Iowa Supreme Court Has Some Choice Words About Crony Capitalism. It’s Too Bad Minnesota Politicians Don’t Listen.

Iowa’s constitution, like that of Minnesota, contains a strict prohibition that the credit of the state shall never be loaned to any private entity. The Iowa Supreme Court recently had occasion to examine this provision, and it’s very relevant today.

The Iowa constitutional provision was taken from New York’s constitution, and was to prevent the practice under which “aspiring new states had loaned their credit freely and extravagantly to corporate enterprises which had in them much seductive promise of public good. These enterprises included railways, canals, water powers, etc.”

The Iowa Supreme Court has jealously guarded the public fisc over the years. In a 1923 case, they held that “no public purpose can be meritorious enough, and no obligation of equity appealing enough, to override this provision.”

In its recent case, the Iowa High Court lamented the fact that other states have ignored similar provisions. “To engraft by judicial gloss a vague and open-ended public purpose exception would undermine this constitutional prohibition.”

They quoted a 1987 Kentucky opinion identifying the practice for what it is: “Crony Capitalism.

The framers of most state constitutions knew better than to freely and extravagantly lend the state’s credit to seductive private enterprises. Fortunately, a handful of states such as Iowa still apparently stubbornly cling to the archaic idea that the public treasury and the public credit should not be used to make the rich richer.

Publicly funded stadiums and other boondoggles should be recognized for what they are–crony capitalism. The seductive promise of public good is an insufficient reason to open up the public treasury to favored private interests.

I have a more complete summary of the case, Star Equipment, Ltd., v. State of Iowa, Department of Transportation at my website.

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