Shredded money.

Corporate personhood also hurts innovation.

After the Federal government’s debt-ceiling debacle in the summer of 2011, I posted a very brief white paper outlining some suggested reforms, aimed at reducing the massive dysfunctionality that seems to have taken root in D.C. One of those suggestions involved campaign financing:

“All organizations, profit or non-profit, should be banned from donating to campaigns; only individuals should be permitted to donate to campaigns, $1,000 maximum per individual per year.”

I was simply interested in returning good governance, and my proposal stemmed from a realistic assessment of the Supreme Court’s Citizens United decision: If we cannot take exception with corporations’ right to free speech – based on a legally thin contention of a corporation’s personhood – then we should simply ban all organizations from donating money. While this proposal will take out the good along with the bad organizations, this should allow it to withstand legal challenges, since all organizations are banned equally. This proposal will serve two purposes; 1) remove a major source of money from the U.S. political system along with its corrupting influence and 2) drastically decrease the cost of funding campaigns, thus allowing more third-party candidates to mount credible campaigns, and keep our elected officials back at their desk, doing their jobs rather than spending most of their time raising money. The latter, of course, operates under the assumption that extravagant campaigns will disappear, and so will the need for large war chests. Campaigns will be forced to work smarter with their limited funding.

Well, it seems James Allworth, over at the Harvard Business Review, has found another reason for removing money from politics: Corruption, er, campaign financing and lobbying activities, is strangling U.S. innovation:

“One of the prime drivers of economic growth inside America over the past century has been disruptive innovation; yet the phenomenon that Lessig describes is increasingly being used by large incumbent firms as a mechanism to stave off the process. Given how hard it can be to survive a disruptive challenge, and how effective lobbying has proven in stopping it, it’s no wonder that incumbent firms take this route so often.”

As I have previously maintained, small businesses, independent proprietors and self employment are the few avenues left for the U.S. to follow for a rebound in employment, but no one is paying attention or addressing this, particularly politicians and large corporations, because these parties do not want to see labor rates climb. Any initiative that has the capacity to soak up the unemployed means the surplus labor supply dwindles, which means labor rates rise.

Now Allworth brings to our attention just how unpalatable large corporations find competition in the marketplace, and how, through campaign financing, corporations erect barriers to small firms trying to enter and disrupt the marketplace.

One of the items on my to-do list is to research the numerous ways in which regulations are written and administered to stifle small firms, while allowing large corporations to maintain their monopolistic and oligarchic controls over markets. It’s high time to pursue such a line of investigation. For instance, current regulatory structures make it all but impossible for organic, free-range livestock farmers to sell their products across state lines.

What’s more bothersome is to witness small business owners rail against regulatory control, yet defend large corporations in the same breath, as if the regulatory controls that apply to small business owners stifle large corporations in the same manner.

Nothing could be further from the truth. Large corporations are interested in quashing competition, and will do so with the occasional buyout, but just as often by regulatory control, too. Small businesses will find no friends amongst the large firms.

Photo by Tax Credits released under a Creative Commons license.