Capitalism and the Courts

Capitalism is a democratic system composed of buyers and sellers who collectively create a market for goods and services for that of which the consumer may desire the benefit of. Capitalism is a democratic system since each buyer and each seller vote with their dollars as they bid up or down a price for a good or service. It is pure democracy in action. When the system is allowed to function without interference it works to bring the best prices for the best goods and services and the consumer benefits. When the system is distorted by special interests who lobby government and receive special favors then it is primarily the special interests who benefit. When politicians legislate unreasonable regulations it is the politicians who benefit. It is that simple. The federal government’s only legitimate function in the regulation of capitalism is to ensure an environment rich with players, that is, buyers and sellers to prevent an uneven playing field for which someone can set up a monopoly. The Commerce Clause is the only legal framework derived from the Constitution that gives any legitimacy to the federal government to regulate anything in commerce. But from the Commerce Clause the federal government now lays claim to powers far exceeding its intended constitutional limitation. So how did we get here?

There have always been those in government who since the founding of the nation have wanted more control over business and commerce. It started with Alexander Hamilton who persuaded George Washington over the objections of Thomas Jefferson to support the idea of a central bank. But other than the idea of a central bank those who desired a system of central planners were kept at bay until the aftermath of the Civil War when reconstruction was imposed on the South using expanded federal powers. The founders knew there was a natural tendency, a sort of entropy of power to expand federal control. This is why the Commerce Clause is only that, one short clause of the Constitution and does not appear as a basic tenet in the Bill of Rights. The Bill of Rights were deemed superior to all other rights, hence all Ten Amendments are positive rights to and for the people and limitations to the federal government. The original intent of the Commerce Clause dealt with the power of the federal government to regulate commerce between the states and with foreign governments. It also was meant to deal with commerce and relations with the Indian nations. The Constitution was intended to put up a wall between the federal government and the states and the people so that most regulatory power would be reserved by the states and the people. These rights and the federal government’s limits were consummated with the Tenth Amendment. The Tenth Amendment thus precluded any federal regulatory powers over commerce beyond the limitations of the Commerce Clause. Over time that wall has been gradually worn down until 1942 when it was completely obliterated with the Supreme Court case of Wickard V. Filburn. A farmer by the name of Roscoe Filburn had been ordered by the federal government to destroy his wheat and pay a fine for exceeding a government imposed allotment based on the Agricultural Adjustment Act of 1938, a part of FDR’s New Deal. Filburn was planning to use the excess wheat for his own use to feed his own chickens. Filburn’s actions was not interstate commerce. It was not even commerce. It was widely thought that the court would rule against the government thereby making the 1938 act unconstitutional, but for years the court had been under attack by President Roosevelt who had been threatening to take control of the Supreme Court by adding several of his hand-picked justices to ensure a loyal majority.  The case was purposely chosen for its flimsiness to showcase the newfound power of the Federal government. The Supreme Court ruled against Filburn and the wall was finally crumbled. That ruling is considered by many as the seminal moment in our history that has led to the unending expansion of federal power, that being if the courts can regulate the feeding of one’s own chickens they can regulate anything. With this expansion, capitalism itself has increasingly come under attack, for the only way to grow government ever larger is to take a larger share of capital for the federal government.

Now that the courts had opened up this new path for federal expansion, politicians and judges were free to go about the systematic destruction of the capitalist system. So how would they go about it? One way would be to allow special interests more power and influence. Check! Nationalize troubled industries. Check! Use the courts to undo contract law. Check! Use executive power to overthrow the hierarchy of debt in investment vehicles as was done to push GM bondholders down the food chain below equity shares held by privileged groups such as the unions. Check! Another way would be to insert themselves between the buyers and sellers so as to un-democratize the process and to over-regulate. Check and check! Insert regulators and special interests such as unions between market supply and demand. Check! Use wage and price controls. Check! Use government subsidies to support prices of their favorite industries and special taxes and excise taxes to punish out-of-favor industries. Check and check again! But the best way to destroy capitalism is to simply deny the system capital. This is traditionally done by imposing high taxes so as to remove capital from the private sector to be transferred to the public sector so that it can be re-disbursed by politicians, albeit just a form of wealth redistribution. Wealth confiscation and redistribution using the tax code has the additional benefit of pyramiding power upon those in government that spend or redistribute the money.

Power pyramids also occur in business where in poorly managed companies managers quickly learn the best way to grow their power is to increase head count thereby requiring ever larger budgets. In business these practices are curtailed or eliminated in bad economic times. But it is these very times that are ripe for government to expand their power base and unlike in business once expanded government rarely contracts. When business is threatened by higher taxes and regulation it simply hoards cash waiting for better opportunities. If these conditions persist beyond the bounds of survivability, business will invest elsewhere, that is in foreign countries. Capital leaves the country forever. This is the phase we currently find ourselves in. We have already seen this when states raise taxes beyond reason. Companies and individuals simply pack up and move to a more business friendly state. I must admit that unreasonable state income taxes in the state of Idaho was one additional reason that led to my family’s move to Texas several years ago where there was no income tax. But when federal taxation becomes unreasonable, capital must be redeployed to foreign interests. The idea of capital deformation was the very reason for the creation of the European Union. Several of the socialist nations in Europe were losing capital to other  European nations friendlier to business. In order to preserve the socialist system a loose union would regulate currency and stop the capital migration. Now we are seeing many European countries curtailing some of the socialist aspects in favor of more capitalism simply because they have not been successful at slowing the capital deformation. Quite simply, they are running out of money. We may be seeing the early phase of new capital growth in the economies of Eastern Europe, China, India, Brazil and virtually every developing nation while the United States remains stagnated as we pursue socialist policies. The next phase of capital redeployment involves the actual relocation of companies and their assets. When this phase kicks in, unemployment soars far beyond the current level. We are in the early phase of this. And now, you have the perfect political storm where the people can be rallied against big business or what is left of it and its final ouster and the eventual roll-up of the capitalist system. But the anti-capitalists want an insurance policy, so they continue to pursue additional attacks.

The anti-capitalists have learned that their best work is done behind the scenes. They seek to find others to do their dirty work without a vote being cast. Obama uses the “pen and the phone”. The Courts use personal edicts disguised as legal opinions. Let’s not forget how far they have come, or progressed as the liberals would say. A bad judge need only find one little loose thread in the text and he or she will pick at it a little at a time until the entire text comes unraveled. The Constitution is “evolving” they say, like they are God and hath given it life. This is what is meant by the “living and breathing document” without which they could not justify their new edicts. But let’s not be fooled. The phrase “living and breathing” is hyperbole, a way to contrast “living” with “dead” and so who wants to defend a “dead” Constitution. No, the Constitution is not dead, but neither is it “living and breathing” like a human being or an animal, lest it be one who consumes all manner of flesh in its path. Perhaps this is what they mean?

This is why with the death of Justice Antonin Scalia we find ourselves at a new and dangerous crossroads. Progressives just need one more of theirs to find newly hidden gems in the Constitution. We are one Supreme Court Justice away from losing our right to privately own a gun if the left can argue that only the “militia”, an army in their minds can carry guns, or if the courts recognize the “speech codes” already implemented and practiced on many of our University campuses as the new limitations on speech. And if they recognize the left’s practice of limiting “Freedom of Religion” and change one little word from “of” to “from”. It is not far-fetched. It is here. All they need is one more judge, one more pen and one more piece of paper for which to write the new meaning of the Constitution.

Remember poor ‘ole’ Roscoe Filburn? All he wanted to do was feed his chickens.


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