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Neoliberal Lochnerism: Can Government Balance Out Private Economic Power?

Guest post by Professor Jedediah Purdy

A batch of recent Supreme Court decisions have increased constitutional protection for private economic power. They suggest a trend that, if it comes to fruition, will be to our economy what the infamous Lochner jurisprudence was to newly industrialized America a hundred years ago. The pattern is a new eagerness to strike down economic and political regulations in favor of the freedom to buy, sell, and spend. The most infamous example is Citizens United, which invalidated limits on corporate campaign spending under the First Amendment. In other cases, the Court has struck down state laws that try to limit the effect of wealth on elections. It has also held – this is more obscure, but important – that Vermont cannot restrict drug companies’ access to prescription records that they use to target their sales pitches

These decisions potentially go to the heart of whether government can act to balance out private economic power. They also mesh with two of today’s most influential right-wing ideas: first, the fierce mistrust of government, and, second, the economics-minded belief that most of life works best as a “free market,” and deregulation will make us all freer. Of course there’s plenty of reason for distrust, even disgust, with the government we have. But the further we go down the anti-government, pro-market line, the harder it becomes to strengthen democracy and build a politics that can address inequality.

The doctrinal key to the new libertarianism is free speech. The principle that Congress “shall make no law…abridging the freedom of speech” is a liberal touchstone. Recently, though, it has also become an anti-regulatory hammer. Constitutional protection of speech increasingly means protection of spending, advertising, and even markets in the data that advertisers use to craft their messages. In the 2010 opinion Citizens United v. Federal Election Commission, Justice Kennedy struck down a federal ban on certain corporate spending in elections. Limits on spending are limits on speech, he wrote, so the power to write a million-dollar check for a wave of last-minute advertising has about the same constitutional status as the right to post a blog entry making the case for your candidate. The principle that spending equals speech was not new, only amplified: It dated back to a 1976 case, Buckley v. Valeo, which overturned limits on individual spending as unconstitutional speech restrictions. The new part of Citizens United was the principle that corporations’ political speech (read: spending) enjoys the same constitutional protection as individuals’ speech. Taken together, these principles implied that Congress could not limit corporate spending to offset the enormous economic power of big companies; doing so was just as unconstitutional as banning a flesh-and-blood person from arguing for or against health-care reform. Kennedy’s language was dire: “The censorship we now confront is vast in its reach.” He warned that the government “has muffle[d] the voices that best represent the most significant segments of the economy.” The decision’s effect on campaigns was immediate and dramatic: The advocacy group Public Citizen reports that in the 2010 elections, spending by newly constitutionally empowered outside groups rose by more than 400 percent over the 2006 midterms.

A year later, Kennedy wrote the Court’s opinion in Sorrell v. IMS Health, the Vermont pharmaceutical decision. The backdrop of the case was the enormous amount that drug companies spend marketing their products to doctors and consumers—estimated at more than $30 billion annually in a 2008 study, which put marketing ahead of research and development as a share of industry spending. Pharmacies and data-miners serve drug marketers by selling them doctors’ prescription records, which the marketers use to target their sales efforts. Vermont had barred the sale (or giveaway) of prescription information and its use in marketing, except where physicians gave permission for their records to be used. The policy was meant to protect doctors’ and patients’ privacy, and also to offset some of the market power of the big drug companies, in the hope that more doctors would prescribe less-expensive generic medicines instead. Kennedy wrote that the law was unconstitutional because it burdened speech—i.e., marketing—based on the identity of the speaker (patent-holding pharmaceutical companies) and the content of their message (advertising of drugs). Kennedy described the issue as follows: “The State may not burden the speech of others in order to tilt public debate in a preferred direction. ‘The commercial marketplace, like other spheres of our social and cultural life, provides a forum where ideas and information flourish.’” There is, of course, something otherworldly about describing as “public debate” companies’ targeted pitches to physicians.

As Justice Breyer pointed out in dissent, regulators control the form and content of information transfer all the time—for instance, in guidelines for public and shareholders’ communications by energy and financial companies, restrictions on the uses pharmaceutical companies may recommend for their drugs, and various controls on disclosure of patient information by doctors and hospitals. Many of these regulations are specific to the content of the speech and identity of the speaker, which was the constitutional problem with the Vermont law. It would be simplistic to say that those regulations are on the chopping block, but the reasoning of Sorrell puts their constitutionality in doubt. If nothing else, that reasoning creates a powerful and flexible tool for limiting the regulation of information markets, and further amplifies the Court’s solicitude for marketing as a core constitutional concern. For instance, post-2008 financial regulations requiring disclosure of standard-form information for certain financial products and services, or limiting the kinds of claims hedge funds or mortgage providers can make to clients, could be subject to constitutional attack.

The Supreme Court went down a similar road in the Gilded Age and afterward, defending laissez-faire economic principles against minimum wages, maximum hours, and other Progressive and New Deal regulation. The new cases have different doctrinal logic, and the economy has changed vastly, but the bottom lines are eerily alike: giving constitutional protection to unequal economic power in the name of personal liberty.

As the rise of industrial capitalism and a vast population of wage laborers made freedom of contract pervasively relevant at the turn of the last century, today an economy built on consumption and information makes the First Amendment a natural vehicle to constitutionalize transactions at the core of the market. Much of what happens in the American economy is, after all, some hybrid of marketing and information transfer. Products, images, information, ideas, and advertising are increasingly aspects of a single economic process.

For all these reasons, the First Amendment has helped the Supreme Court do for the consumer capitalism of the Information Age what freedom of contract did for the Industrial Age: constitutionally protect certain transactions that lie at the core of the economy. This makes unequal economic power harder for democratic lawmaking to reach, because there are only a few ways to reduce the effects of economic inequality: redistribute wealth, guarantee certain goods (such as education or health care) regardless of wealth, and limit what the wealthy can do with their money. Constitutional protection of marketing and spending takes the last option off the table at a time when the other two are politically embattled. Whether in elections or in marketing and the vast data economy behind it, the market itself, with all its inequality, is ever more thoroughly constitutionalized as a realm of freedom.

This development is a milestone in the Court’s march away from a principle that it accepted with the New Deal: Buying and selling enjoy no special constitutional status, and legislatures can regulate markets and businesses to make life more equitable, safe, or healthful. When these policy decisions are opened to constitutional attack, the wealthy interests burdened by legislation can appeal from the political process to the Supreme Court. If they win, they send lawmakers back to square one, and, win or lose, they delay regulation and raise its costs. Moreover, these cases give wealthy interests a rhetorical leg up: They can denounce regulation as “censorship” with the Supreme Court and the Constitution behind them.

On the one hand, the anti-regulatory cases celebrate individual freedom. On the other hand, by “protecting” individual freedom from government interference, they help to guarantee that the inequality of the private marketplace will persist. Ironically, this often means that the individual freedom at stake—consumer choice, campaign spending, liberty of contract—is less worth having. Up close, the individual choice—buy, sell, hold—is unburdened by regulation; but pull back the camera, and you realize that the free choice is among a set of options that regulation helps to define—or does not, if the Constitution prevents it. Like the old Lochner-ism, today’s new anti-regulatory doctrines are rooted in ideas: that personal freedom has an economic dimension that the Constitution protects, and that government efforts to equalize or otherwise direct economic power are pernicious and constitutionally suspect. Like the old cases, the new ones end up protecting economic power as a form of freedom, which ties the hands of government and leaves lots of people less free.

Jedediah Purdy teaches in environmental, property, and constitutional law at Duke Law. He writes about how law interacts with and embodies ideas about freedom, social order, and the human relationship with the natural world, and how these ideas arise and change.