04/01/2015 02:44 pm ET Updated Jun 01, 2015

Adam Smith Says...

Adam Smith, the founder of modern economics, got a lot of things right. Here is something he said in 1776 that, with only slight adjustment, describes what is happening to the political system in this country. Smith wrote that though "combinations of masters" (by which he meant business people) "are rarely discussed,".... "whoever imagines....that the masters rarely combine is as ignorant of the world as of the subject."

Tell it to the Supreme Court. In all but eliminating campaign contribution limits, the Court said that it envisioned that political spending by outside groups would, according to a study for the Brennan Center for Justice, "pose no threat of corruption because of their independence from candidates." 1. Instead, just the opposite has occurred. Super-rich individuals have gotten together and pooled vast quantities of their money in order to enhance their already dominant role in the political process.

The form this collusion has taken is referred to as "independent expenditures" or "outside spending." These are political expenditures that, though supportive of political office seekers, legally are not allowed to formally and explicitly coordinate with politicians' campaigns.

The growth in the political importance of outside spending has been dramatic. In 2010, the money raised for these expenditures came to about $395 million, a little more than one-fifth (21.8 percent) of the amount collected by Congressional candidates themselves. Four years later, in another non-presidential year, outside spending stood at $785 million, almost half as much (47.6 percent) as that raised by candidates.

The most important vehicle for such expenditures are Super Pacs, organizations that can accept unlimited contributions from donors. In 2010, Super Pacs accounted for 15.8 percent of independent expenditures. By 2014, that percentage had grown to 44.4 percent. Aside from political parties themselves, the next most important source of outside spending are organizations known as 501(c)(4)s. These are supposed to be social welfare organizations, though they are permitted as well to spend on political activities. All that is necessary to know about how closely these organizations are monitored concerning the importance of their social welfare activities is that the National Rifle Association is a 501(c)(4). As is the case with Super Pacs, there are no limits on how much money an individual or an organization can contribute.

Super Pacs are now the political vehicle of choice for the super-rich. According to estimates prepared by the Center for Responsive Politics, the top 100 Super Pac donors accounted for more than half (56 percent) of the almost $700 million dollars that these organizations raised. This comes to an average contribution from each donor of almost $400,000. Furthermore, these expenditures, in the words of the Brennan Center study, "are carefully choreographed to assist campaigns" and are "highly focused on competitive races" in order to secure the greatest possible political impact. 2.

Outside expenditures have had a significant political impact. In particular, "dark money"-- money contributed by undisclosed donors -- has been used to great effect. According to the Brennan Center study such "dark money played a critical role" in determining the Republican takeover of the Senate in the 2014 election. In those Senate races deemed to have been toss-ups, dark money as a percent of nonparty outside spending averaged 77 percent for the nine Republican victors; that percentage was 31 percent for the two victorious Democratic candidates. 3.

This is nothing more than the work of a "combination of masters" intent on taking over the political system. On the evidence, they have succeeded to a considerable extent. That they are subverting democracy is obvious. But what is also clear is that the policy outcomes they are paying for are bad for the country. Nothing positive for example can be expected to be done to reverse the widening gap between the ultra-rich and everyone else so long as the latter are using their wealth to dictate the content of politics.

No less an authority than Adam Smith would have understood and opposed such collusion. He wrote, "People of the same trade seldom meet together even for merriment and diversion, but the conversation ends in a conspiracy against the public...." As a result he writes, "the proposal of any new law or regulation of commerce which comes from this order ought....never to be adopted till after having been long and carefully examined [because] comes from an order of men whose interest is never exactly the same with that of the public...."

Unhappily today, those individuals not only are listened to. They increasingly determine the content of new laws and regulations. The task ahead is to put an end to that dominance so that policies adopted by Congress reflect the interests of the public generally, not just of those at the very top of the income distribution.

1. Ian Vanderwalker, Election Spending 2014: Outside Spending in Senate Races Since Citizens United (New York: Brennan Center for Justice, 2015) p. 15
2. Center for Responsive Politics, "2014 Super Pacs: How Many Donors Give";Ian, Vanderwalker, Election Spending 2014, p. 1, 15.
3. Ian Vandewalker, Election Spending 2014, p. 2 and computed from table on p. 14.