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Tuesday, December 28, 2010

Guest Column: The Rights of Corporations

Today's guest column is from Allison McCarty, a senior at Pepperdine University in Malibu, CA majoring in Philosophy and Economics. She interned this past summer at the Institute for Justice through the Koch Summer Fellow Program. Her post is relevant to some of the research she has done in the past year:

With Tiger cheating and BP oil wells leaking, the year 2010 was rife with excitement and scandal. Even the Supreme Court was not immune from drama. The Court’s January decision in Citizens United v. FCC—which struck down sections of the 2002 McCain-Feingold Act for unconstitutionally limiting the First Amendment rights of corporations—sparked a visceral public reaction, drowning out the decibel of any public outcry since the 2005 Kelo v. City of New London decision.

According to a 2010 Washington Post-ABC News poll, eight in 10 Americans believe that Citizens United was wrongly decided. In 2005, a similar 81 percent of the American public disagreed with Kelo’s holding in favor of eminent domain for private development, per a Saint Index Survey.

This polling pattern may seem perplexing for conservative and libertarian intellectuals, who tend to support Citizens United and oppose Kelo for related reasons. Assuming that conservatives and libertarians have the correct view as a matter of jurisprudence, at least three factors can explain the undue negative public reaction to Citizens United: inattention to Bastiat’s distinction between “what is seen and what is not seen,” as well as the anti-foreigner and anti-corporate biases that are endemic in America today. Even if unjustified, the public outcry against Citizens United is understandable, and indeed must be understood in order for liberty-minded legal theory to prevail in future cases.

“What is Seen and What is Not Seen”

The late economist Frédéric Bastiat’s “broken window fallacy” admonishes us to “take into account the sum total of all effects, both immediate and future” when engaging in cost-benefit analysis, lest we praise the destructive practice of window breaking for increasing employment in the glass industry.

Human cognitive bias makes it all too easy to privilege the seen effects of a given policy while ignoring the unseen effects entirely. In the case of Kelo v. City of New London, the broken window fallacy pumps our skeptical intuitions about eminent domain for private development. Government abuse of eminent domain power is rampant—with 10,000 documented abuses and counting, according to the Institute for Justice—and highly visible. For every Susette Kelo, there is a little pink house that bashfully awaits a bulldozer, and an unmistakable sympathy towards those who fight for property rights. The implications, real or exaggerated, of economic development projects are unseen and thus underrepresented in our impact calculus.

For Citizens United, the reverse is true. We see the corrupting influence of money in politics is all around us, and wish, in the words of a April 19 New York Times editorial, "to prevent influence-buying by big contributors and influence-selling by too willing parties and politicians.” But what is unseen, and probably purposefully avoided, is whether campaign finance laws actually accomplish this objective. More likely, campaign finance reform is motivated and manipulated by incumbents who seek to protect their own power and persecute their political opponents.

Unfortunately, the American people are sold on the fallacious idea that they can break the First Amendment and garner public benefit. Increased education about public choice economics, such as the clever "Camp Politics" educational video from the Institute for Justice, is needed bring the otherwise unseen implications of legal doctrines to light.

Foreigners at the Floodgates

They took our jobs, and now they’re taking over our political process. In his 2010 State of the Union address, President Obama publically chastised the Supreme Court for Citizens United, claiming that the ruling “open[ed] the floodgates” to allow “foreign corporations… to spend without limit in our elections.”

With all due respect, the president’s statement is simply untrue. Citizens United left 2 U.S.C. § 441e intact, meaning that foreign nationals are still prohibited from directly or indirectly contributing to federal candidates or political parties and banned from making independent political expenditures.

It is improbable that foreigners would want—let alone have the means—to overshadow domestic political spending, which exceeded $3 billion dollars in the 2010 midterm elections. And even if credible, the concern that foreign political speech could smother domestic political speech cannot justify doing precisely that—smothering domestic political speech through campaign finance regulations. As usual, irrational biases lead to irrational policies. While there may be no easy solution, like singing "Kumbaya" in unison, hopefully our society will slowly become more skeptical of the "fear the foreigner" political smear tactic.

The C-Word

One obvious similarity between Kelo and Citizens United is that the ostensible victors in both cases were corporations, a legal outcome that is seen as roughly as desirable as Lindsay Lohan winning a child custody lawsuit. The American anti-corporate bias implicitly affects public sympathy towards corporate clients, and is more directly visible in the faulty argumentation surrounding Citizens United. Critics such as dissenting Justice Stevens have attacked Citizens United as an example of how the legal fiction of corporate personhood—which dates back to the 1866 ruling of Santa Clara County v. Southern Pacific Railroad Company—allows the “rights of corporations” to trample the “rights of real individuals.”

This view is deeply problematic. Nobody is seriously arguing that corporations are literally persons, and the doctrine of corporate personhood does not mean that corporations are entitled to all the same rights as natural persons (among things, they lack the ability to run for political office and the protection of the privileges and immunities clause of the Fourteenth Amendment). Further, the holding of Citizens United does not depend on the concept of corporate personhood. The First Amendment protects speech per se, without regard to the personhood or corporate status of the speaker, and does not allow for discrimination based on the identity of the speaker.

The American public would do well to realize that it is anti-corporate rhetoric—not admittedly fictional legal institutions—that reifies the concept of corporate personhood at the peril of our basic liberties. Corporations are not evil, supernatural entities. Used by churches, political groups, charitable organizations, and (significantly) Starbucks, corporations are merely the legal means through which individuals engage in economic and civil society. Accordingly, curtaling the rights of corporations can only trample on the rights of the individuals who compose them.

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  1. What is this a friggin term paper? Reading this left a salty, strained taste in my mouth that only a more blatant overuse of legalese could quench.

  2. If I wanted to hear what an intern had to say, I'd go on Facebook and read status updates.

  3. Anti-corporate rhetoric is fundamentally populist in nature, and I've yet to see a good way to break through populist rhetoric because you always wind up fitting the stereotype of "the man" trying to flimflam the little guy.

    The cognitive bias is also hard to get past. That one can be a little more approachable, though, you just have to use concrete examples. For example, if someone's arguing that new technology X will destroy jobs, you don't start with nebulous explanations of how really, more jobs are being created and that you just can't see them.

    Rather, you start with an extreme example: compare a western nation to a third world nation, and point out how the technology-poor nation uses teams of people to manage things, where as an advanced nation uses just a few. Point out how in a third world nation, getting anything done requires organizing those teams of people, people get sick, they aren't educated, etc., whereas in the western nation, you get one or two guys on the phone and they just go and do it. Then explain how things just work faster, meaning that more stuff gets done, and *that* is why technology creates jobs rather than destroys them.

  4. Ludwig Von Mises understood 60 years ago that consumers hold the power - not the evil corporations. Here's Mises on "Consumer Sovereignty" in a free market economy:

    "Consumers are the kings and queens of the market economy, and ultimately they reign supreme over corporations and their employees. … In a market economy, it is consumers, not businesses, who ultimately make all of the decisions. When they vote in the marketplace with their dollars, consumers decide which products, businesses, and industries survive — and which ones fail."

    It used to be consumers voted everday with their dollars who the winners and losers would be. That was before the Bush/Obama era when government decided it would pick the winners and losers.

    I really hope we can restore the power to the people.

  5. Kudos to the author for pointing out the obvious in the Citizens United case:

    1. the decision was based upon free speech;
    2. the restrictions upon foreign corporations contributing to US campaigns were not removed but left intact;
    3. that corporations are legal entities, but are not persons yet there is no reason for them not to have the right to free speech.

    What most overlook are the facts of the case, that Citizens United wanted to run a documentary about Hillary Clinton during the Presidential campaign. The FEC has certain restrictions regarding the timing of the airing of the documentary.

    The people behind Citizens United came together for a reason: one such reason would be the protection of the individual from personal lawsuits.

    Like the author, after studying the reasons given for the decision of Citizens United, I happen to agree with that decision.

  6. Personally, I enjoyed the article and thought it quite worthwhile. I'd rather read a protracted bit of well crafted reasoning, than a visceral opinion.

    Of course corporations should have rights. They are, as the post points out, institutions derived for the purposes of serving the lawful activities of individuals. Moreover, corporations are expected to pay into the public trough (along with their shareholders) and so, should have some say on how that money is spent.

    What I find interesting in many of my recent dealings with government agencies, is the increasing use of the words "the government has the right to...", as in the government has "rights" in their dealings with me (rights that apparently, supersede my own). Now THAT is something to be concerned about.

  7. "As usual, irrational biases lead to irrational policies."

    Money line alert! Welcome to our knee-jerk political system! 'Perceived' problems, in the eyes of our politicians, can and should be 'fixed' with legislation.

    Joe down the street tripped on a sprinkler head and broke his neck? Here come the lawyers and the sprinkler head police.