Political corruption is eating our democracy out from the inside. Most Americans know that. But democratic and economic health can’t be easily disentangled. As it diminishes our public sphere and drowns out the myriad of citizen voices, it also sucks the energy and vitality from our economy. This causes pain to business owners.

According to a recent report from the Committee on Economic Development, an old, white-shoe non-partisan organization that came out of the aftermath of World War II (and was a booster for the Marshall Plan), the United States economy is increasingly represented by crony capitalism, not competitive capitalism.



Lobbyists and privately funded elections have, according to the CED: “exerted an important toll on the US economy”. They propose banning registered lobbyists from raising money for federal candidates and officeholders, and implementing strict revolving door policies.

Crony capitalism, the report details, leads to “rent-seeking through subsidies or taxes that benefit vested interests at the expense of others, rather than the pursuit of profit through socially and economically productive behavior”.

What is most striking about the report is who is behind it. The CEO of CED is former Romney supporter Steve Odland. A former top lobbyist for PepsiCo, a republican called Larry Thompson – someone I never thought I’d agree with – is endorsing the single most important structural reform in America: publicly financed elections.



Thompson is the Co-Chair of CED’s Sustainable Capitalism Subcommittee, a driver in the release of the report. Paul Atkins, another member of the CED board (and the sustainable capitalism subcommittee) was a Bush-appointed SEC Commissioner who opposed rules constraining hedge funds.

“Campaign finance reform could free elected officials from their dependence on private campaign funding. Such funding is seen as an important reason why elected officials might bend their views on policy issues away from the public interest” the report said.

I disagree with a big part of the report. I don’t think we should reduce the corporate tax rate. But the crony capitalism argument is right on point, and the most striking thing about the report is its full-throated endorsement of a public financing model. And, the report persuasively shows how our current model reduces competitiveness of the economy “by favoring insiders over outsiders” and “continues to sap vitality” out of our economic life.

We haven’t always had this problem. Until the 1980s, candidates spent a fraction of their time talking to donors; just a few weeks a year, a little more right before an election. True, they’d fund raise from the wealthy interests, as they do now, but it was a minuscule part of their job: policy and constituent services were the heart of the work.



Now, due to a set of cultural changes and Supreme Court cases like Citizens United v FEC, the dominant job of many Congress members is to raise money. What that means is that politics has become dominated by policy priorities that serve certain business interests. In most places in the country, you can’t be taken seriously as a candidate without first becoming a professional courtier to big money interests that serve certain companies.

These dynamics build upon each other in a toxic way: companies lobby more, create closer relationships through revolving doors and embed themselves in Washington’s social life. In turn, those companies that are embedded get more and more favors, pushing out the smaller companies, and rewarding cronyism instead of innovation.

The report proposes the solution that has been working in New York City since its full implementation in 2009: small donor contributions matched in multiples by a state fund. The multiple-match program frees up candidates to represent people, instead of particular business interests. And it makes it less tempting for business to replace their research and development with lobbying.

Dependence on private money to run campaigns causes pain to Republicans and Democrats alike – and business owners. It’s time we did something about it. And public financing of elections should be the first step.