Commerce Raider

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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 conflicted. The private armies of the Middle Ages all too often turned into bands of brigands or rebels. In this century, during the rise of the labor movement, private police forces were often hard to distinguish from goon squads.

Or consider the naval privateers, who flourished in the seventeenth and eighteenth centuries. They, too, were private citizens pursuing private gain and performing a public service in the process, just as the trial lawyers claim to do. In their case they raided the enemy’s commerce during wartime. It was a very dangerous business, of course, but the rewards, like those from a major lawsuit, could be staggering.

An inferior naval power, unable to match the enemy ship for ship, usually has no option but to employ a strategy of commerce raiding—what the French, who practiced it often, call “ la guerre de course .” The U-boat campaigns of the two world wars show just how devastatingly effective commerce raiding can be as a naval strategy.

Earlier privately owned commerce raiders sometimes were just as effective, and, of course, didn’t cost the government anything. But many of the early privateers—Captain Kidd for instance —allowed their self-interest to lead them over the very fine line between privateering and piracy. Later privateers also sometimes turned their wartime assets into equally dubious peacetime activities.

In the War of 1812, for instance, the United States was certainly an inferior naval power. And while the early frigate battles against the British were thrilling victories that owed much to superior American ship design, they affected the balance of power not one whit. By 1814 the American Navy was bottled up in port, as was nearly all our commercial shipping.

Only the privateers were still contesting the seas—and doing a splendid job of it. British insurance rates skyrocketed that year, reaching as high as 30 percent of the value of the ship for voyages between Liverpool and Halifax, Nova Scotia. Even in the Irish Sea—British territorial waters—insurance rates were 13 percent. The Naval Chronicle , a semi-official British publication, reported that “the depredations committed on our commerce by American … privateers, has attained an extent beyond all former precedents.”