and older, who lived in a very different country, can only be described as un-American.

Interestingly, the ruling comes after the publication of the most important business book of the year, Thomas Piketty’s Capital in the Twenty-First Century. Based on deep research on the United States and elsewhere, he argues that the golden age of the American middle class, from 1945 to 1974, was an anomaly. Instead, the world is returning to the dynastic wealth that was the norm through history — and it is being driven by the oligarchs’ control over politics.

He writes that “forces of divergence can at any point regain the upper hand, as seems to be happening now, at the beginning of the twenty-first century…The consequences for the long-term dynamics of the wealth distribution are potentially terrifying” if these trends continue. (You can read reviews of the book here).

So if you were worried about how Big Finance brought the world to the brink of collapse, privatizing their profits while socializing their losses through taxpayer bailouts and getting away with it… Or how an elite increasingly expands its control of wealth by “rents” and financial hustles instead of funding productive enterprises that create jobs… Or how the fossil fuel industry buys public policy to heavily subsidize its business while socializing the costs of climate change — just wait.

McCutcheon doesn’t mean that the average small or even medium-sized businesses will “get government off their backs.” Far from it. Multinationals and consolidated sectors operate by different rules and objectives. Among them are to stamp out smaller competitors, sandbag innovations that might undermine their commanding positions and ensure prohibitive costs of entry to new competitors.

Through their vast sums of campaign contributions, they have the ears of politicians and control of regulators. The era of big government is not over. Bought big government is in charge. Big business and big government operate together, picking winners and losers, attempting to freeze their power and privileges in place.

Every community has felt this, as local businesses have been snapped up thanks to lax antitrust reviews or factories closed because of self-dealing trade agreements. But just wait. Plutocrats such as the fossil-fuel baron Koch brothers now feel so empowered that they can meddle in something as seemingly benign and small-time as a bus proposal in Nashville — to torpedo mass transit.

For those of us who believe that capitalism means competition, choice, new ideas, a real if imperfect meritocracy and a system, for all its flaws, that ensures ever rising opportunities for those willing to work hard — that’s in the rearview mirror. That capitalism depended on real checks and balances, including government of the people, marketplace pluralism and competition, and unions.

Instead, McCutcheon-style “capitalism” will be pretty much what critics on the (real) left have always claimed it to be: plutocracy ruling through a fixed market, whatever the accompanying slogans of “freedom.

Now the only answer is a constitutional amendment.

Comments | More in Business legal issues | Topics: McCutche

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