Matt Stoller: Lobbying Used to Be a Crime: A Review of Zephyr Teachout’s New Book on the Secret History of Corruption in America

Yves here. You can also read Zephyr Teachout answering questions about her book at last weekend’s Book Salon at Firedoglake.

By Matt Stoller, who writes for Salon and has contributed to Politico, Alternet, The Nation and Reuters. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller. Originally published at Medium and Firedoglake

If there’s one way to summarize Zephyr Teachout’s extraordinary book Corruption in America: From Benjamin Franklin’s Snuff Box to Citizens United, it is that today we are living in Benjamin Franklin’s dystopia. Her basic contention, which is not unfamiliar to most of us in sentiment if not in detail, is that the modern Supreme Court has engaged in a revolutionary reinterpretation of corruption and therefore in American political life. This outlook, written by Supreme Court Justice Anthony Kennedy in the famous Citizens United case, understands and celebrates America as a brutal and Hobbesian competitive struggle among self-interested actors attempting to use money to gain personal benefits in the public sphere.

What makes the book so remarkable is its scope and ability to link current debates to our rich and forgotten history. Perhaps this has been done before, but if it has, I have never seen it. Liberals tend to think that questions about electoral and political corruption started in the 1970s, in the Watergate era. What Teachout shows is that these questions were foundational in the American Revolution itself, and every epoch since. They are in fact questions fundamental to the design of democracy.

Teachout starts her book by telling the story of a set of debates that took place even before the Constitution was ratified — whether American officials could take gifts from foreign kings. The French King, as a matter of diplomatic process, routinely gave diamond-encrusted snuff boxes to foreign ambassadors. Americans, adopting a radical Dutch provision banning such gifts, wrestled with the question of temptation to individual public servants versus international diplomatic norms. The gifts ban, she argues, was evidence of a particular demanding notion of corruption at the heart of American legal history. These rules, ‘bright-line’ rules versus ‘corrupt-intent’ rules, govern temptation and structure. They cover innocent and illicit activity, as opposed to bribery rules which are organized solely around quid pro quo corruption.

The Constitution is full of such bright-line rules. For instance, the residency requirement was intended to protect against ‘adventurers’ and the takings clause protects private property and has an anti-monopoly interpretive framework. The census, rules on representation of House members, the regular electoral cycle of two year terms, age requirements (to prevent dynasties), requirements for legislative journals, salary payments for legislators, and prohibitions on holding legislative and other offices are all anti-corruption provisions. The founders, Teachout argues, were obsessed with corruption. They had seen their beloved British system fall into the trap of corruption, with ‘place men’ (members of parliament dependent on the king) and rotten boroughs, and sought to prevent a recurrence in America.

Teachout points out something fairly obvious, but not recognized today — the theoretical underpinning of the American revolution was that a corrupt government had no legitimacy to govern. This is something the founders well recognized. The debates they had — Madison, Jefferson, Adams, Franklin, Washington, Hamilton, and people in the culture at large — reflected a divide between political philosophers Thomas Hobbes versus Baron de Montesquieu. Hobbes’s vision, echoed today among the Chicago school’s law and economics scholars, was that corruption as a concept made no sense. Life was a brutal competition among selfish actors. In such a paradigm, a revolution would simply be a question of raw power, rather than any set of principles.

The founders roundly repudiated this view, adopting Montesquieu’s arguments that there is such a thing as a public interest and that people could orient themselves around it given sufficient personal virtue and adequate structural incentives to do so. Montesquieu is best-known for his promotion of the concept of different branches of government, but that concept came from his moral view of human nature. Teachout shows that questions of bribery were fairly insignificant in the dialogue over the structure of the new republic, whereas anti-corruption as a Montesquieu-influenced deliberative design principle was the key animator of the shaping of the country.

This debate continued, in some sense, throughout the two hundred plus years of American legal and cultural history. The first significant test of the revolutionary anti-corruption doctrine was the 1795 ‘Yazoo’ controversy, when a Georgia legislature sold a massive land grant to speculators who had, as it turns out, bribed lawmakers. Voters turned out the legislature at the next election, and the newly elected lawmakers voided the deal. The case generated widespread controversy and went to the Supreme Court, where in 1810, in Fletcher v Peck,the court said that the sanctity of the contract must be upheld even in the face of corruption. In a nod to today’s logic of brutal tolerance of corruption, the court argued that corruption may be problematic, but there was nothing the state could do about it. This was a highly consequential decision, and prioritized contract rights over anti-corruption.

During the railroad era, the country faced similar Yazoo-like legal problems managing corruption, but under a different guise. When large corporations got land grants to build rails and facilities, and used lobbying and bribery to acquire them, were those concessions voided? Courts usually said no. A corrupt legislative act might be distasteful, but one could not interrupt commercial society through either democratic or judicial redress over something so undefined as corruption. But questions over structure and process never went away.

In her discussion of the 19th century robber baron era, she includes the critical yet forgotten law of 19th century lobbying. Lobbying today is considered a Constitutionally protected free speech activity, an unfortunate but necessarily tolerated side effect of the First Amendment. That, however, is a relatively recent legal status.

In the 19th century, lobbying was perceived as an illegitimate and inherently corrupt activity, a betrayal of one’s own citizenship. The Georgia draft Constitution in 1877 made lobbying a crime. ”Throughout the country, from the early 1830s through the early 1930s, the sale of personal influence was treated as a civic wrong in the eyes of the law,” she writes. “A citizen did not have a personal right to pay someone else to press his or her legislative agenda.” This anti lobbying sentiment was not enforced through criminal law, but through civil law. Contracts for lobbying were unenforceable by courts, as the case Trist vs Child showed.

In 1890, the first law requiring lobbyists to register was passed in Massachusetts. This began the legitimization of lobbying as a profession. In 1927, the Supreme Court began chipping away at the de fact prohibition on lobbying via contract law, but as late as 1941 it still upheld Trist vs. Child.

Corruption in this era was widespread, as was the reaction against it. The Pendleton Act, which created the civil service, and the secret ballot, were both bright-line rule innovations to reduce the temptation of corruption. The country also began wrestling with the increasingly high cost of campaigns, which was a pivotal factor in the election of 1896 contest between populist Democrat William Jennings Bryan and Republican William McKinley. Banks were assessed a .25% charge on capital to finance McKinley’s run, which amounted to roughly $5 billion in today’s money. This led to, among other things, Teddy Roosevelt’s anti-monopoly crusades and his work to ban corporate contributions in the early 20th century.

Corruption was more than just bribery, it was a threat to self-government and individual citizenship. It was a moral problem. Mark Twain’s novel The Gilded Age, from which the era took its namesake, was a story of an innocent woman turned sophisticated amoral lobbyist. Corruption as a problem had religious overtones.

Gradually, this ardor has cooled. It was only in the post-World War II era that courts began carving out a First Amendment right on lobbying. Lobbying in the post-war administrative state was a necessity, and the increasing expense of public campaigns suggested that restrictions were necessary. But in 1976, the Supreme Court ushered in the modern Hobbesian view of political economy with its ruling in Buckley vs. Valeo. This case invalidated restrictions on campaign spending, and began the reinterpretation of corruption to simply mean quid pro quo bribery. The court argued that spending on elections in a First Amendment right, though the government had a valid anti-corruption interest in limiting speech. Contribution limits were valid, but spending limits were not. Post Buckley, the only limits on campaign spending became corruption-based, so scholars and lawyers began defining their policy preferences in terms of corruption, twisting and warping the term.

The book’s final chapters are a discussion of Citizens United, the Supreme Court’s makeup, and a legal proscription of how to restore the more appropriate conception of corruption in our national life.

According to Teachout, Citizens United was a decision in which the Supreme Court ignored the historic record to narrow the definition of corruption to mean a simple quid pro quo transaction. It found that the First Amendment protects “political speech regardless of the identity of the speaker,” and that the Court found no sufficient “government interest in limiting corporate political advertising.” It equated favoratism and influence with ‘democratic responsiveness’. This was, as Teachout shows earlier, what Benjamin Franklin saw to be a dystopian view of how the American republic would be organized.

Teachout shows how the court itself has undergone transformations that turn it into a deeply elitist and anti-political body. Throughout much of its history, the court had as justices people with practical experience in politics, in getting elected, and in the muck and push and pull of democracy and vote getting. Since the 1970s, nearly all sitting justices have come from academia and appellate courts, creating an unnatural distance from the practice of politics. Conservative justices believe in the law and economics school of thought developed by University of Chicago scholars like Robert Bork, and institutionalized in organizations like the Federalist Society. This line of thinking is Hobbesian, and relies on the selfish man model of human nature. It is formal, abstract, and is not rooted in ordinary human experience, but in models that prioritize efficiency and assumed selfishness. These men ignored 200 years of historical experience, case law, and legislative activity to pursue a legal revolution that in essence rolled back the American break with England. This revolution has restored a system of de facto ‘place men’ and rotten boroughs.

Teachout concludes with a discussion of how to think about corruption as an intellectual question. There are no easy answers, but then again, there never have been. The legislator has a unique role in a representative democracy, he or she must appeal to voters to get elected; indeed ”democracy is premised on that plea…. Creating laws that deter bribery of legislators, but do not deter democratic organizing, has been among the most vexing problems of the American political experiment.” As she points out, “Democracy’s greatest threat (responsiveness to donors), is deeply intertwined with democracy’s greatest promise (responsiveness to voters).”

In a post-Citizens United world, Teachout calls for a renewed discussion of corruption as a broad principle, and suggests several ‘bright line’ institutional innovations. The first is public financing of campaigns, which reduces the temptation of corruption by reducing the dependence of legislators on contributors. And the second is a new set of anti-monopoly laws, which would reduce the aggregate power of private interests that have increasingly come to govern our culture. These come from her establishment of what she calls the ‘Anti-corruption principle’, a principle in which public servants should identify with the public interest. This is both structural, in that we need bright line rules to help them do so. But it is also personal, in that we should act as citizens with personal virtue, and elect public servants who do so as well.

The book is a fascinating and sprawling work designed to help us rethink corruption as an idea. It’s a genuine intellectual achievement, riddled I’m sure with problems that come from trying to sweep several hundred years of legal and political history into one narrative. The Yazoo controversy, for instance, had to do with Native American land claims, which is elided in the book. Slavery is only briefly mentioned, despite slavery being at its very ideological core a question of the corruption of property rights. The 19th century may have seen a very different approach to lobbying, but how the forgotten law of lobbying squares with one of the most corrupt periods in American history is never addressed in the book. These criticisms are more quibbles than anything else — I found myself reorganizing my own thinking about politics based on what Teachout has put together here. She shows that corruption is foundational in all aspects of American law and culture, and that we ignore its rich history only if we want to impoverish our own thinking and imaginations about what is possible.

I would be remiss if I didn’t also note that Teachout herself is as interesting a character as anyone she writes about. She was an organizer of Howard Dean’s Presidential campaign, an inventor of internet politics, and she recently ran for Governor of New York against Andrew Cuomo on the issue of anti-corruption. Her arguments resonate among voters, at the very least. It’s unusual to have a genuine intellectual running for office, and Teachout is a throwback to politicians like Woodrow Wilson and Teddy Roosevelt, deep thinkers who also believed in action. For her, as for them, thinking must be invigorated by advocacy and politics.

Ultimately, the most important audience for the book is the Supreme Court and the judiciary. What Teachout is trying to do is help them understand the context of their work, and arm them with the historical and legal tools to make better decisions about corruption and politics. Teachout has taken on an ambitious task, which is to reorganize the modern conception of corruption and return us, ironically, to our original debates. Scalia, were he honestly an ‘originalist’ as he incoherently claims, would be proud.

Americans broadly speaking would probably agree with Teachout’s interpretation of corruption, rather than that of those who authored Citizens United. Americans see the revolving door of lobbying and believe Congress and the government as institutions are corrupt. They have, in other words, a structural sense of what corruption means. It is not just bribery, it is a set of incentives that are not per se illegal, just unethical. Teachout shows, through painstaking historical research, that this popular conception of corruption is actually far more consistent with the intent of the Constitutional framers than the odd and anomalous John Roberts-led Hobbesian majority.

Corruption in America is a book worth reading, almost as much as Teachout is a person worth following. Reorganizing America is a large task, and many of us are seeking to do that. But first, in some sense, we must reorganize our own thinking, trapped as many of us are in Robert Bork’s nightmarish Hobbesian world of hopelessness. This book will help us take that first critical step.

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39 comments

    1. wbgonne

      Agreed. Outstanding review of a desperately-needed effort to re-acquaint ourselves with the common sense notions of justice and corruption that we have been submerged under a miasma of twisted constitutional doctrine (money is speech; corporations are people). One point: since neoliberalism is the effective merger of government and corporate power, it is difficult to conceive of political corruption under such a regime. To me, this shows (yet again) why neoliberalism is anathemic to democracy. For democracy to flourish in a capitalist society, government and business must be separate and government must maintain its superior position as the people’s surrogate. Allowing public-private partnerships and other such neoliberal abominations blurs the distinctions between the power centers, undermines government’s systemic role, and ultimately disenfrachises the people.

      We have eliminated political corruption by defining it out of existence. Success? You be the judge.

    2. Schofield

      Corruption wasn’t just the “lipstick on the pig” in 18th century Britain ancient Egypt had it too:-

      http://libcom.org/history/records-of-the-strike-in-egypt-under-ramses-iii

      Best to see corruption as an outcome of the duality of human nature (negative Individualism and Mutualism versus its positive opposites) coupled with poor attachment process in childhood. Net outcome? A balancing act that needs constant effective monitoring and correction by human societies. No good pretending as the ancients did that we must follow God’s will and the religious fundamentalists do to day by finding a king or queen or religious leader to rule and interpret that will. God or Nature (take your pick) made us dual in survival instincts and so God’s or Nature’s will becomes ‘what ‘We’ want” and we can only find the balance we need as human societies by ensuring political equality at all levels and functions of society where possible and practical and make use of democratic processes.

  1. flora

    “Corruption was more than just bribery, it was a threat to self-government and individual citizenship. It was a moral problem. ”
    Yes. Still true.
    Thanks for this post.

  2. Minor Heretic

    A fallacy at the root of the modern 1st Amendment interpretation of campaign finance is just that: money as speech. Consider that high spending candidates win congressional primaries 98% of the time. That 98% is literal – see USPIRG’s work on this. That makes donating money analogous to voting, not speaking. Last I checked, we were each supposed to have an equal number of votes, namely one.

    Just throwing this out: Limit political donations (to candidates, parties, PACs, ballot initiative movements, lobbying organizations, 501(c)4…) to a day’s wages at the federal minimum wage. It would also be the annual maximum. That’s $58 at the present level. David Koch and the guy who mows David Koch’s lawn would have equal clout.

    Going further with the idea of money-as-vote, there should be a constituency restriction. Why should a resident of Ohio be able to influence the outcome of an election or ballot initiative in California? For that matter, why should a resident of Ohio congressional District 1 influence the elections of a representative for Ohio District 2? In neither case would the donor have legal party status.

    I’m going to read Teachout’s book. I should note that her sister Woden co-wrote an excellent book called “Slow Democracy,” about the practice of direct deliberative democracy, including (but not limited to) town meetings.

    1. Sam Kanu

      “Money = free speech” is the ultimate fallacy. If money is equal to speech, then per definition, speech cannot be free or equal, as we have huge disparities in wealth. And in turn that means we dont have a democracy.

      So basically the courts have dictated that democracy is dead. But that is not news on these pages, where it has long been obvious that we live in an oligarchy….

    2. Torsten

      Corporations and democracy are incompatible. The organizing social principle of democracy is “one person, one vote.” The organizing social principle of corporations is “one dollar, one vote.”

      1. Left in Wisconsin

        As with lobbying, the current iteration of and justification for “corporations” bears virtually no relationship to the original circumstances justifying their creation and existence. But it should surprise no one that corporation execs and owners have worked since then to change what corporations are to suit their interests, and to prevent the people from reining them in. Mostly they win, except when they don’t.

    3. pebird

      If money is speech, then taxes are unconstitutional. If money is not speech, we should tax political contributions to fund elections

  3. Ned Ludd

    Americans broadly speaking would probably agree with Teachout’s interpretation of corruption, rather than that of those who authored Citizens United. Americans see the revolving door of lobbying and believe Congress and the government as institutions are corrupt. They have, in other words, a structural sense of what corruption means.

    The most important audience for this book is the American citizenry. The book provides context and history to support their view of corruption as a structural problem, whereas a lot of elite propaganda limits the concept of corruption to a narrow concept of bribery.

    Ultimately, the most important audience for the book is the Supreme Court and the judiciary. What Teachout is trying to do is help them understand the context of their work, and arm them with the historical and legal tools to make better decisions about corruption and politics.

    Or you could appeal to a group of elites who prospered under the current, corrupt system. This will work as well as prisoners having a high-minded debate with prison guards over how to lessen corruption among the correctional staff.

  4. cabjoe

    As she points out, “Democracy’s greatest threat (responsiveness to donors), is deeply intertwined with democracy’s greatest promise (responsiveness to voters).”

    I like the Swiss way of dealing with this inherent conflict. Give the voters the right to veto in a referendum any law passed by the parliament. By all accounts, it makes their representatives very careful to draft laws that are not likely to be overturned straight away.

    1. jonboinAR

      Those vetoes would invite corruption themselves. Only massive centers of influence ($$) and propaganda (privately owned conglomerations of news outlets) would be likely to manage to organize the public’s mind enough to effect a veto of a federal law. I can’t see any escape route from our fetid vale so effective as these two actions: repealing corporate personhood, and squelching the idea that money = speech.

  5. Paul Tioxon

    The corruption of the Gilded Age included the buying of US Senate offices. Mark Twain in particular wrote against the practice whereby state legislatures picked the US Senators for a state, without any direct election by the citizenry. One of the richest men in world, William A. Clark, The Copper King of Montana, paid off the entire legislature of that state to become its appointed Senator. Finally, the the 17th Amendment to the US Constitution provided for the direct election of US Senators. Today, another institutional barrier to democratic elective office is the Congressional District. When I vote for a Senator, we have state wide elections, not 1 of 2 Senatorial Districts. When I vote in PA for my Congressional representation, I am only voting for a tiny fraction of my full representation, due to my being forced to vote for only one candidate in my congressional district. PA has 18 districts because it has to follow the law that provides for this organization. I should get to vote for all 18 of the federal representatives, because I am a citizen of Pennsylvania, which enter the Union of the USofA. The districts are not hallowed institutions, because they keep changing with the growth in population of the nation. And I, get to vote for some frequently redrawn district that keep the amount of Republicans going to Washington DC in numbers greater than the total vote count for their party for each of their district races. I want a vote fore each representative, no matter how many there are for my state. Some small states with only 1 representative have a statewide election. That is what I want for all of the citizens with more than 1 representative. If I had 18 votes, I could vote 18 times for a Democratic slate of reps or maybe 12 Dems and 6 Green Party reps. As it stands now, 17 or the 18 people who represent my state get to go to DC without my consent. I am not 1/18th Pennsylvanian and I don’t want 1/18th of a voice in Congress. One person, One vote, for One Candidate. How come I can’t vote for the rest of my state’s delegation to Congress. Oh yeah, we might take over the government mechanism of decision making.

    1. Jess

      Yes, but if everybody got to vote for every house (or legislative) seat, then metropolitan voters would snuff out any chance of reps being elected from rural or less densely populated areas. Chicago would overwhelm everyone downstate. So Cal would overwhelm all the agricultural and forest counties.

      1. Paul Tioxon

        No, NO NOOOOOOOOOOOOOOOOOOOOO!
        Everyone gets to vote one vote for one candidate. You need to be in a party to get on the ballot. A party would have primaries. The top 18 candidates in one party could run. So could a lot of small party candidates. CA has 38 million people. LA has 3.8 million. 90% of the population does not live in LA and does not have to vote for a group that is just from LA. Opposition parties would cut your strategy to pieces by created a ticket balanced from all of the major metro areas and counties. A party with a balanced ticket getting a straight ticket vote could send a state bloc from all areas of a state every 2 years like clockwork and get a lot through Congress. Every state has big cities. PA has 12 million people, but only 1.5mil live in Philadelphia. 90% of the population does not have to vote for anyone from that city. This would create a greater party/policy control over candidates who must vote as a bloc to get everyone elected time and again. AS it stands now, candidates are running as celebrities more than party members. Policy voting is not their priority due to gerrymandering districts. A state wide election smooths out the concentration of one type of conservative or liberal constituency. EVeryone in the state votes. Even if you are in a small population county, there are dozens of small counties like you with similar interests that comprise a huge amount of the electorate who will vote. The 4 suburban counties of Philadelphia, outnumber the city which is also a county. The rest of the state outnumbers the city and its 4 immediate counties. Yes, there is a heavy population in just 5 counties, but the other 4 dozen or so counties outnumber them 3-1. This is true in for the most part in all of the states with large urban areas.

  6. beene

    To me this is the most outrageous settle law that we have failed to address in over two hundred years (to the Supreme Court, where in 1810, in Fletcher v Peck,the court said that the sanctity of the contract must be upheld even in the face of corruption. In a nod to today’s logic of brutal tolerance of corruption, the court argued that corruption may be problematic, but there was nothing the state could do about it. This was a highly consequential decision, and prioritized contract rights over anti-corruption.).

    cabjoe mentioned voters being able to vote on approval of any new law passed by our representatives seems like an excellent correction to a lot of corruption by law makers.

  7. Linda Amick

    As a post grad student of Historical Philosophy, I find it absolutely shocking that our societal first principles are Hobbesian. His view of human dynamics and behaviors is MIGHT MAKES RIGHT. Human beings are nothing more than brutes.
    If our societal viewpoint was Aristotelian with man being a rational animal and part of the living organism of the earth and solar system with a responsibility to respect all parts, maybe our society would find its basis in something more akin to the Golden Rule.

    1. Jim

      Mr. Hobbes, I believe, has inappropriately been maligned by many of the posts on this particular thread when making allusions to his moral psychology.

      If you take a more careful look at his writings you might notice that Hobbes is concerned with cultivating a personality type concerned with honor. Hobbes says “That which gives to human actions the relish of justice is a certain nobleness or gallantness of courage, rarely found, by which a man scorns to be beholden for the contentment of his life to fraud, or breach of promise. The justice of the manners is that which is meant, where justice is called a virtue, and injustice a vice.” (Leviathan, Chapter 14).

      When talking about the first steps in the transition from the state of nature to a social contract Hobbes seems to believe that at least some members of the original society have to be of a sufficiently magnanimous temperament that they are willing to take unprecedented risks for the benefit of all.

      Hobbes identifies magnanimity with the just conduct that springs from a “contempt” of injustice, and he seems to recognize that men are often prepared to risk their lives rather than suffer some sorts of shame. He also says that “magnanimity is a sign of power.”(Leviathan, Chapter 10)

      1. Generalfeldmarschall von Hindenburg

        Misreading the opaque writings of philosophers is all too easy. Nietschze for example, is either a libertarian conservative devil or a liberating champion of self actuation depending on who’s reading which translation with what preconception.

  8. JTMcPhee

    Speaking of corruption, moral hazard and all that related badness, years ago I was in the man cave of a person busy in the open-outcry activity at the CME. Up on his wall in a florid frame was the front page from a Chicago Tribune dated as I recall in august 1852. The headline story reported he criminal conviction of two fellas for engaging in “speculation” on the future price of corn, or maybe pork — back then, the stock in trade of the CBOT/CME today was totally illegal, even barred by the Illinois constitution, for a lot of reasons that reflect the pain that smartass “speculation” and derivatization have and continue to cause:

    The Struggle for Legitimacy

    Nineteenth century America was both fascinated and appalled by futures trading. This is apparent from the litigation and many public debates surrounding its legitimacy (Baer and Saxon 1949, 55; Buck 1913, 131, 271; Hoffman 1932, 29, 351; Irwin 1954, 80; Lurie 1979, 53, 106). Many agricultural producers, the lay community and, at times, legislatures and the courts, believed trading in futures was tantamount to gambling. The difference between the latter and speculating, which required the purchase or sale of a futures contract but not the shipment or delivery of the commodity, was ostensibly lost on most Americans (Baer and Saxon 1949, 56; Ferris 1988, 88; Hoffman 1932, 5; Lurie 1979, 53, 115).

    Many Americans believed that futures traders frequently manipulated prices. From the end of the Civil War until 1879 alone, corners – control of enough of the available supply of a commodity to manipulate its price – allegedly occurred with varying degrees of success in wheat (1868, 1871, 1878/9), corn (1868), oats (1868, 1871, 1874), rye (1868) and pork (1868) (Boyle 1920, 64-65). This manipulation continued throughout the century and culminated in the Three Big Corners – the Hutchinson (1888), the Leiter (1898), and the Patten (1909). The Patten corner was later debunked (Boyle 1920, 67-74), while the Leiter corner was the inspiration for Frank Norris’s classic The Pit: A Story of Chicago (Norris 1903; Rothstein 1982, 60).14 In any case, reports of market corners on America’s early futures exchanges were likely exaggerated (Boyle 1920, 62-74; Hieronymus 1977, 84), as were their long term effects on prices and hence consumer welfare (Rothstein 1982, 60).

    By 1892 thousands of petitions to Congress called for the prohibition of “speculative gambling in grain” (Lurie, 1979, 109). And, attacks from state legislatures were seemingly unrelenting: in 1812 a New York act made short sales illegal (the act was repealed in 1858); in 1841 a Pennsylvania law made short sales, where the position was not covered in five days, a misdemeanor (the law was repealed in 1862); in 1882 an Ohio law and a similar one in Illinois tried unsuccessfully to restrict cash settlement of futures contracts; in 1867 the Illinois constitution forbade dealing in futures contracts (this was repealed by 1869); in 1879 California’s constitution invalidated futures contracts (this was effectively repealed in 1908); and, in 1882, 1883 and 1885, Mississippi, Arkansas, and Texas, respectively, passed laws that equated futures trading with gambling, thus making the former a misdemeanor (Peterson 1933, 68-69).

    Two nineteenth century challenges to futures trading are particularly noteworthy. The first was the so-called Anti-Option movement. According to Lurie (1979), the movement was fueled by agrarians and their sympathizers in Congress who wanted to end what they perceived as wanton speculative abuses in futures trading (109). Although options were (are) not futures contracts, and were nonetheless already outlawed on most exchanges by the 1890s, the legislation did not distinguish between the two instruments and effectively sought to outlaw both (Lurie 1979, 109).

    In 1890 the Butterworth Anti-Option Bill was introduced in Congress but never came to a vote. However, in 1892 the Hatch (and Washburn) Anti-Option bills passed both houses of Congress, and failed only on technicalities during reconciliation between the two houses. Had either bill become law, it would have effectively ended options and futures trading in the United States (Lurie 1979, 110).

    A second notable challenge was the bucket shop controversy, which challenged the legitimacy of the CBT in particular. A bucket shop was essentially an association of gamblers who met outside the CBT and wagered on the direction of futures prices. These associations had legitimate-sounding names such as the Christie Grain and Stock Company and the Public Grain Exchange. To most Americans, these “exchanges” were no less legitimate than the CBT. That some CBT members were guilty of “bucket shopping” only made matters worse! http://eh.net/encyclopedia/a-history-of-futures-trading-in-the-united-states/

    The Players reported on in that Tribune article, as I recall, were convicted of multiple felonies, and sentenced to something like 15 years each in pre-privatization Illinois prison.

    And another example of the fun and games, and how libertarianism actually operates if allowed: Remember the Onion Corner scam, again centered in Chicago? http://en.wikipedia.org/wiki/Onion_Futures_Act

    I’m old enough and cynical enough to know that there’s an irreducible amount of corruption, some cheerful but most perverse, in any social organization. The constant problem is managing what I’d call “slack,” the apparently necessary “play” in the system, that like mechanical tolerances in timepieces and transmissions, keeps friction and heat from locking up the mechanisms. I doubt we humans will ever be very successful at keeping the “sharpest” among us from fattening themselves via fraud, abuse, theft, combination and all that — there are no incorruptible mechanisms that can keep the “slack” to a level that like, our gut bacteria population does not proliferate and degenerate into a disease state that threatens to kill us, the organism of ordinary people that keep all this going with our work and our little bits of wealth…

    1. Pepsi

      Very good points.

      I remember being apalled at this Ted talk by a goldman sachs woman who was crowing about starting a commodities exchange in Ethiopia and how they’d greatly benefitted the country by installing net cafes so that farmers could check the prices of crops.

  9. blucollarAl

    The entire philosophical and ideological foundation of modern capitalism, the almost always unquestioned because unrecognized and assumed anthropological and moral premises of the system of organizing economic and social life, is Hobbesian in its roots and accepts a Hobbesian picture of the universe. What passes today for the “American Conservative Movement”, that collection of foreign policy neo-cons and economic/social neo-liberals that deceptively calls itself “conservative”, suggesting a respect for if not a reverence for the traditional and older ways, represents in fact a radical, anti-American tradition of Hobbesian political philosophy as Treachout seems to recognize in her book (I have not yet read it).

    Still the best treatment of the Hobbes and modern capitalism are Hannah Arendt, “The Origins of Totalitarianism”, Chapter 5, “The Political Emancipation of the Bourgeoise”, and C.B. McPherson, “The Political Philosophy of Hobbes”. Read them and weep.

    So we have a radical, anti-American, anti-human philosophy based on a picture of human nature as pure passion, aggression, power-hungry greed, appealing to ordinary Americans under the guise of “conservative” respect for their cherished (what’s left) customs, traditions, and respect for decency. It is as if we have all fallen into a deep trance with no one, certainly not today’s Democrat Party, there to wake us up.

    1. Jim

      bluecollar Al

      I have really enjoyed your comments over the past few weeks.

      What do you think is the core of political society?

      The more I’ve reflected on this question the more I tend to believe that it is substantive feeling (or passion)

      Doesn’t Hobbes’s delineation of the social contract even presuppose an environment were coordinated social interaction is possible?

      1. blucollarAl

        Thank you for your response, Jim.

        Those are some large questions. May I respond by asking you to think about something? In last Sunday’s “NY Times” there was a story about the fact that in France almost every neighborhood has at least several first-rate small, privately owned bookshops that offer a wide selection of books, many of which are far from the popular “best sellers” that dominate the publishing, marketing, and selling of books in the U.S. Unlike America, in France the giant online retailers have not been able to destroy the small guy or gal in order monopolize sales. How can this be?

        It seems that the French government has enacted a variety of laws designed to protect the existence of small bookstores like setting restrictions on discounting and offers of free shipping in order to even the playing field for the big and little bookseller. The basis for this government protection, requiring restraint of the “freedom” of consumer and corporation alike, is that books in all the dimensions of their creation, sale, and marketing, are judged to be an “intrinsic good” and as such deserve special protection, as do the many people who make a living from them.

        That there are “intrinsic goods” that benefit not simply this or that individual, this or that special interest, constituency, etc., but that are important to the flourishing of human life lived together in community, is not something we Americans are used to thinking about. The fact that there may be disagreement about which things ought to be considered “intrinsically good” should not cause us to reject the very idea of such notion. It is one thing to debate which goods ought to be protected as “intrinsic” to the common good of our political-social life in common. It is quite another to reject the idea out of hand and assume that the very notion is some kind of mistaken language game and that politics is always and everywhere only about individuals and their privately determined needs and desires. At least Hobbes was intellectually consistent when he recognized that in such a society of competition and warring interests, government must grow stronger, not weaker, ultimately monopolizing all power, in order to prevent those individuals who are more naturally endowed by nature or nurture from enslaving, even killing, the weaker in pursuit of the objects of their insatiable appetites.

        The latter worldview constitutes one giant strain of modern political thought whose great-grandfather was Thomas Hobbes and, through the moderating hand of his successor in the English contract-theory tradition, John Locke, made its way into many political constitutions including our own. It was never unopposed, however, and the “common good” or “public interest” tradition had its standard-bearers as well, including both the “conservatives” like Henry Adams and Matthew Arnold, social theorists like Weber, and revolutionary thinkers like Marx. Obviously France has deeper cultural and political roots in all of these alternative ways of thinking than does, say, the U.S.

        One important result of the triumph of the Hobbes and his progeny is this: if “common good” is really just a category mistake, a mental fiction, so that society is always and everywhere just a sum of competing private and individual interests, passions, desires, appetites, then politics is essentially about nothing but power: who has it, how to get it, how to keep it, and how to use it to further my interests or those of my group.in an endless competitive struggle of all against all. Arguing for legislation, say, on behalf of small booksellers, shop keepers, small family farms or businesses, long term protection of the environment, more public access to open spaces like parks, theater or even public radio and TV, becomes incomprehensible within such a worldview. All or almost all (public safety is a Hobbesian exception) “goods” become good only insofar as individuals in sufficient numbers desire them and spend themselves to obtain them. For Hobbes this meant by working to acquire and develop land-property, nowadays it mainly means acquiring enough capital-money to buy, trade, and own an increasingly commoditized world of things and experiences and control the other people who might get in my way).

        Finally, another terrible result is something Hannah Arendt has described with precise, poignant, powerful analysis: the loss of the habit of prudence, the ability to think about the affairs of human beings living in common, and with it the loss of the courage and capability to make responsible judgments about right and wrong, good and evil. Terrible result indeed, as her controversial at the time but now oh so prescient essay, “Eichmann in Jerusalem”, laid out for all to see. Under such a regime when thoughtlessness and cowardice have formed the character of the people, as Ivan Karamazov said, “all things become possible”.

  10. diptherio

    So is it time for a repeat of 1776 yet? Are we there yet? You all are probably already aware of my feelings on the situation: the only solution is revolution. Voting ain’t never gonna be enough. Blacks have had the vote for how many years now?–and women even longer–and you see all the good it’s done.

    We have nothing to lose but our oligarchs.

    1. Carolinian

      Then you must agree with Mark Twain

      http://lefti.blogspot.com/2014_08_01_archive.html#4045032598413586070

      To close, a few more notes about Mark Twain which got left out of Burns’ film. First, his comment on the French Revolution:

      “When I finished Carlyle’s French Revolution in 1871, I was a Girondin [a moderate]; every time I have read it since, I have read it differently — being influenced and changed, little by little, by life and environment … and now I lay the book down once more, and recognize that I am a Sansculotte! And not a pale, characterless Sansculotte, but a Marat.” [The Sanculottes – whose name says that they were not the moderate bourgeois revolutionaries who wore culottes (silk knee-breeches) – were the more radical, left-wing, working class arm of the revolution].

      Next, this perhaps startling quote, definitely not heard in Burns’ film:

      “I am said to be a revolutionist in my sympathies, by birth, by breeding and by principle. I am always on the side of the revolutionists, because there never was a revolution unless there were some oppressive and intolerable conditions against which to revolute.”

      And one final quote, this one from Connecticut Yankee:

      “All gentle cant and philosophizing to the contrary notwithstanding, no people in this world ever did achieve their freedom by goody-goody talk and moral suasion: it being immutable law that all revolutions that will succeed, must begin in blood, whatever may answer afterward. If history teaches anything, it teaches that.”

      Of course nobody around here is advocating blood but it is the one thing the ruling class truly fears (and that was just as true in my long ago Dixie as modern iphone America). Hence the armored cars, swat teams etc.

      1. flora

        yes. pretty much.
        there was Shays Rebellion in the 1780s, the Whiskey Rebellion, the 1890s Farmers Situation (vis railroad price gouging), the 1930s radical farm movement to halt farm forclosures/liquidations.
        In each case it was concentrated money power of the “eastern elite” against the frontier or western or rural farms and farmers – basically the average man of his day. In the late 1880’s and early 1900s it was the Rs who reined in abusive corporate practices. In the 1930s and later it was the Ds who reined in abusive practices. Now both parties talk against the “eastern elite interests”, but only in regard to identity politics. Economically, both parties now support the “elite interests”, the concentrated wealth interests.

          1. flora

            In most cases the lawmakers were not eliminated. But their thinking was mightily altered.
            Teachout’s book and Lessig’s book and other writings will, hopefully, begin to alter the thinking of lawmakers and reinforce voters confidence in themselves. Give a new, or rather ‘old’, framework for evaluating competing claims of what is intellectually and morally defensible, and what is indefensible, for our democracy.

            I think much of today’s intellectual defense of corruption is weak, self-interested flim-flam. (Neoliberalism) Like the technical defense of “what the meaning of ‘is’ is.” Or the Supreme Court’s ‘Citizens United’ decision. A book like Teachout’s gives one the tools to think about corruption in a way that reinforces one’s common sense. This is no small thing. “The consent of the governed” is still important.

            1. flora

              erm… I am above referring to rebellions in the US, not the US or French revolutions. just to clarify.

      2. JTMcPhee

        Even The Capitalist Tool, and the Economist (sic), and the OECD (and of course the keepers of order, the military and state security types) know the pot is already simmering, the flame is turned up and all that:

        “The Rise And Fears Of The New Elite,” http://www.forbes.com/sites/kenrapoza/2012/03/29/the-rise-and-fears-of-the-new-elite/

        “What Rich People Fear Most,” http://www.forbes.com/sites/kenrapoza/2012/04/17/what-rich-people-fear-most/

        “OECD Fears Middle Class Civil Unrest Is Coming,” http://www.zerohedge.com/news/2014-07-18/oecd-fears-middle-class-civil-unrest-coming?page=1

        How about the jejune USAToday: “Growing wealth gap opens gate to unrest: Our view,” http://www.usatoday.com/story/opinion/2013/10/06/income-inequality-wealth-gap-editorials-debates/2933453/

        Even that apologia for More Of The Same, The Economist: “For richer, for poorer: Growing inequality is one of the biggest social, economic and political challenges of our time. But it is not inevitable, says Zanny Minton Beddoes,” http://www.economist.com/node/21564414 (Neither are heart disease and cancer, sort of…)

        On the Big War side of things, ” Pentagon preparing for mass civil breakdown: Social science is being militarised to develop ‘operational tools’ to target peaceful activists and protest movements,” http://www.theguardian.com/environment/earth-insight/2014/jun/12/pentagon-mass-civil-breakdown, and unless one really enjoys depression and self-flagellation, it does not pay to research the crowd control technologies our young innovators are handing to the rich shits and their “people.”

        The “elite,” having lucked into the knack of creating a Black Hole to suck in all the resources and wealth of everyone else, of course need “Security” to not only hang tight to what they have grabbed, but to keep anyone else from picking off a few crumbs. More from Forbes:

        Security Concerns Of The Super-Rich

        Worried about someone hacking into your offshore bank account? Kidnapping you and holding you for ransom because of your high net worth? Breaking into your Caribbean villa while you’re working from lower Manhattan?

        Those aren’t concerns for most of us, but for the extremely wealthy they could be. Trite as it may seem, the rich really are different from you and me. Especially when it comes to security….” http://www.forbes.com/sites/brianwingfield/2010/10/20/security-concerns-of-the-super-rich/

        And all those ex-imperial military types, loaded for bear and needing a paycheck… “retainers”, isn’t that the old term?

        Katie, bar the door!

  11. ex-PFC Chuck

    Judging from this review, Teachout’s book covers much of the same ground that Larry Lessig did three years ago in Republic, Lost. In that book, Lessig drew considerably on Teachout’s earlier work in this area. He used the terms “dependence corruption” and “systematic corruption,” to describe features and practices that undermine the peoples’ influence on government but are not illegal, and differentiates them from quid pro quo corruptions such as bribery. He describes at length how dependence corruption was a major concern of the founders. Here are some links for people interested in doing something useful in this area:
    movetoamend.org
    http://wilpf.org/CvDCmte
    http://www.wilpf.org/docs/ccp/corp/ACP/CP_article%2Btimeline.pdf

  12. juliania

    Many thanks for this review, Yves!

    “…Teachout shows, through painstaking historical research, that this popular conception of corruption is actually far more consistent with the intent of the Constitutional framers than the odd and anomalous John Roberts-led Hobbesian majority…”

    In my small liberal arts college back in the early ’60’s we were reading the papers of the framers of the Constitution, after having read works by the English philosophers, and what I remember of Hobbes boils down to his description of the lives of human beings as being ‘nasty, brutish, and short.’ (Consequently when I think of Hobbes in my mind he takes on that persona – nasty, brutish, and short.) Teachout’s analysis of Citizens United is extremely interesting; I always thought the Constitution was crafted with Hobbesian realities in mind; that was what ‘checks and balances’ were all about. It was never ‘just a piece of paper’ but you had to toe the line it brightly (love that appellation) laid out.

    Always until now the better angels of our nature were not just folderol propaganda, given occasional lip service and nothing further, but also verities enshrined in our founding documents, to be treasured and protected – how far we have come away from that glorious heritage!

    Maybe we are approaching the turning point.

    1. Sluggeaux

      “I believe that the common character of the universe is not harmony, but hostility, chaos, and murder.” — Werner Herzog, Grizzly Man

      As one of the few people in this country who seems to have actually read the opinions which make up the Citizens United decision, I believe that our Constitution represents an effort to overcome a Hobbesian world by those who well understood the brutish instincts of their fellow human beings.

      Kennedy actually relies on dissents penned by William O. Douglas and Earl Warren to decisions affirming the muzzling of collective political action by organized labor under the Taft-Hartley Act passed in the wake of the Second World War at the beginning of the McCarthyite Red Scare. Eight of the nine Justices agreed with Kennedy that collectively spending money on political communication is protected by the First Amendment, but that the Congress may constitutionally require that the speaker(s) be transparently identified (only Thomas dissented from this view).

      It is the Congress which has corruptly failed to act on the Supreme Court’s invitation to ban “Dark Money” and force political speakers to identify themselves and their agendas. Such sunshine would make their corruption far more difficult.

    2. Jim

      I think you should try to keep in mind that Hobbes was also a theoretician of skepticism, something which seems in extremly short supply in 2014.

      Hobbes’s has said “For the thoughts are to the desires, as scouts, and spies, to range abroad, and find the way to the things desired (Leviathan, Chapter 8).

      As with Hume, Mr Hobbes argues for a certain type of circularity in our arguments where the reasons generated by reason are largely concerned with clarifying the ends to which are passions are driving us and in figuring out the most expeditious means for getting there.

      In other words, in contrast to, say, the political theorists of MMT (at least in their earlier versions) there is a powerful argument in both Hobbes and later Hume for the primacy of the prescriptive over the descriptive– if we are honest with ourselves.

  13. Jim

    “The founders…adopting Montesquieu’s arguments that there is such a thing as a public interest and that people could orient themselves around it given sufficient personal virtue and the adequate structural incentives to do so.”

    But if the general public tends to lack virtue and “double government” becomes institutionalized then what are we to do?

    The recent article/book by Michael J Glennon “National Security and the Double Government” deals directly with the profound issues of personal virtue and structural checks and balances.

    Glennon argues that we have created, especially in the area of national security, a type of double government–one part public (Congress, the President, and the courts) and the other more concealed were several hundred executive officers in the military, intelligence and law enforcement agencies are basically responsible for protecting the nation’s security and have acquired unchecked power–which accounts for the same imperial foreign policy no matter who is Preseident as well as our incrementally collective moves towards totalitarianism,.

    The result of such an situation, according to Glennon, is a negative feedback loop were resuscitating the more Madisonian institutions (Congress, Presidency, Courts) requires an informed, engaged electorate (civic virtue) which is simultaneously faced with a political structure that has locked them out–thus voters have little incentive to become informed or engaged and in fact often appear to be moving toward greater unengagement

    Glennon finishes his analysis with a quote from John Adams: “The nation which will not adopt an equilibrium of power must adopt a despotism. There is no other alternative.”

  14. Walter Antoniotti

    What bothers me is how few educated people don’t know this. John Hamilton, a bootlegger, paid for the Minutemen so he would not have to pay taxes for British protection. People should read Lies My Teacher Told Me and Don’t Know Much about history. People like David Brooks really thinks now is a really bad time. Compared to 1962-1982 things are great. Lets compare US citizens killed in wars, assassinations, the misery index, the social net, income of old people, corrupt politics, riots in cities, students killed on college campuses…

  15. Anon

    That’s all a nice review, and everything, but, still – the question needs to be asked: IS IT GOOD FOR THE “JEWS”? Ultimately, THAT seems to be the ONLY question that really matters.

    “All America Must Know the Terror That is Upon Us”
    http://www.amfirstbooks.com/IntroPages/ToolBarTopics/Articles/Featured_Authors/strom,_kevin/kevin_strom_works/Kevin_Strom_1991-1994/Kevin_A._Strom_19930814-ADV_All_America_Must_Know_the_Terror_That_Is_Upon_Us.html

    Mayor Rahm Emanuel to Ban Gun Shops from 99.5% of Chicago, Videotape All Sales
    http://sgtreport.com/2014/06/296012/

    Be sure to read ALL comments in the ‘comments’ section, which follows the article on Rahm Emanuel. Also, be sure to follow links, and read, listen to, ALL content. You may be surprised what you LEARN.

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