Politics, Social Science, and the Golden Rule: Reading the Handwriting on the Wall
In the same hour came forth fingers of a man’s hand, and wrote over against the candlestick upon the plaister of the wall of the king’s palace. . . . MENE, MENE, TEKEL, UPHARSIN. This is the interpretation of the thing: MENE; God hath numbered thy kingdom, and finished it. TEKEL; thou art weighed in the balances, and art found wanting. PHERES; thy kingdom is divided and given to the Medes and the Persians.
Book of Daniel
A REVERENT and quite nonsectarian nod to the charitable deduction is about as close to religious themes as the Public Broadcasting System’s Nightly Business Report ever comes. One memorable evening in late October 1992, however, the talking heads who normally find inspiration on Wall Street decided suddenly to borrow their evening story line from the famous tale of Belshazzar’s feast in the Book of Daniel.
Just as in the Old Testament original, a ceremonial royal banquet provided the setting—in this instance, the regular fall meeting of the Business Council at Hot Springs, Virginia, where a special camera crew had been dispatched. And, again, as in the older episode, the sumptuous repast was significant less in its own right than as the artistic backdrop for reflections on a mighty empire’s succession crisis—in this case, the 1992 presidential campaign, about which a select group of Business Council leaders had agreed to be interviewed on camera.
First on the air that night was Ford Motor Chair Harold Poling. In contrast to many others in his industry, the auto executive still enjoyed not only honor but profits. Nevertheless, his view of the campaign of incumbent President George Bush was not sanguine. To many, indeed, it sounded like a last judgment on the man whom he had accompanied only a few months before on an ill-fated trip to Tokyo. Poling was, according to the introductory voice-over, “pointedly” maintaining neutrality, pending further clarification of the candidates’ views on trade and other issues. After him came Bethlehem Steel Chair Walter Williams, who offered the evening’s first real revelation: that deep “disillusionment” with one of the most ardently free enterprise–oriented regimes in American history was “pushing [many businesses] to [Democratic nominee Bill] Clinton.”
John Young, chair of Hewlett-Packard and a longtime Republican, followed. Some days before, Young and Apple Computer Chief Executive Officer John Sculley had led a phalanx of Silicon Valley executives in a mass public endorsement of the Arkansas governor. Now, once again on camera, Young sonorously reaffirmed his new convictions. Next in the parade was another onetime Republican stalwart, Southern California Edison Chair Howard Allen. The utility executive came startlingly to the point:
It’s contrary to my basic instincts as a Republican and the way my father reared me, but there are certain things that government should have oversight on and not just sit back and say that competition will solve everything . . . it hurts me to say that and my father would turn over in his grave if he heard me say it.
It fell to Martin-Marietta CEO Norman Augustine to sum up the evening’s discussion. “I think,” the defense industry executive observed, “the Democrats are moving more towards business, and business is moving more toward the Democrats.”1
In the account in the Book of Daniel, King Belshazzar did not initially get the message. But at least he recognized there was one: as soon as he saw the moving hand, he “cried out loud to bring in the astrologers, the Chaldeans, and the soothsayers.” When they proved unable to decipher the inscription, he had the good sense to heed his queen. He summoned the prophet Daniel.
No such lucidity attended 1992’s high-tech reenactment of the incident. This time, when the handwriting flashed on the electronic walls of some 2 million homes, no one batted an eye (apart from viewers of the program, who dialed up a specially advertised 900 number, seeking more information in disproportionately heavy numbers).
Instead, a few months later, President Clinton—with Apple’s Sculley and Federal Reserve Chair Alan Greenspan ensconced in the audience next to Hillary Rodham Clinton—unveiled his long-awaited economic program in a special address to a joint session of Congress. Although his proposed five-year deficit reduction plan strikingly resembled a scheme put forward by Ross Perot that candidate Clinton had attacked all during the campaign, and was shortly to win a public endorsement from many of America’s largest businesses, the president’s call to raise taxes on the very wealthiest Americans struck a strangely sensitive nerve. Somehow, in a miracle of doublethink, many of the astrologers, Chaldeans, and soothsayers who provide most of what passes for political analysis in America descried ominous signs that the new administration was flirting with the specter of class war.2
If war had in fact been declared, it was certainly of a novel kind. Only one side seemed to be mobilizing. As Japan, with an unemployment rate far below that of the United States, prepared to embark on a much larger fiscal stimulus program, the president scaled back his own promised stimulus initiative to a paltry $16 billion—an amount less than the measurement errors in many parts of his new budget. Then, as some of his own Treasury appointees questioned the need for any action, the president dropped the measure altogether after a single rebuff by the Senate. With members of his economic team putting out word that a key indicator of their success would be the state of the bond market, the president also postponed action on two additional campaign promises: to raise the minimum wage, which had stayed fixed for more than a decade, and to require American employers to invest in training workers. He also withdrew (or declined to send forward) the nominations of several prominent liberal activists whose views piqued conservative critics, and handed the hot potato of labor law reform to a special commission not due to report for a year. In the midst of these switches, the president also struggled to find a compromise that he and the top military brass, if not necessarily gay Americans serving their country in the armed forces, could live comfortably with.
By abandoning plans for a fiscal stimulus as economic growth slowed in the rest of the world and cutbacks in military spending and massive exports of American jobs overseas continued, the president was in effect throwing the entire burden of reviving the economy on the bond market and the Federal Reserve. The hope was that a credible deficit reduction program would induce the Fed to lower short-term interest rates, and reduce investors’ fears of inflation. With the Fed cooperating, investors would then buy quantities of long-term bonds and push down long-term interest rates. Despite its short-run plausibility, however, this strategy carried with it a self-defeating catch-22 that guaranteed that ordinary Americans would feel increasingly beleaguered for a long time to come, regardless of what happened to the deficit: given their virtual paranoia about inflation, both the Fed and financial markets were certain to demand a return to higher rates at the first signs of a recovery.
But that was a problem for the future. In the meantime, the Cheshire-cat economic upturn—now you see it, now you don’t—was fanning widespread anxieties about a “jobless recovery,” and the new round of stridently partisan wrangling on the budget could not fail to stir up additional unease. As consumer confidence plunged, and the White House stumbled from one snafu or scandal to another, the president’s popularity went into free fall.
Once again, a mighty empire was in crisis. Amid savage media attacks, a siege mentality enveloped the White House. With the president ordering air strikes against a successor of the Medes and the Persians, more calls went out to the astrologers, Chaldeans, and soothsayers. Their replies were all but unanimous. As though an invisible hand were directing them, the sages brushed off public concerns about the slow pace of economic recovery. Instead, they chorused, the president was in trouble because he had strayed too far to the left of center. To have any hopes of salvaging his presidency, the chorus continued, the president must repudiate the liberals who had hijacked his programs and recruit experienced, senior “centrist” advisers who could help him get back on track in the middle of the road.3
Bombarded with this advice for many days by newspapers, magazines, television, and many private sources, the White House eventually got the message. On May 29 came a stunning announcement: David Gergen, an intimate of many of the top business figures most opposed to Clinton in 1992 and a premier architect of the Reagan agenda that Clinton was pledged to reverse, was rejoining the White House as a special counselor to the president.
With this much-heralded “return to the middle of the road,” the logjam that had held up the president’s budget in Congress now began to break up. After further trimming to please conservative critics, the new “government of national unity” (as it would be styled in Italy or Latin America) secured passage of a markedly deflationary budget that even many proponents admitted would weigh heavily on the economy for a long time to come. Then it set about scaling down plans for sweeping reform of the health-care system while cranking up a campaign in favor of a particularly rigid and uncompromising version of the controversial North American Free Trade Agreement (NAFTA).4 Though many details remained to be ironed out, three points were already evident: First, because from the start the president had ruled out “single-payer” (“Canadian-Style”) health care, whatever health plan finally evolved would be comparatively expensive, and likely in the end either to force curtailment of services or hefty rises in taxes of one sort or another. Second, the best hope the administration could hold out to average Americans anxious about the export of their jobs overseas was its highly publicized campaign to force another country (Japan) to live better. Third, the pillars of Hercules that marked the outermost limits of respectable political discourse in the United States had just relocated—once again, to the right. The debacle of Clinton’s first months in office, all respectable opinion now agreed, proved the bankruptcy of the liberal or “left” alternative.5
Now my point in retracing this latest uncanny turn in America’s public life is not that the right-wing media reduced to ashes the good intentions of some backwoods naïfs within months after they entered office. Quite the contrary, a major ingredient in the disaster clearly derived from the new administration’s elephantine attempts to cover its own retreat from its economic promises by highlighting social issues—first by showcasing Robert Reich and Vernon Jordan as heads of a transition team that recruited the cream of Wall Street and Lloyd Bentsen, the Senate’s literal six-million-dollar-man, to run the economy; then by rushing headlong into the gays in the military debacle at the very moment it was completing plans to take over (much of) Perot’s deficit program while turning its back on efforts to stimulate the economy, retrain workers, and raise the minimum wage; and finally by striving so ostentatiously to field the perfect politically correct cabinet that a good idea became a painful and embarrassing joke. As discussed in this volume’s essay on the 1992 election (chapter 6), such playing to stereotypes has a clear, identifiable function (and by now, a long history) in a Democratic party that is supposed to represent ordinary working Americans but is actually run by investment bankers and their allies. But it is also very dangerous—especially when a country faces literally years of slow growth and high unemployment under an administration whose political base strikingly resembles the Seattle Space Needle.
Nor, certainly, would it be wise to suggest that, with or without Gergen around to play high-tech sandman, the president cannot recover, at least to the extent of possibly squeaking through to reelection in 1996. If for reasons spelled out later in this book, the Clinton presidency is always likely to be a strange combination of Kennedy style and Carter substance, it would be rash to jump to the conclusion that our latest Southern president is shortly fated to be gone with the wind. As a graduate student, I sat in on one of the first courses ever offered by an American university on “political business cycles.” That course was team-taught, but one of its leaders was a distinguished economist whom President Clinton appointed to the Council of Economic Advisors. I will, accordingly, be surprised if in 1996, if no other year, the Clinton administration cannot contrive a “national development bank,” the promise of yet another “middle-class tax cut” or, at least, a few well-timed cuts in interest rates to quicken both the economy and the pulse of liberals for a few strategic months. With help from the rest of the world (by no means guaranteed) and vast sums of campaign money, such moves might provide the racer’s edge, particularly in a three-horse race marked, as it surely will be, by massive public cynicism and low voter turnout.
Instead, my point is less complicated—that it is high time both social scientists and voters learned to read the handwriting on the wall. That Clinton strongly resembles a registered Republican and might well go down in history as the most conservative Democratic president since Grover Cleveland was entirely predictable. Anyone should have seen it who had followed what might be termed the “Golden Rule” of political analysis—to discover who rules, follow the gold (i.e., trace the origins and financing of the campaign, along the lines laid down in the first essay in this book). Indeed, some people did see it—though many of those who bothered to look were active participants in financial markets and thus had no incentive to talk.
By contrast, the armies of people who live by words, who report, observe, and comment in public on American politics had virtually nothing of substance to say before, during, or after the 1992 election. Instead, in the manner of a children’s storybook or a morality play, the press and politicians talked incessantly about character, as if the key question facing America were whether it would be better to have a steady navigator, a street bully, a hockey goalie, a cancer survivor, a war hero, or a hillbilly from Oxford as president. When they didn’t descant upon character or “toughness,” they flapped about the horse race, about “spin,” or consultants, or “who was electable.” When they spoke of issues, it was usually to debate details of a tax cut that was too small to do anyone any good and that was, in any case, unlikely ever to happen.
But it is a simple fact that virtually all the issues that both elites and ordinary Americans think about outside of or alongside campaigns—work and employment, free trade or protection, health care, the future of U.S. production, the cities, taxes—are critically important not only to voters, but to well-organized investor blocs, businesses, and industries. And it is another simple fact that many such groups invest massively in candidates.
During the campaign, however, we heard at best about fundraising totals. Or a few names, as though that told anyone anything. In a frontpage story in early March 1992, for example, USA Today informed readers that actress Dixie Carter was backing Clinton, that Ed Asner had contributed to Tom Harkin and rock singer Don Henley had donated to Paul Tsongas. Quoting a study whose authors should have known better, the paper also indicated that “philanthropists” were the group most heavily represented among donors to Pat Buchanan’s uniquely acerbic campaign.6
In December 1991, when Jerry Brown first attempted to make an issue out of the corrupting effects of campaign finance, he was ridiculed by the Democratic Party’s leaders, the other candidates, and the press. The networks, which have surely done more to lower public standards of taste in the past half-century than any group this side of Las Vegas, and party leaders, who virtually without exception double as handsomely remunerated lobbyists, claimed that any mention of Brown’s 800 number for small donors during television debates would demean the campaign. (This noble commitment to good taste, however, proved short-lived. Soon one issue about the leading Democratic aspirant dominated the airwaves and the newspapers: Did he or didn’t he? The reference was not to a hairdresser.)
The record of the academy over the last twenty years—or indeed, over the last half-century—is scarcely better. For most scholars Rockefeller is a foundation; Lamont, Seth Low, and Widener are libraries, and Brookings is an institute, to which they aspire to be duly grateful. Serious discussion of money, industrial structure, and politics scarcely exists, save among a thin stratum of gifted students of comparative politics. Most detailed studies of politics and money are highly stylized. Among these are the many studies of political action committees (PACs), where serious mismeasurement of the independent variable is virtually guaranteed, since PACs comprise a comparatively small part of politically significant money in most national elections; the older tradition of “phone books” listing large donors, which recall the Comte de Buffon’s lucubrations on the animal world, and which, after almost half a century, have yielded little more than the generalization that generalizations are hazardous and the cautionary bromide (which is certainly true) that money doesn’t buy everything; and a thin literature on congressional elections, which is sometimes seriously meant and occasionally productive of some insights, but remains blind to the ways (discussed in chapter 1 in this volume and elaborated in the appendix) that money-driven political systems shift the whole political spectrum around and comprehensively influence candidates’ electoral appeals.7
Early in my life I worked briefly in Washington and on Wall Street. Ever since, I have intermittently returned to each. I have also observed firsthand how several major foreign political systems function. I wrote the original version of the first essay in this book (chapter 1) because I was convinced that modern students of politics resemble adherents of Ptolemy in a Copernican world—and that the now fashionable “rational choice” approaches to analyzing electoral systems produced not rigor but mortis.8 It was high time, I thought, to spell out precisely what was wrong with the celebrated “median voter” approach to electoral democracy and to put forward a clear alternative, in which—as long as basic property rights do not emerge as the dominating issue—competition between blocs of major investors drives the system.
This first essay attracted a considerable amount of attention—rather more, indeed, than a simple citation count would suggest. Among the most interesting responses were several from analysts working in the highly controversial gray area where neoclassical microeconomics now meets political analysis. Though in principle the issues they raised were uncomplicated and of broad concern, their arguments tend to be formulated in rather technical terms.
To avoid putting off readers unfamiliar with microeconomics and the applications of what are somewhat grandiloquently labeled “rational choice” methods to political science and history, my review of the ensuing discussion appears in the appendix to this book instead of directly after chapter 1. Anyone who chooses can thus move directly from the original essay to the more accessible case studies of various elections which follow in chapters 2 through 6.
But I hope very much that any reader who takes this shorter path will eventually be inspired to try the appendix. A royal road to comprehending the complex relations between money and politics will probably never be found. But this appendix presents what I hope is the next-best alternative: a serious inventory and reply to the major objections leveled by the critics of the investment approach.
Because the discussion is really concerned not with technique but with perennial issues in social theory, I have made every effort to make it accessible. It sharpens the considerations advanced in the earlier essay by working through the case of the “median voter” in some detail. By systematically considering how problems of political money affect the logic of the conventional model, it becomes embarrassingly obvious how flimsy that much-touted construct really is. The conventional model breaks down even in very straightforward cases which should display it to best advantage. Simply extending the discussion a bit more also points up fallacies in the cases advanced by other critics of the original essay—both the critique in terms of “rational expectations” put forward by Richard McKelvey and Peter Ordeshook as well as the objections from the “retrospective voting” school, according to which even a completely uninformed electorate is able to control policy by just voting the rascals out.
This appendix will also, I trust, dispose forever of suggestions that the study of political ideas or “rhetoric” is somehow antithetical to serious efforts to come to terms with the realities of money-driven politics. On the contrary, as I emphasize there, investment in ideas is an absolutely fundamental part of the American political system, going well beyond the jejune notions of “agenda setting” that have dominated academic writing (which sees agendas set by, for example, clusters of American states). And, as Lance Bennett has recently emphasized, the investment approach to party competition is basic to understanding why American campaign appeals are the asthenic compounds they are. In the next few years, I expect, we will learn to measure some of these phenomena a bit more precisely.9
The other essays in the book put this investment approach to practical use, analyzing real political coalitions in the spirit of the first essay. Chapters 2–4 “From ‘Normalcy’ to New Deal,” “Monetary Policy, Loan Liquidation, and Industrial Conflict” [a coauthored study of the Federal Reserve System in the Depression], and “Industrial Structure and Party Competition in the New Deal”) add up to a detailed empirical and theoretical critique of our understanding of one of twentieth-century America’s great formative political experiences—the New Deal. Drawing on a large amount of archival evidence—including many letters and documents whose import is still imperfectly assimilated—these essays show how a bloc of capital-intensive, multinationally oriented businesses came to power during the Great Depression by reinventing the Democratic Party.
The third of these essays (chapter 4, “Industrial Structure and Party Competition in the New Deal: A Quantitative Assessment”) brings together the results of more than a decade of work in archives to present a detailed quantitative study of the financing of the 1936 presidential campaign. It also contains an extensive discussion of the statistical methods I believe are best suited for analyzing presidential elections, and a long discussion of potential pitfalls.
The remaining two essays in the book, chapters 5 and 6, bring the story down to our own time, by examining the disintegration of the New Deal system since the late seventies. The first of these, on the 1988 election, amounts to a review essay on the main political developments from the pivotal 1973–74 recession to Bush’s succession to the presidency. (Though it does not presuppose familiarity with my coauthored Right Turn, it does in effect function as a kind of sequel, since the former broke off with the 1984 election.)10 In contrast to most other academic treatments of this period, the discussion of the party system and the business community is framed throughout in a global context, with considerable attention paid to foreign economic policy developments within the G7. The essay analyzes how these eventually led to the erosion of the Reagan coalition and the revival of business opposition to the GOP inside the Democratic Party.
The last essay in the book discusses the collapse of the Bush presidency and the rise of what became the “Clinton coalition.” It also presents a lengthy analysis, drawn from many primary sources, of Ross Perot, whose meteoric career on the national political stage repays close study as the ne plus ultra of what the investment approach is pointing to about our political system.
The lamentable state of the social science literature on money and politics tempts anyone who trys to engage the question afresh to plead that if he or she has failed to see farther, it is because one is standing on the shoulders of pygmies (indeed, all too frequently, subsidized pygmies). But the real situation is not as bad as this sounds. It is certainly true that the normally sunny dispositions of many well-known political scientists, and perhaps slightly fewer economists and historians, seem to cloud over when questions of politics, industrial structure, and pecuniary resources come up. It is also regrettably the case that serious work in this field is unlikely to be supported by any foundation or grants agency whatsoever. But withal, scholarship remains a social endeavor. I have certainly benefited from a great deal of help, which I have tried to acknowledge at the beginning of each of the essays in this book.
A few people, however, deserve special mention. At the head of the list is Ben Page, the editor of the University of Chicago Press American Politics and Political Economy series. He first persuaded me that this study was worth undertaking and could actually be published. Even more importantly, however, at several points near the end he played an absolutely decisive role in encouraging me to complete it. Without him, there would be, literally, no book. I owe almost as much to John Tryneski of the University of Chicago Press—not least for the patience and good humor he displayed while waiting for Godot (who, I believe, did not have two young children, and thus perhaps had less of an excuse).
Over the last few years I have profited greatly from virtually constant interchange with a number of gifted analysts of comparative politics and economics, including Bruce Cumings, Robert Johnson, James Kurth, Stephen Magee, and Alain Parguez. It is also a pleasure to acknowledge my considerable debts to Walter Dean Burnham, Gail Russell Chaddock, Erik Devereux, James Galbraith, David Hale, Stanley Kelley, David Noble, Edward Reed, Sherle Schwendiger, Jeri Scofield, and Meredith Woo-Cumings. I was very fortunate to have two very able scholars as coauthors, Gerald Epstein and Joel Rogers. (One of the essays with Epstein is included in this book, in chapter 3. This was very much a joint work and the order of our names was settled by the alphabet when the essay originally appeared in the Journal of Economic History. It seemed only right to adhere to the same convention for the version in this book.) Ed Beard and Acting Provost Fuad Safwat of the University of Massachusetts, Boston, also helped my research in significant measure. Goresh Hosangady provided invaluable statistical assistance time and again, while Michael Kagay responded to numerous requests for assistance with polling data. Suggestions and comments that were often very helpful and stimulating came from two anonymous referees for the University of Chicago Press (one of whom, Theodore J. Lowi, promptly declassified his identity) and a member of the press’s editorial board.
My wife, Anne McCauley, contributed many suggestions about both the form and the content of this study, while my daughters Louisa and Chloe made sure I was never tempted to rest. To the three of them this book is dedicated.