The Corporate Fallacy

Popular Economics Weekly

The dust is settling on the U.S. Supreme Court’s decision to nullify Montana’s 99-year old law that banned political contributions by corporations. But the controversy is not settled, since the majority Justices’ interpretation in what has been called Citizen’s United II is that since corporations are ‘persons’ in law, they should be protected by First Amendment free speech, regardless of its affect on the functioning of our democracy.

Corporations are not persons by any standard definition of personhood. Corporations are not even mentioned in the Constitution. They in fact more closely fit the socialist model, with a ruling hierarchy comprised of its CEO, a compliant Board of Directors that is owned by the public at large. And that ‘hierarchy’ wields much more power for good or harm that an individual ‘person’.

Although dictionaries define a person as a “human being or organization with legal rights or duties”, a corporation is really a state-within-a-state, since it is really a socialist system in which “producers possess both political power, and the means of producing and distributing goods”. And now corporations have almost unlimited means to increase their political power.

It even more closely resembles an oligarchy, as current law and usage enshrines control not with shareholders, but its executives who make the day-to-day decisions and long term plans. This is exactly the model of such socialist states as Russia and China, with their single-party rule.

So under what definition should corporations be protected by First Amendment freedom of speech? Persons are not protected by the so-called Free Speech Amendment if they cause damage to other persons. The 99-year old Montana law just struck down by this Supreme Court protected free speech by curtailing what corporate power was doing to their state.

Specifically, it was holding all the political power, without any responsibilities towards either its employees or Montana’s citizenry at large. Montana’s 99-year old law upheld by its State Supreme Court was meant to limit corporate power, when it literally owned state politicians.

“Even if I were to accept Citizens United,” said Justice Breyer’s dissenting opinion in Citizen’s United II, “this court’s legal conclusion should not bar the Montana Supreme Court’s finding, made on the record before it, that independent expenditures by corporations did in fact lead to corruption or the appearance of corruption in Montana. Given the history and political landscape in Montana, that court concluded that the state had a compelling interest in limiting independent expenditures by corporations.”

Chief Justice Mike McGrath of the Montana Supreme Court, writing for the majority in its 5-to-2 ruling, stressed that the state’s experience of having its political system corrupted by corporate interests early in the 20th century justified the ruling.

“At that time,” Chief Justice McGrath wrote in the New York Times article, “the state of Montana and its government were operating under a mere shell of legal authority, and the real social and political power was wielded by powerful corporate managers to further their own business interests. The voters had more than enough of the corrupt practices and heavy-handed influence asserted by the special interests controlling Montana’s political institutions.”

In other words, there is good reason that such corporate power has to be curtailed in a democracy. Quite simply the one-voice, one-vote principle that makes a democracy work is nullified. That is why Montana had continued to enforce its Corrupt Practices Act. It had robber barons of the first magnitude with unlimited financial resources that could buy almost any politician.

Before a referendum banned corporate contributions in 1913, Butte copper barons openly bought officer holders with massive bribes. One corporate bigwig, W.A. Clark, flagrantly handed out gobs of cash to state lawmakers, who then in turn, elected him to the United States Senate, said a history of the subject, according to the small-town Montana Havre Daily News.

“In a refreshing break from the stately language used in court decisions, Montana Chief Justice McGrath quoted humorist Mark Twain as saying Clark "has so excused and so sweetened corruption in Montana that it no longer has an offensive smell."

“Sick of this skulduggery, in 1913, voters approved a referendum banning corporations from making donations and barring politicians from accepting them. They then changed the law to demand that people, not the state legislature, would elect U.S. Senators. The rest of the country followed suit in seven years.”

So, the U.S. Supreme Court is in essence decreeing a return to the old system of political patronage, where corporations and their wealthy supporters elect our representatives, instead of ordinary citizens. But instead of looking out for the welfare of all Americans, it will be their richest, profit-seeking supporters who benefit.

Harlan Green © 2012