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Whither Corruption and Conservatism?

Oren Cass invited me to contribute to this site not as a conservative but as a lefty and Democrat who is fascinated by the project of intellectual revival in which this network of thinkers is engaged. The contributors share an important goal, which is to rebuild an economic and political consensus in favor of the national interest, and to discard the hollow promises of neoliberalism/libertarianism. I’m going to try to provoke and prod, to force this community to strengthen their thinking.

My own reason for participating is to both learn, and to encourage both parties to compete for votes based on a view of a moral society that situates power in the hands of local communities, families, and producers, and removes power from the middlemen on Wall Street and at McKinsey, who today organize our corporate state. My view is that it is monopolists, in industries as varied as candy to coffins to missiles, who control the commerce and politics of our nation, so building community sovereignty and a vibrant self-governing republic means taking on the central challenge of monopoly.

Corporate concentration reduces incomes, generates regional inequality, and enables predatory actors in the United States collaborate with foreign governments – in particular China but not limited to China – to organize dangerous infringements on our sovereignty. We’ll probably end up agreeing on many facets of consolidation and the problems they induce, though not on all aspects of them.

I’ve enjoyed the essays and blog posts written so far, and there’s one common theme: the reemergence of the state as the key locus of legitimacy for the exercise of power. Rachel Bovard’s piece on the need to reconsider the global trade and Senator Josh Hawley’s call to abolish the World Trade Organization both call for a return to what Franklin Delano Roosevelt’s Secretary of State Cordell Hull organized after World War II, where public, rather than private, rules, structured commercial trading relationships. Senator Tom Cotton noted the danger of industrial dependency on China, as did Senator Marco Rubio; both see a massively enlarged role for the state in structuring industrial capacity.

Wells King’s thoughtful essay notes how Henry Clay and Abraham Lincoln built on Alexander Hamilton’s framework for industrial self-sufficiency, Oren Cass helpfully re-centers markets as primarily political institutions rather than natural ones, and Julius Krein observes that Hayek’s information theory of the price system is incomplete.

All of these ideas point to the basic need for a competent state that can govern and enforce rules over private concentrations of power, as well as prohibit foreign influence over Americans. What is so far missing is a vision of how to structure such a state without succumbing to corruption. That’s how libertarians will attack the ideas underpinning these new conservative ideas, they will note that a strong state is simply impossible to organize because such a concentration of power will inevitably be misused for self-serving ends. That’s the point of ‘Public Choice’ theory, to make public governance seem incoherent by its very nature.

However, the founders – and not just Alexander Hamilton – did have a vision of how to protect American interests by building a strong publicly accountable state. The modern conceptual framework of libertarianism would be puzzling to them. They did not excessively distinguish between the public and private sectors, and understood all trade as politically structured, from the charters of trading corporations to dense networks of local price controls for basic goods. After all, the Boston Tea Party was a protest not just against the British government but against a multi-national crown corporation, the East India Company.

Most of the founders, when breaking from England, wanted to ensure they did not recreate the corrupt state of the British empire they had just left. When building a new nation, they were in fact obsessed with the problem of corruption, because they perceived of corruption as a primary threat to liberty. Before their establishment of America, these were proud Englishmen protecting their rights as Englishmen. A core reason they rebelled is because their beloved British system fell into the trap of corruption, with rotten boroughs and “place men” or members of Parliament dependent on the King, subverting their rights. Wealthy executives from the East India Company who had plundered India and returned home to powerful positions, or ‘nabobs,’ represented a dangerous corrupt alliance of aristocrats and economic power creating a political threat to the rights of Englishmen living in the colonies.

Conservatives would do well to read Zephyr Teachout’s book on these debates, Corruption in America: From Benjamin Franklin’s Snuff Box to Citizens United. Teachout discusses the ideological roots and institutional consequences of these arguments. She points out that the theoretical underpinning of the American revolution was that a corrupt government had no legitimacy to govern.

Even before the Constitution was ratified, she notes, there were a series of debates about whether American officials could take gifts from kings; French kings gave diamond-encrusted snuff boxes to foreign officials to influence as a mechanism of control. In the Constitution, we simply barred American officials from taking such gifts. This was a bright-line rule, not a case specific one, a statement that the acceptance of any gift induced a conflict of interest. They rejected the modern libertarian idea, that corruption requires showing a specific quid pro quo. Corruption meant a lot more than just bribery; theirs was a broad statement of national interest about the nature of temptation.

Arguments about corruption and the state drew from a fundamental philosophical conflict between the old world and the new, between Thomas Hobbes and Montesquieu. Hobbes saw corruption as an inherently dominant facet human nature, and thus anti-corruption measures were not a coherent organizing principle for a state. Life was a brutal competition among selfish actors. All questions of politics are simply questions of raw power. Montesquieu believed in the possibility of human virtue, and that the public interest was a genuine possibility given the right institutional design and public honor. It was Montesquieu who prevailed in America, with the separation of powers as a mechanism to prevent corruption and promote virtue.

For two hundred years, Americans battled over and extended these anti-corruption principles through laws and rules, across new institutions as they emerged, from the Yazoo land disputes in the mid-1790s to the regulation of the large railroad and telegraph systems, to the Pendleton Act in the 1880s creating a civil service to antitrust laws that broke apart industrial concentrations of power in the 1910s to New Deal reforms constraining banking power in the 1930s, to the break-up of AT&T in the 1980s over the cross-subsidization from its publicly protected regulated business to its competitive long-distance and equipment subsidiaries. Institutions like the Post Office, which is in the Constitution, were designed to facilitate the flow of news and information, subsidizing newspapers so that there would be an educated population able to constrain corruption and be free from foreign influence. Policies to encourage broad and wide land ownership and to facilitate small business lending were anti-corruption and pro-liberty measures. As William Findley, a revolutionary era Congressman put it, “wealth in many hands is many checks.” Marco Rubio’s Paycheck Protection Program draws on this legacy of broad property ownership as a barrier against corruption and tyranny.

Today, large corporations wield power, and these private governments in control of public infrastructure are a core threat to our liberties. It is Facebook establishing a global super court for censorship, not Congress, and that private government is still going ahead with an attempt to build out its own currency. It is pharmaceutical corporations lobbying to keep our vital supply chains in China, Amazon acting as a regulator of markets, and a small number of prime defense contractors organizing limits on our defense posture. These are the new East India Companies, governing our society without virtue, responsibility, or accountability.

Teddy Roosevelt understood a similar dynamic when he noted in 1910 that the great challenge, the ‘special interests,’ of his age was the corporation, much as the challenge for his revolutionary forebears was British tyranny in the American Revolution, and the challenge for his Civil War era forebears was the slave power of the Confederacy. Regardless of the specific institutional context, the threat to our liberties came from corruption, structures that play upon the nature of temptation combined with a concentration of power in the hands of the tempted.

Neoliberals see such corporate arrangements not just as good and efficient, but as inevitable. Globalization, like Amazon, is a natural force beyond our control. This view is basically Hobbesian, a rejection of the American Revolution itself and Montesquieu’s vision of the possibility of virtue and human agency to assert it through politics. The neoliberal law and economics school, through such notions as a rational actor framework and public choice theory, argues anti-corruption measures simply aren’t coherent. Place men and rotten boroughs, or their modern analogues like corporate monopolies controlling politics, while perhaps wonderful or perhaps sad, are just the nature of the world, and far better than any attempt to use an inherently corrupt public power to govern. Temptation to them is not worth avoiding, or even possible to address. Putting sugary foods in front of a public that becomes obese or addictive social networks in front of a population that becomes irate is simply ‘revealed preferences’ at work, not bad governance.

Neoliberals do not openly embrace Hobbes and argue for corruption. Instead they use a neoclassical optical illusion, positing that the free market is a natural force, untouched by a sinful human government, and thus untainted from corruption. Of course, this is really just an attempt to elevate an aristocracy, to imagine a select are virtuous while the rest are a great unwashed mass. The independence of the Federal Reserve is such a mythos, as are entire technocratic seizures of social power, like cost/benefit analyses. Robert Bork, for instance, sought to remove questions of antitrust and market structure from Congress, by situating it in the hands of the closest he saw to untainted bulwarks against popular pressure, lifetime appointed judges. In many ways, neoliberals have a Hobbesian vision that corruption and selfishness are simply dominant inherent aspects to be accepted in any society, with elites doing what they can to rule without pressure from the people. It is not so different, in fact, than the vision held by the Leninist leaders of the Chinese Communist Party. And neither is the extreme centralization of power it has fostered, both in America and in China.

To such neoliberals, the very idea of republican governance or planning makes no sense. We are all always tempted, and virtue is for suckers. It is why they misread China so badly, they could not imagine a strategically oriented set of state-led actors. They could not see beyond their own illusions. Taking on libertarianism and the CCP means pulling out this Hobbesian vision root and stem. It means admitting that we can govern and govern with virtue, and setting to the task of building out a strong state to foster the public interest. At the same time, it also means constraining the political power of these excessively powerful private institutions and foreign governments who are governing us, by using trade, antitrust, public utility, and procurement rules, so that checks and balances work in the commercial sector as they do in our government. We must split up our corporations and regulate them, moving industrial capacity in concert withe public interest. Above all, we must govern our corporate institutions, instead of being governed by them.

To make this point more practically, let’s take the pandemic. For necessary reasons, the President and Congress have placed immense power in the hands of the state to plan our economy, mostly through the Federal Reserve’s offering of trillions in dollars to support corporate assets. This is in some ways what this community seeks, a conservative yet assertive planning state. But what might appear to be strength is merely bigness. To this end, a set of private equity firms and large powerful corporations will likely attempt to buy up their competitors, or to acquire the property of ordinary Americans by using their capacity to access resources from this newly enlarged state, which is not otherwise limiting them. In other words, this pandemic-charged public sector may be vastly bigger, but it is still weak, and corporate actors will seek to exploit that weakness.

That temptation to inappropriate acquire undue power using the state is a political problem of corruption, and a threat to our liberties. 40% of America’s small businesses may go out of business because of this pandemic. Americans support small business because they are community institutions that root us, and because we don’t want our commerce organized entirely by Jeff Bezos, Mark Zuckerberg, or Xi Jinping, any more than we wanted it organized by King George III. So far, Rubio’s small business program has been the sole bulwark against this consolidation of power. There must be more. As Josh Hawley suggests, elevated antitrust scrutiny during the pandemic would be a good idea, and even better, a structural solution, like a prohibition on most big mergers as proposed by Congressman David Cicilline, would remove the temptation to acquire power entirely.

Regardless, this conservative project must wrestle with the fundamental problem of corruption and statecraft. And doing so is within the best part of the American tradition.

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Matt Stoller

Matt Stoller is the research director at the American Economic Liberties Project and the author of Goliath: The Hundred Year War Between Monopoly Power and Democracy.

@matthewstoller