All Commentary
Sunday, February 1, 1998

Campaign Finance: The Symptom, Not the Problem

Wealth Redistribution Should Not Be For Sale

For decades politicians and pundits have been wringing their collective hands over massive political campaign contributions and spending. Almost daily there are revelations of campaign law violations and even suggestions of bribery. Pundits lament that many “good” people avoid political life because of the need to raise sufficient money to campaign effectively. Everyone agrees, in public, that “something must be done.” But nothing ever happens. Maybe the time has come to ask why.

The issue, though, is not why reform never happens, but why people voluntarily give vast amounts of money to politicians in the first place. Clearly, those people who give think they are buying something. What is for sale? What is it that they demand and politicians supply? Identifying the product in this political marketplace will at least allow the debate to focus on the real issue.

The product, of course, is wealth. Wealth is desired because it makes people better off, and all human activity is a search by people to make themselves better off.

Two Ways to Get Wealth

Cooperating with others is one way to make yourself better off. You engage in some kind of quid pro quo, a voluntary exchange: I’ll do something for you if you do something for me. I’ll give you a hundred dollars, if you fix my car. If you give me five dollars, I’ll cut your hair. Both parties come out ahead. Voluntary exchange is the basis for all economic activity. It is productive.

But there is also another method to get others to make you better off: stealing. Theft is a redistributive activity, as opposed to a productive activity. There are two basic ways to steal: the crudest way is to use force or the threat of force. This is an involuntary exchange, and it is condemned by all systems of law and ethics.

The other way to steal is to prevent people from engaging in voluntary exchanges and forcing them to exchange with you to your benefit. Forced exchange lowers the benefits the forced party would have obtained otherwise. For example, a giant food-processing firm lobbies hard to keep quotas on foreign sugar. That makes the domestic price of sugar artificially high and the price of the firm’s corn syrup more attractive. The company is better off, but consumers are worse off.

This is always the case. Voluntary associations are productive; all participants are better off. Involuntary associations, no matter of what kind, are redistributive. Some are made better off, and others are made worse off. Further, redistributive activity makes the economic pie smaller by reducing people’s incentives to produce and exchange. Why produce if someone is going to take some (or all) of it? Why produce to get something in exchange if you can get it for nothing?

Government’s Role

Government, of course, can play a role in both kinds of exchanges. Government can, and should, foster voluntary exchange. It does so by defining and protecting property rights—voluntary exchanges are simply exchanges of property rights—and by enforcing contracts, which are merely promises to exchange titles to property. This is what a good legal system is supposed to do.

But government also can, and unfortunately does, foster involuntary, redistributive exchanges of both kinds discussed above. Some taxes, of course, are needed to support the legal system that fosters voluntary exchanges by protecting property rights and enforcing contracts. But those taxes are a tiny part of the total that government collects. Most taxes are purely redistributive. The money is taken from some and given to others, depending on their relative influence in the political process. Thus, manipulating the taxing-and-spending system is a major reason why people lobby politicians and make campaign contributions.

Redistributing wealth by preventing voluntary association is perhaps even more pervasive than redistribution carried out directly through the tax system. Every regulation benefits someone and hurts someone else, thus giving each an incentive to pay off politicians and regulators to tip the scales in their direction. Further, when the potential for regulation is present, affected people have an incentive to play the redistributive game, either offensively or defensively, even if nothing ever happens. As economist Ben Zycher wrote, “Politics is the art of wealth redistribution, and economic regulation is the continuation of politics by other means. Whatever rationale for regulation one chooses—natural monopoly, external effects of individual behavior, health and safety, requirements of national defense, ad infinitum—the universal characteristic of regulation, regardless of industry, time, or place, is a redistribution of wealth from political losers to those favored by regulators and politicians.” (“Market Deregulation of the Electric Utility Sector,” Regulation, Winter 1992, p. 13.)

Government as Broker

In essence, the cause of large political contributions and spending is the government’s possession of the power to redistribute wealth. Originally, the U.S. Constitution properly and powerfully limited that power. Governments could not take private property without compensation, and then only for “public use”; governments could not interfere in private contracts; state governments could not interfere in interstate trade. On the civil side, governments could not interfere with freedom of speech, religion, and association. But over the last century, the constitutional prohibitions against the major means of redistributing wealth have been greatly eroded, opening the door to the offensive and defensive purchase of this power through political contributions.

The superficial response is to simply outlaw those contributions. But this does not get at the cause of the problem. As long as the supply and demand exist, such prohibitions will be largely ineffective. For years government has sought to deal with the drug problem by making drugs illegal and devoting billions every year to enforcement. Yet the market thrives. Sixty percent of all federal prisoners are drug offenders, and the drug problem persists. If there is supply and demand, there will be exchange, regardless of what the law says.

It is the same with campaign finance. The only real solution is to deal with the root cause: the supply and demand for the redistribution of wealth. And the way to do that is to return to the constitutional prohibitions against it. Then there would be nothing to buy.

  • John T. Wenders was a Research Fellow at The Independent Institute, Professor of Economics, Emeritus, at the University of Idaho and Senior Fellow at The Commonwealth Foundation. He received an A.B. from Amherst College, M.A.s from the University of Hawaii and Northwestern University, and a Ph.D. from Northwestern University, all in economics.