The 1% we have always with us, going back to before recorded history, at least to the beginnings of civilization, defined as starting to live in cities and use money routinely. It is worthwhile to examine what people of the time, any time for which we have records, had to said about their 1%ers. I can easily quote the Bible on usurers, money changers, Roman Imperial tax gatherers, and the rich in general. For example, 1 Timothy 6:10 “The love of money is the root of all evil.” I could, with only a bit more work, quote earlier laments and regulations on financial shenanigans. The history of the United States is as much a history of Hamiltonian government by and for financiers vs Jeffersonian Democracy as it is a history of slavery and Abolition down through Jim Crow and other continuing oppressions.
It is particularly interesting to see what ideas Louis Brandeis, later a distinguished Supreme Court Justice, provided to the highly progressive Woodrow Wilson campaign of 1912, about how big and obnoxious corporations were getting.
The title gives it away: Other People’s Money And How the Bankers Use It. Brandeis’s book is a collection of essays published in Harper’s Magazine after Wilson’s election, collected in book form in 1914 and now in the public domain. The titles of the essays/chapters are
- Chapter I: Our Financial Oligarchy
- Chapter II: How The Combiners Combine
- Chapter III: Interlocking Directorates
- Chapter IV: Serve One Master Only!
- Chapter V: What Publicity Can Do
- Chapter VI: Where The Banker Is Superfluous
- Chapter VII: Big Men And Little Business
- Chapter VIII: A Curse Of Bigness
- Chapter IX: The Failure Of Banker-Management
- Chapter X: The Inefficiency Of The Oligarchy
In essence, the problems have not changed in their nature at all since then. They have just gotten more so. Brandeis complained about the bankers’ hold on millions of dollars. Today the complaint is not even about their many billions, but about their trillions.
The election of 1912 came between the earlier Trust-Busting period of President Theodore Roosevelt, following on the financial bubble of the 1890’s Gilded Age, and the later World War I and the succeeding Roaring Twenties bubble market associated with President Herbert Hoover. (The term “Gilded Age” was coined by Mark Twain and Charles Dudley Warner in their book The Gilded Age: A Tale of Today. ) Of course, prior US history is littered with financial bubbles and scandals, as is history since. See, for example, the corruption of the Grant Administration, 1869-1877, and the Panic of 1873, in comparison with the corruption of the Harding Administration, from 1921 until Harding’s death in 1923. (Neither Grant nor Harding was personally involved in the corruption, but neither exercised effective oversight over his Cabinet.)
I don’t think I need to explain the shenanigans of the 1% of Brandeis’s time, which are no different in kind from those that went before or came after. I would like to draw your attention to essay V: What Publicity Can Do. This is not about muck-raking journalism, as important as that is. It is about mandating financial disclosure on the part of every significant economic actor, and especially on those with excessive market power or excessive political influence.
Genuine economic theory (not Friedmanite Market Fundamentalism) points out that free information is an essential part of a functioning competitive market. Competition here does not mean cutthroat competition characterized by financial shenanigans and back-alley corporate muggings, but rather competition based on quality and cost of products and services among parties none of whom can interfere with the others or the proper workings of the market. A Free Market in the sense of Freedom from “combinations in restraint of trade”.
Current Supreme Court legal doctrine holds, illegitimately, that corporations have the privacy rights of natural persons (in the old phrase), that is, of humans. Specifically, it grants to corporations the rights intended for ex-slaves in the Reconstruction amendments to the US Constitution. As long as corporations are in fact chattels, wholly owned and in no way free, or even capable of freedom, this cannot be legitimate. In fact, nothing could be further from the truth. To say that corporations have human rights is to say that they are, in fact, more equal than humans, because humans do not have the limited liability and other special privileges granted to corporations by statute. Such a doctrine is not what Brandeis had in mind when bringing to light the Constitutional right to privacy.
Justice, genuine moral understanding, and true economics all agree that corporations, as creatures of government granted certain privileges, must have the corresponding duties and responsibilities. Chief among them is financial disclosure. Not by requiring the government to get a warrant, as in a criminal case, but as a matter of daily routine. Not by requiring disclosure to oversight agencies that will keep “trade secrets” away from the prying eyes of investors, the media, the public at large, but disclosure that cannot be waived, directly to those concerned. As Brandeis put it himself,
But the disclosure must be real. And it must be a disclosure to the investor. It will not suffice to require merely the filing of a statement of facts with the Commissioner of Corporations or with a score of other officials, federal and state. That would be almost as ineffective as if the Pure Food Law required a manufacturer merely to deposit with the Department a statement of ingredients, instead of requiring the label to tell the story. Nor would the filing of a full statement with the Stock Exchange, if incorporated, as provided by the Pujo Committee bill, be adequate.
To be effective, knowledge of the facts must be actually brought home to the investor, and this can best be done by requiring the facts to be stated in good, large type in every notice, circular, letter and advertisement inviting the investor to purchase. Compliance with this requirement should also be obligatory, and not something which the investor could waive. For the whole public is interested in putting an end to the bankers’ exactions. England undertook, years ago, to protect its investors against the wiles of promoters, by requiring a somewhat similar disclosure; but the British act failed, in large measure of its purpose, partly because under it the statement of facts was filed only with a public official, and partly because the investor could waive the provision.
Today, of course, we can do much better. We can require disclosure on the World-Wide Web. Disclosure of transactions; disclosure of political contributions; disclosure of contracts; disclosure of communications between corporations and the government; disclosure of conflicts of interest; disclosure of anything material to the public’s understanding of the workings of the economy in general and financial shenanigans in particular.
Wikipedia on Louis Brandeis
Brandeis…became a recognized lawyer through his work on progressive social causes. Starting in 1890, he helped develop the “right to privacy” concept by writing a Harvard Law Revkiew article of that title, and was thereby credited by legal scholar Roscoe Pound as having accomplished “nothing less than adding a chapter to our law”…He later fought against powerful corporations, monopolies, public corruption, and mass consumerism, all of which he felt were detrimental to American values and culture.
Wikipedia on Woodrow Wilson
In his first term as President, Wilson persuaded a Democratic Congress to pass major progressive reforms. Historian John Cooper argues that in his first term, Wilson successfully pushed a legislative agenda that few presidents have equaled, and remained unmatched up until the New Deal. This agenda included the Federal Reserve Act, Federal Trade Commission Act, the Clayton Antitrust Act, the Federal Farm Loan Act and an income tax. Child labor was curtailed by the Keating–Owen Act of 1916, but the U.S. Supreme Court declared it unconstitutional in 1918. This act served as an example for the later successful effort in the 1930s. He also had Congress pass the Adamson Act, which imposed an 8-hour workday in various industries, which was eventually approved by the Supreme Court. He also became a major advocate for the women’s suffrage amendment to the U.S. Constitution. Much of his agenda would later serve as an example or a basis of support for the New Deal.
I have added Brandeis’s book to the Education Working Group Reading List.