Commerce Raider (September 1995 | Volume: 46, Issue: 5)

Commerce Raider

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Authors: John Steele Gordon

Historic Era: Era 4: Expansion and Reform (1801-1861)

Historic Theme:

Subject:

September 1995 | Volume 46, Issue 5

In the years between 1989 and 1994, the big-three American automobile companies (with combined annual sales of well over two hundred billion dollars) contributed about two million dollars to congressional-election campaigns. The ten largest American gas and oil companies, with an even greater chunk of the nation’s gross domestic product, gave contributions totaling seven million dollars. The nation’s trial lawyers, meanwhile, contributed nearly thirty-one million dollars.

 

It doesn’t take Sherlock Holmes to figure out that vast economic self-interest must be at stake here. After all, as Charles Keating—formerly head of a major savings and loan bank and now in a federal prison—reportedly said when asked if his contributions to congressional PACs had bought him influence, “I certainly hope so.”

The American legal system is uniquely well designed to benefit lawyers, which is why they want to keep it as it is. We have the “American rule,” where each side pays its own legal costs regardless of outcome. Almost everywhere else, the loser pays, so only strong cases are initiated. Punitive damages—in effect a civil fine, but one paid to the plaintiff (and his lawyers) instead of the public treasury—are rare elsewhere. So are contingency fees. All of this, of course, is great for the legal profession and goes a long way toward explaining why this country has more lawyers—and more lawsuits—than any other.

But the lawyers have a problem in promoting the status quo. It is one of the peculiarities of democracy, it seems, that one cannot straightforwardly admit self-interest when seeking to influence legislation. Instead, self-interest, however obvious, must always be cloaked in the mantle of the public good, however specious. My personal favorite example of this took place in 1970, when cable television first was coming to New York City. Owners of the city’s movie theaters, horrified by the threat of having to compete with cable, went on a one-day strike, and each theater emblazoned its marquee with the slogan “Save Free TV.”

One of the trial lawyers’ main arguments for the status quo, therefore, is that the vast number of lawsuits from which they profit perform a vital public service, forcing doctors, manufacturers, and others to be more careful than they otherwise might. They argue that many malpractice suits make for less malpractice, that product liability suits produce safer products. Private lawsuits, the lawyers maintain, police the public marketplace by going after bad guys, so the government doesn’t have to.

This is an assertion that would be difficult to demonstrate, to say the least. But it is also a very curious one when you consider that most of that thirty-one million dollars in political contributions went to stalwart advocates of big government. Policing the marketplace, after all, has long been considered a quintessential function of government (not the private sector), in the same category as maintaining national defense and domestic tranquility.

The reason is simple enough. When these matters have been in private hands, self-interest and the public interest inevitably