Money in Politics, Pt. I | How Corporations Became People

There is little doubt surrounding whether big money, special interests have influence at all levels of government. Lobbying, campaign contributions, and outside spending have all lead to special interests gaining access to elected officials. No doubt, efforts across tactics such as these have proven effective for the wealthy and large corporations. The University of Kansas found that firms that engaged in tax lobbying received a 22,000 percent return on investment (ROI) for their lobbying expenditures. At the time of the study, big pharma heavyweights Pfizer and Merck & Co., tech giants IBM and Hewlett Packard, as well as Johnson & Johnson stood as the top beneficiaries.

Former President Carter seemed to understand the complexity and danger of money in politics when in 2015 he said that unlimited money in politics, “violates the essence of what made America a great country in its political system. Now, it is essentially an oligarchy, with unlimited political bribery being the essence of getting the nominations for president or to elect the president. And the same thing applies to governors and U.S. Senators and congress members. So now we’ve just seen a complete subversion of our political system as a payoff to major contributors, who want and expect and sometimes get favors for themselves after the election’s over.”

It’s not just former President Carter who understands the severity of this issue. Americans across all partisan lines grasp how problematic money in politics has become.

The viewing of public opinion polls shows this to be the case.

How is it that Americans, with bipartisan support, want money out of politics to such a high degree without any real progress made on this issue? The answer to this question can be found in the 2010 case of Citizens United v. FEC. The group Citizens United sought an injunction against the FEC in the United States District Court for the District of Columbia. The injunction was filed over the Bipartisan Campaign Reform Act (BCRA) and its application in its film Hillary: The Movie. The movie included opinions regarding whether Senator and later Democratic Presidential Candidate Hillary Clinton would make a good president.

In a 5–4 decision that ruled along the Justices’ ideological lines, the Court ruled in favor of Citizens United. The Supreme Court overruled portions of the 2003 McConnell v. FEC and 1990 Austin v. Michigan Chamber of Commerce cases. Both of these prior cases led to rulings by the Court holding that political speech could be banned based on the speaker’s corporate identity. Justices in the majority ruled in accordance with the notion that corporate funding of independent political broadcasts for the election of candidates cannot be limited.

The majority opinion of the SCOTUS concurred that political speech is vital to the success of a democracy, regardless of whether it comes from a person or corporation. The results from the Citizens United case have had massive consequences. Rather than discuss those consequences in this article, I wanted to explore the ideological and historical basis for the notion that corporations are people and money is speech. These two premises are the legal grounds upon which well funded interest in politics have been allowed to exist.

Due to the density of each of these questions, I found it best to split them into two separate parts. In Part I, I will consider the historical and ideological precedent that corporations are people. In Part II, I will consider the historical and ideological precedent that money is speech.

Are Corporations People?

Arguably one of the greatest accomplishments of humanity was the creation of corporations. Before their existence, individuals faced tremendous risk in starting their own enterprise. An individual would be held directly responsible for any debts the company incurred. If the company went bankrupt, the individual may have had to sell their property, their home, and any other valuable commodities that they owned up to and including being forced to sell their own children into servitude. The individual was held directly liable for all obligations without limit.

This legal situation strongly discouraged entrepreneurship. People were hesitant to take the leap in starting new businesses due to the possible economic risk they posed. The invention of limited liability companies, LLCs, was an extremely important step in the progression of business and economics. In the United States, we use the term corporation to refer to these entities. Corporations are separate legal entities from those who invest in them, work for them, or manage them.

As Yuval Noah Harari describes in his book Sapiens, one of the primary differences between humans and other mammals is the ability for humans to use language about what does not concretely exist. Humans have evolved through the power of telling effective stories. This is true of mythology, nationalism among nations, and even limited liability companies. The word corporation is derived from the Latin word ‘corpus’ which means ‘body’. I find this particularly intriguing in that corporations do not contain a body. One could make the argument that a corporation’s ‘body’ is the sum of its workers, factories, warehouses, products, services, etc.

While the body of a corporation can be considered to be comprised of these key components, a simple thought experiment proves that they are not precisely as we think of them. Take for example the eCommerce giant, Amazon. If Amazon decided to fire every single one of its employees and hire new ones the next day, Amazon still remains in the sense that we come to know them. If all of their warehouses burned to the ground overnight, they could rebuild them and Amazon would still exist. But If a judge were to mandate the dissolution of Amazon, its warehouses, employees, shareholders, would not cease to exist. Rather, the corporation of Amazon would vanish.

This is metaphysical view of identity is commonly referred to as a Ship of Theseus argument:

Is an object with all of its parts replaced still the same object?

Amazon does not have a physical body as you or I do. The company seemingly has no connection to the physical world outside of its assets and property. Amazon is rather a figment of our collective imagination. Lawyers refer to this as ‘legal fiction’ to be precise. While Amazon does not have a physical body, it has a few similarities to you and me.

  • Amazon is bound by the law of the countries it operates in.
  • Amazon can open bank accounts.
  • Amazon pays taxes.
  • Amazon can even be sued completely separate of the people that work for and own the corporation.

The Historical Context

The first premise that the Citizens United case rests upon is the notion that corporations are people. How is that we have come to view an inanimate entity as a person? More importantly, how is it that corporations came to receive the same legal rights as people? The quest to answer this question begins over 130 years ago.

The corporation Southern Pacific Railroad Company, owned by the robber baron Leland Stanford, pushed back after lawmakers in California imposed a special tax on railroad property. Unbelievably, Southern Pacific’s argument was based upon the fact that the law was unconstitutional under protections granted by the Fourteenth Amendment.

The Fourteenth Amendment was adopted after the Civil War to protect the rights of the slaves who had been freed. The amendment guarantees every “person” the “equal protections of the law.” Southern Pacific Railroad Company argued that as a company, they are a person too. Their reasoning was that if the Constitution prohibited discrimination based upon racial identity, then it should protect Southern Pacific and its corporate identity too.

This is where this story becomes fascinating. The man who represented Southern Pacific in court was Roscoe Conkling. Conkling had been a leader of the Republican Party for more than a decade at the time. He had also been nominated to the Supreme Court twice and the Senate confirmed him on his second nomination. Conkling turned down the nomination both times and is the last person to turn down a seat on the Supreme Court after winning the nomination. The justices on the Supreme Court saw Conkling as one of their equals.

The fact that the Supreme Court saw Conkling as their peer was advantageous for Mr. Stanford’s cause. There was another convenience afforded to Stanford. As a young congressman in the 1860s, Conkling served on the committee that wrote the Fourteenth Amendment. Conkling was the only surviving member of the committee, a fact that proved to be crucial for the case.

Throughout the case, Conkling stated that those who drafted the amendment changed the wording of the amendment from “citizens” to “persons” for a specific reason: the amendment was supposed to cover corporations as well. Conkling stated that laws referring to persons have “by long and constant acceptance … been held to embrace artificial persons as well as natural persons.”

Conkling knew he had to prove his word. He presented a musty old journal, claiming that it was previously unpublished record of the drafting committee deliberations. Historians now know that Conkling’s journal, while real, actually proved his story was fraud. The journal contained absolutely no discussion regarding a desire among the drafters to protect corporations in the same way they desired to protect people. Amazingly, it showed that the protection language was never changed from “citizens” to “persons,” like Conkling had claimed.

The Supreme Court never made an official ruling on the Southern Pacific Railroad case, leading many experts to question whether the justices knew Conkling’s story was a lie. After unexpectedly settling the case, Southern Pacific appeared in front of the Supreme Court again to raise the exact same legal question. The team of lawyers was exactly the same, with the exception of Conkling. The lawyers never brought up Conkling’s journal this time around.

When the Supreme Court presented their decision, the Court expressly declined to decide upon whether corporations were people. Preposterously, J.C. Bancroft Davis, the reporter of decisions (who officially published the court’s opinions in an edited manner via volumes) provided an inaccurate summary of the Southern Pacific case. His summary stated “corporations are persons within … the Fourteenth Amendment.” Experts have long debated whether his summary was an error or a product of ill will. The truth is, we will never know why the summary did not reflect the decision of the Court.

This false summary was used in the early 20th century by the Supreme Court to strike down various economic regulations. Some of these included child-labor laws, wage laws, and amount of working hours laws. It is puzzling to consider how the Fourteenth Amendment failed to protect African Americans in cases like the 1896 case of Plessy v. Ferguson. Remember, the Fourteenth Amendment was created to protect freed slaves, not corporations. Between 1868 and 1912, the Supreme Court ruled on a total of 28 cases involving African Americans. Astoundingly, the Court ruled on 312 cases regarding the rights of corporations.

Lost beneath the court cases of Buckley v. Valeo, First National Bank of Boston v. Bellotti, and Citizens United v. FEC is the legal reasoning that view corporations as people. The Fourteenth Amendment was created to protect freed African American slaves but was extended to give corporations similar rights as human beings. While we can debate whether corporations should hold the same rights as people, we must acknowledge that the precedent that extended the Fourteenth Amendment to give corporations these rights was highly flawed.