Many people believe that money corrupts politics. It’s certainly an easy conclusion to draw from the evidence if you consider only the superficial aspects of the problem, but my argument is a bit different. I don’t believe that money corrupts politics nearly so much as politics corrupts money. Money is merely a symbol of value. It’s a token we use in place of a barter system, since it’s far easier to exchange. When you work, you’re creating value, but it’s difficult to exchange the value of that work directly to those from whom you would like to purchase, so the people to whom you sell your labor pay you in money, and then you take that money to all the places you would like to spend it. This is the nature of money. It’s an efficient system of exchange and it works quite well, right up until the moment you insert politics. Rather than spend our time on a question I think misses the mark, let us now examine how politics corrupts money.
If you earn your money by honest labor, whether by manual or mental exertions, you are creating new wealth. If you consider a block of wood, and you carve it into something fantastic, whether practical or artistic, if somebody will pay you more than it had cost you in materials and energy, that net payment is both an assessment of the value of your time and therefore also your profit. Some of us are able to turn very little time into huge profits, while others of us are able to make only minimal profits on our time and exertions because what we are producing is not so valuable to others. That is natural, and normal, and must always be the case. The maker of candles will never be rewarded as highly as the person who invents a light bulb or the electric generation system to power it. The reason is simple: Almost anybody can make a candle. Workers who can do this are numerous. The mind that can imagine a light bulb or a generator are rarer, and therefore, their efforts are more valuable. It is the market in which you sell that labor that decides its worth.
Here is where politics enters to corrupt money: Because candle-makers are more plentiful than inventors, they have many more votes. They can turn to the political class and demand laws to make their candle-making unnaturally more valuable. Politicians can follow a number of courses in response to the demands of the numerous candle-makers:
- They can enact a law making candle-making more valuable than it is in fact
- They can enact a law making inventors’ efforts less valuable than they are in fact
- They can steal money from the inventor and give it to the candle-maker
- They can say “No, property is property, you have yours, and the inventor has his!”
Which of these do you suppose the politicians is least likely to do, since it will not satisfy all his candle-making constituents, and thus will lose him his next re-election? Of course, this situation becomes a good bit more complicated when we add competing inventors. Suppose somebody comes along with an invention to replace the ordinary light bulb. Let us imagine that unlike compact florescent bulbs, it has no toxic mercury, and it’s much more efficient at the same brightness. If it’s also less expensive than the ordinary light bulb, and is in all measures a superior product, the market will answer by making it the new leader, and it will become the new ordinary light bulb in short order. Now, the manufacturers of the older style light bulb will descend on politicians to demand protection of their market. Politicians can respond in a number of ways:
- They can enact a law outlawing the new style light bulb
- They can enact a law requiring the use of the old style light bulb
- They can add extra taxes to the manufacturer of the new style light bulb, driving up its cost
- They can give a tax break to the manufacturer of the old style light bulb, driving down its cost
- They can do nothing at all, and ignore contributions from the manufacturers of the old style bulb
Which of these options is the politician unlikely to choose? Now let us imagine that the new light bulb is actually a terrible idea. Let us imagine that it is filled with toxic mercury, and that in the long run, you’ll have EPA hazards created in your home if one breaks, and that while they are slightly more efficient, they are also annoying, and the light is actually modulating at a very high rate, and while barely perceptible to you, your eyes lead you to constant headaches, and besides the high frequency buzzing drives your pets insane, because they can hear frequencies you cannot. Let us now imagine what politicians might do, not on behalf of the old style bulb manufacturers, but on behalf of the new ones:
- They can enact a law outlawing the old style bulb
- They can give tax credits to purchasers of the new style bulb
- They can do nothing and let the market decide and skip the opportunity of contributions
Which of these have politicians actually done?
Now some will tell me this is all well and good, and merely proves their point, in that the money offered to politicians corrupted them. Instead, I will tell you this is a lie, and now I will be happy to explain it if you missed what has really happened over the course of this post: The law was used as an instrument of enrichment by already corrupt politicians. They had no money apart from their salaries and immediate benefits, but in order to have more money, either in their own pockets, or in their campaign war chests, they used the law, your law, in each and every case to skim money from the system for their own purposes. What this has the effect of doing is to change the market, and to change what people do in the market. That means you are changing the value of the labor and the value therefore of money irrespective of what the market might prefer. What you have done is to use politics to corrupt money.
There is an economic law, “Say’s law,” that tells us something about natural economic function, and it is that a supply creates its own demand. The inverse and equally true corollary of this law tells us that without a supply, there can be no demand. (Demand as an economic term, but not as a human behavior.) What does this mean in the question of politics and money? It means simply that you cannot purchase that which is not for sale. No candle-maker, no light-bulb inventor, and no manufacturer of any sort can purchase influence that is not first offered for sale. This is not a question of corruption by money, but of money. When the politician uses his position and his legislation to influence the markets, whether he takes payment from a player in the market, or instead merely profits directly by his previous purchases in the market, this is not a matter of money corrupting politics. It is the much more deadly issue of politics being used to corrupt money.
In every way, this upsets the natural order of the market. Things that the market would find worthless are suddenly made precious, by law, and things that had been precious are made worthless, or even illegal to possess. Any such action commits a fraud on all holders of money everywhere and at once. What else could be the meaning of a law that imposes on you the purchase of compact florescent bulbs, that cost many times their traditional competitor, the incandescent bulb? Do you have any doubt that most of the politicians who supported this law did so in order to profit in some way from the law, your law? Notice, however, the ordering of cause and effect, and this will tell you which has corrupted the other, money or politics: Which came first? The political action, or the monetary result? How many of these elected thieves had invested in GE or other CFL producers, before the enactment of the law, knowing what gains their investments would see once they made a law banning the good old incandescent bulb?
I am sympathetic to those who believe, innocently, that money corrupts politics, but the truth is something else: Politics is being used to corrupt money. When people make money by graft, it is the money that is corrupted. It is a form of counterfeiting money, and since money is just an expression of value, what you must see if you’re to have any hope of reversing the trend is that the reason our system is so corrupt is not because of money, but because of those who use the law, and the power of government to extort, coerce, and otherwise gain money they haven’t really earned. This is because government is involved in far too many things, and I’d ask you to consider Bastiat’s view of plunder to understand it. If you want to solve the problem, don’t seek to get the money out of politics, but instead get politics and politicians out of money and markets. That’s a real reform that could save our country.