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Economic inequality, politics, and capital

Economic inequality and campaign finance are two of the hottest topics in America today. Unfortunately, the topics are typically discussed separately, but they are actually intertwined.

The rise of US economic inequality that economist Thomas Piketty chronicles in his renowned book Capital in the Twenty-First Century – starting in the late 1970s and continuing through today – coincides remarkably with the US Supreme Court’s decision of Buckley v. Valeo. That decision extended constitutional protection to spend vast sums of money to elect candidates for political office. In 1976, Buckley seismically altered the election process; it opened the “money gates,” flooding elections with torrents of dollars.

Interestingly, in defending the congressional legislation that regulated both presidential and congressional candidates, Congress itself bluntly asserted the interest of preventing corruption. Having endured the Watergate scandal and the Nixon impeachment crisis, Congress had witnessed the devastating power of corruption. Unfortunately, the Court partially accepted and partially rejected this interest; it split the baby and in so doing, it produced a grossly deformed law bearing no resemblance to the systemic approach of the original legislation.

Treating campaign financing as free speech, Buckley upheld congressional limitations on contributions to political campaigns, but struck down limitations on a candidate’s personal and total campaign expenditures. Contributions were only a symbolic expression of support for a candidate, and contribution limitations advanced Congress’s primary purpose of eliminating political corruption or its appearance. Importantly, the Court also invalidated limits on independent expenditures made by others, including Political Action Committees (PACs). Theoretically, these regulations did not deter political corruption as they concerned expenditures made independent of the candidate and his or her campaign.

The opinion equated spending money to elect a candidate with speaking, and this laid the foundations for allowing a very small group of people to dominate the entire political system. Considerable data shows that wealthy campaign donors share certain common interests, as one would expect, driven by their common economic situations. Contrary to the warnings of the great political philosopher Michael Walzer in Spheres of Justice, the political sphere is not separated from the eco­nomic one. Instead, Buckley has united them, or in fact empowered the economic sphere to subjugate the political sphere.

As elementary democratic theory would suggest, control of the political process translates into control over law. Predictably, a few short years after Buckley was decided, legislative policy began to turn sharply toward property interests as evidenced by the astonishing and temporally correlated rise in income share of the top 0.1 percent, to levels not seen in many years; indeed, the current extreme concentration of income in the top 0.1 percent has not existed for a century.

Piketty has shown that, from the First World War through the mid-1970s, income inequality decreased colossally in the US. However, it then suddenly boomeranged and now rivals its level witnessed in the early twentieth century. The graph below, chronicling the income share of the top 0.1 percent, shows a dramatic ascent of their fortunes shortly after Buckley was decided.

Another decision several decades later unleashed another torrent of potential funding. Citizens United v. Federal Election Commission, decided in 2010, extended protection to independent electioneering expenditures made by corporations. The graph also shows another dramatic rise in income share of the 0.1 percent beginning in 2010.

The correlations are uncanny. The disparity in income began a slow rise in the late 1970s and rocketed upward beginning in 1980. During the 1980s, income and estate taxes plunged disproportionately in favor of property interests. Contemporaneously, assaults on the New Deal welfare state began, targeting government regulations, unionization, and the social safety net for the vulnerable. Such “coincident” developments thus increasingly look less like coincidences. Skeptics will argue that the rise in economic inequality just happened to have begun at the same time as Buckley was decided. Theories of risk analysis actually establish that Buckley and subsequent campaign finance cases have played a tremendous, probably pivotal, role in driving American economic inequality. Regrettably, economic and political inequality are synergistic: allowing money into the political sphere introduces the inequalities of the economic sphere into the political one. The resultant malignant growth in political inequality causes further economic inequality, and so on. And so the deadly spiral begins. This constricting coil chokes both democracy and capitalism, leading to oligarchy and oligopoly.

Piketty describes American economic inequality as the worst among advanced nations. In The Price of Inequality, Nobel Laureate Joseph Stiglitz says that the U.S. is approaching the inequality levels of countries such as “Iran, Jamaica, Uganda, and the Philippines.”

It is a widespread worry that this economic inequality accounts for the rise of American populism. It may also account for the anemic growth the US has been experiencing. Economic inequality hurts the demand curve: people who don’t have money can’t buy things, and that is bad both for them and for our consumer-driven economy. Moreover, Stiglitz thinks that economic inequality has produced more frequent and severe economic downturns like the Great Recession of 2008.

The correlation between the campaign finance cases and soaring US debt is sadly predictable. If the campaign finance cases enabled the capture of the electoral system, that capture would manifest itself` in changing legislation to advance the interests of the 0.1 percent: tax cuts, skewed heavily to favor the wealthiest strata, advanced their interests. However, these tax cuts have also produced skyrocketing government debt. The political and economic systems are interrelated, and theories of political economy must take this into account.

We know that elections matter, but as with any other game, the rules heavily influence the outcomes.

Featured image: Capital Hill by cytis. CC0 Creative Commons via Pixabay.

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