The Rule of Law, Wealth Inequality, and Our Response

The rule of law is the principle that all people and entities are subject to laws that are fairly applied and enforced. No one, according to this principle, is above or outside the reach of the law—neither presidents nor corporations.

Unfortunately, the rule of law in the United States is being undermined. The current president is well known for attacking the federal judiciary in spoken and written word, though federal judges have life tenure, which affords them some degree of immunity from his political ravings. The more alarming shift—with profound, long-term implications for the rule of law—is the current administration’s nomination of partisan extremists to the federal bench and the record pace at which the Senate is confirming many of them. (It should be noted that some of these nominees are so poorly qualified that even Republicans turned their noses).

The extreme politicization of the judicial nomination process has already begun to erode the rule of law in the US. Perhaps the most egregious example of this is the Supreme Court’s 5-4 vote in the infamous Citizens United ruling, which invalidated parts of a federal law that had imposed limits on corporate money in politics. The ruling allows corporations to spend unlimited amounts of money to support or oppose political candidates through television, Internet, and radio ads. The decision opened the gates for an unprecedented influx of corporate spending to influence our elected officials and shape their legislative agenda.

Giant corporations and the über-rich have always wielded enormous power in this country, and the Citizens United ruling increased their influence to an all-time high. And it shows: the new tax legislation slashes rates for corporations and rich citizens, ensuring they will accumulate even more wealth and power.

The combination of dramatically increased political influence and greater wealth has led corporations and their agents to flout laws with indifference, since it’s clear that there is no political will to penalize them beyond a slap on the wrist. One large pharmaceutical company was recently fined just $150 million for its role in fueling the opioid crisis—only about $50 million more than the annual salary of its CEO—despite the fact that it knowingly shipped hundreds of millions of opioid pills to small states like West Virginia each year and did not report suspiciously large orders from individual pharmacies. Politicians, who before the Citizens United decision were already beholden to corporate interests, now have even less incentive to regulate or punish corporations.

As the rule of law weakens, powerful individuals such as the current president act with impunity to further increase their own wealth and power. As wealth becomes increasingly concentrated in the hands of the rich, more people are pushed into lower income brackets. Voter participation decreases with sinking incomes, feeding a vicious cycle of disenfranchisement. It comes as no surprise then that rising inequality erodes democracy.

Given our current domestic situation in the US, what can socially responsible investors do to strengthen the rule of law and reduce wealth inequality? At Natural Investments, we carefully screen companies according to our stringent rating system, which evaluates environmental, social, and governance factors against our criteria. We invest in companies that share our values—those that invest in their local communities, implement concrete measures to prevent runaway executive compensation and address the gender pay gap, and take action to minimize their environmental footprint.

Natural Investments commits one percent of its annual revenue to nonprofit organizations, such as Regenerative Finance, the Center for Inclusive Entrepreneurship, and Responsible Wealth—groups working to fight growing inequality. My colleagues and I actively advocate for policies and laws to reduce the growing wealth disparity in our country, and we call, write, and visit our elected officials when politicians attack the rule of law. We also back initiatives to increase and preserve judicial independence and impartiality through our funding of groups like the New Economy Coalition. The New Economy Coalition in turn supports organizations like People’s Action that work with activists on the state level to fight corporate influence in state judicial elections.

Supporting policies that increase economic justice and advocating for the rule of law is of the utmost importance in these times. In the words of Supreme Court Justice Elena Kagan, “What the rule of law does is nothing less than to secure for each of us what our Constitution calls ‘the blessings of liberty’ – those rights and freedoms, that promise of equality, that have defined this nation since its founding.”

Joel Koerner

Welcome to my archive of newsletter articles and blog posts. For more information on my service offerings, please go to my advisor webpage.