By Invitation Only: Party Competition and Industrial Structure in the 1988 Election
THE EARLY YEARS of the “Reagan revolution” witnessed one of the great public relations campaigns in U.S. history. From almost every quarter of American public life, not only obviously interested parties—the White House, the Republican Party, or most big business circles—but also virtually the entire press, many social scientists, and even many prominent Democrats rushed to proclaim that the U.S. electorate had shifted dramatically to the right.
It was a long time before these claims were subjected to quantitative testing by the normal methods of public opinion analysis. When they were, however, the results were startling. By simply lining up time series data, it was easy to show that the U.S. public had not made a “right turn.” On the contrary, the basic structure of postwar political opinion remained remarkably stable. Most voters continued to shy away from the “liberal” label, but they were still very suspicious of “big business” and supportive of government intervention in the economy and many areas of social life.
New Deal issues continued to attract them. Most opinion changes were quite gradual, and often, in a broadly liberal direction. Opinions on taxes and some social welfare issues occasionally suggested that the electorate was skeptical of new initiatives, but there was no popular support for laissez faire. Above all, Ronald Reagan was far from being the most popular president of modern times. Nor was he uniquely beloved by people who disagreed with his policies.1
The modern theory of critical realignments in U.S. politics is a flexible, even protean, system of thought. But there is no place in its conceptual apparatus for a smashing loss of the Senate by the party that is identified as triumphantly ascendent. For a while, therefore, it was possible to hope that the tidal wave of Democratic Senate victories in 1986, including a spectacular victory in Georgia by a biracial coalition much concerned with economic issues, might function in U.S. politics a bit like the famous eclipse observations of 1919 did in the debates over Einstein’s theory of relativity.2
But political commentators in the United States can often resist anything except temptation. While many post-election analysts drew attention to the opaque, almost “issueless” character of the 1988 campaign, a second wave of Reagan realignment studies is beginning to crest.
The best known of these are flimsy indeed. The postelection revival of the myth of Reagan’s overwhelming popularity, for example, is easily refuted by the simplest arithmetic: the Great Communicator’s average popularity falls 16 percentage points below Franklin D. Roosevelt’s, 14 points below Dwight D. Eisenhower’s, and 18 points below John F. Kennedy’s. It is even 2 points below Lyndon Johnson’s average, and a bare 5 points above the much despised Jimmy Carter’s.
Another claim widely touted in the latest Reagan revival, that non-voters preferred George Bush to Michael Dukakis, is also almost certainly wrong. What is probably the best instrument for directly ascertaining the opinions of nonvoters, the Gallup poll’s final pre-election surveys of who is likely to vote, indicates that in 1988, as in most elections since the New Deal, substantially more nonvoters than voters preferred the Democrats.3 Nor is there much evidence for the common claim that young voters are becoming the avant garde of tomorrow’s Republican majority. In the 1988 election, voters between 18 and 29 years of age gave fewer votes to Bush than any other age group except those over 60.4
More serious efforts attempt to locate a mass basis for Reaganism in either the revival of fundamentalist Christianity or racial antagonisms. Close readers of even the very best of these studies, however, will notice a striking fact: that direct evidence of the importance of either race or fundamentalism in anyone’s voting decision is scarce indeed.5
Though space limitations make it impossible to pursue the point here, when voters’ decisions are analyzed properly, with a method that allows alternative bases for the voting decision, the new views turn out to be as chimerical as the old. It is not race, or the flag, (or the “L-word,” or foreign policy) that is killing the Democratic Party at the presidential level. Instead, since Carter, the Democrats have forfeited their ancestral identification as the party of prosperity. With its continuing flirtation with austerity and raising taxes, while refusing to challenge the GOP on important New Deal issues, the party has had little to say to ordinary Americans on many issues that matter most to them.6
But if voters were not responsible for the eerie silence that left many of them more anxious about Dukakis’s economic policies than Bush’s, or for what even the media recognized as “the mysterious disappearance of issues” during the primaries (Jesse Jackson obviously aside), then who or what was? And what does Bush, the man who left no tracks in the primaries, stand for?
These are the questions I propose to tackle in this chapter. Relying on the investment approach to party politics developed in earlier essays and using data from the Federal Election Commission and other sources, I attempt to apply the “Golden Rule” to the 1988 presidential election: To see who rules, follow the gold.7
FROM REAGAN TO BUSH: A TALE OF TWO BLOCS
It is convenient to begin with the Republicans, for the divisions that surfaced within the business community over the 1988 election follow immediately from policy dilemmas that emerged as a direct consequence of decisions taken in the earliest days of the Reagan revolution. At that time, the height of what might be termed the laissez-faire revival, the incoming Republican administration sought sweeping changes in both U.S. society and the world order. In the name of restoring domestic economic growth, it sought major cuts in taxes on high incomes and corporations, rollbacks in environmental and safety regulations promulgated in the seventies, major reductions in federal ownership and spending, and a broad deregulation of the economy, including major changes in the administration of the National Labor Relations Board (NLRB).
Its ambitions, however, did not stop at the water’s edge. It planned to make not only the United States, but the world, safe for free enterprise (which it equated with “economic growth”). To reverse what it claimed was a decline in U.S. power around the globe, the administration commenced the largest military build-up in history, with a particular focus on the navy. It heated up the cold war, pressuring Europe and Japan to rearm and restrict exports to the Soviet bloc. It also sought to roll back the tide of state-owned enterprise in the Third World and to pressure other countries to deregulate their own markets, especially in finance. It also aggressively intervened in various Third World trouble spots in favor of regimes it preferred.8
The almost millenarian frenzy with which the administration approached these labors in its early days invited analysts—friends and critics alike—to view it as a political formation sui generis. Critics, in particular, tended to treat Reaganism as the political program of a newly unified business community.
For a few months of 1980 to 1981, this line of thought is not misleading. A global analysis of Reaganism in these terms, however, courts serious misunderstanding. It makes it impossible to understand the dynamics of the two Reagan terms with the abrupt switch toward détente and inter-allied economic cooperation during the second term, or to analyze the forces now bearing on the Bush administration.
The truth is that the Reagan coalition always had a huge seam running down its middle. That seam, the consequence of living in the world economy, divided the Reagan camp into two distinct blocs (each of which, in turn, was crisscrossed by other seams too complicated to discuss now). The policies of the Reagan administration served, or appeared to serve, the interests of major parts of both. Each, however, had a somewhat different interpretation of what it thought was really happening, and the two basically disagreed about where the policies were supposed to lead. In effect, the Reagan revolution was a giant banner, under which two columns marched in different directions.
The first “bloc” might be referred to as the “protectionist” bloc.9 As the label suggests, this bloc, centered in old industries long tied to the GOP, like textiles or steel, saw the Reagan revolution largely as political and economic Alka-Seltzer: Relief from imports, from labor, from hated government regulators, and, perhaps, from endlessly menacing Communists was only a jubilant swallow away.
In sharp contrast, the second bloc, or more precisely, its leading spokespersons, were thinking far more expansively (and they were indeed thinking, in the sense that all through this period they were making major investments in policy-oriented research published through a wide variety of think tanks and research institutions).
To sum up the views of this second, multinational, bloc in a few pithy sentences inevitably invites caricature and risks exaggerating the degree of centralization and consensus within it. Nevertheless, with due allowance for these pitfalls, its thinking can be analyzed as the polar opposite of the now fashionable “imperial overextension” critique of Reaganism brought to public attention most forcibly by the historian Paul Kennedy in his recent The Rise and Fall of the Great Powers.10
It is not that the business leaders (organized in such groups as the Committee for the Present Danger) who in 1980 were calling for a 600-ship navy, worldwide “horizontal escalation” in the event of war with the Soviet Union, major new weapons modernization programs, and an end to the “Vietnam syndrome” necessarily shrank from analogies with the Dutch, French, or British empires. It is that they saw and, with some qualifications, continue to see the comparison differently.
In their view, the overriding issue in the world was whether the three great economic areas (the Pacific Basin, the Americas, and Western Europe) were going to develop “cooperatively” into one essentially “worldwide” multinational market, or whether these areas would go their own ways, each under the influence of a regional hegemon. How this issue was resolved would shape development in the Third World, and in the long run perhaps even in the Second.
From this standpoint, the vast U.S. expenditures on military force and foreign aid that critics of imperial overextension feared would bankrupt the United States actually represented major investments in free trade and an integrated world economy committed to a dollar standard.
Not only would these investments help stabilize the Third World (and thus lower the target rate of return a multinational required before deciding to invest), but the military build-up, in addition, was a vital U.S. bargaining chip with the other major allied governments. Only the United States could afford the fabulous costs of the conventional and nuclear guarantees that provided the social overhead capital for the postwar recoveries of Japan and Western Europe. And only the United States could project enough force into the Middle East to protect the oil supplies of the allies.
As long as the United States maintained its military dominance, therefore, European governments had little incentive to try to go their own way, and many reasons to cooperate. So did the Japanese, a fact which by 1980 had become of towering significance to many U.S. businesses, which were increasingly convinced that exclusion from the Pacific implied banishment from the next century’s fastest-growing region.
In the late seventies, after the West German refusal to reflate in tandem with the United States and Japan wrecked the Bonn summit, most members of the second bloc, which included multinational manufacturers and financiers, but also many exporters, high-tech firms, oil companies, and weapons producers, became convinced that only dramatic unilateral action by the United States could break the economic deadlock that was developing in the “triad” (today’s buzzword) or “trilateral” (yesterday’s) world and avert the drift toward state-owned enterprises in the Third World. With increasing talk of repricing internationally traded raw materials (read: oil) in another currency as U.S. rates of inflation raced ahead and the dollar depreciated, these businesspeople also became convinced that only truly draconian monetary policies could end inflation and save the dollar.
The atmosphere of intensifying crisis enormously advantaged the only political party for which massive social expenditure cuts were thinkable: the GOP. Multinationals which had been perfectly prepared to support Democrats during the New Deal era abruptly cut off their support, or intensified their commitments to Republicans. At the same time, so did the traditional protectionist bloc. Not surprisingly, the first result was confusion, as all sorts of “New Right,” “Old Right,” and “neoconservative” cultural and political entrepreneurs competed to tap the rivers of cash that rapidly began flowing.
Under the inflexible pressure of political deadlines, however, a more or less articulate compromise emerged within the Republican Party. Candidate Reagan struck a formal agreement with South Carolina Senator Strom Thurmond on behalf of the textile industry, and appears to have made promises to several other industries, including steel, while publicly trumpeting the merits of free trade. The prospective general revision of the General Agreement on Tariffs and Trade (GATT) ardently desired by the free traders was put off until after the administration had some time to force restructuring on the rest of the world, while powerful industries were promised piecemeal protection in the meantime.
By temporarily removing the divisive trade issue from the agenda, this deal (which was struck by Reagan rather than by Bush, the first choice of many multinationalists in the “Eastern establishment”) opened the way for the “golden horde” that financed the GOP’s sweeping triumph in the fall of 1980. Once the decision to raise interest rates was taken by Federal Reserve Chairman Paul Volcker during the Carter administration, for example, what multinational would object to domestic restructuring? And, while contemplating the promised import relief, what protectionist would object to a new cold war? From this vantage point it is easy to see the logic that drove the Reagan administration first to foreswear G5 (later G7) cooperation and noisily to denounce the “evil empire,” and then, in early 1985, as James Baker took over at the Treasury, dramatically to reverse both policies.
As it came to power, the administration faced a set of decisions that could easily split its coalition apart. Not surprisingly, it moved very cautiously. To the disgust of Secretary of State, Alexander Haig, it declined to make a major issue of Central America at that time. To the dismay of social conservatives, it placed social issues on the back burner.
The Reagan administration concentrated instead on economic issues that sent broad rivers of cash flowing to all its supporters in the business community: the military build-up, deregulation, personnel changes at the NLRB, and the centerpiece of its economic program, the famous tax cuts. After some fits and starts, the Reagan administration fell in line with Volcker’s high interest rate policies.11
The result, from the administration’s standpoint, was a series of striking successes. Along with its new labor policies and deregulation, the high interest rates triggered a sweeping reorganization of the workforce. Unions lost ground and wage growth slowed, as many firms took advantage of the huge rise in unemployment to make major cuts in staffing and changes in work rules. As other central banks transmitted the interest rate rises to their countries (and, pushed by the Reagan administration, promoted deregulation of their own economies), a worldwide movement toward laissez faire gained steam. The growing climate of austerity, in turn, encouraged further cuts in social spending and taxes everywhere, while the rise of the dollar reestablished its position as the world’s currency, and started an export boom in Europe and Japan that helped undo the damage caused by the “evil empire” rhetoric.
The policies, however, could not be sustained forever. The price of the interest rate rise was the deepest recession of the postwar era. In the Third World, growth ceased absolutely, while in the United States imports flooded in and business bankruptcies mounted, bringing friction with Japan and calls for import relief. Although they went along with the intermediate-range nuclear forces (INF) deployment, Europeans resented the administration’s efforts to discourage business with the Soviets. And, as it seems clearly to have foreseen, the administration failed to get enough spending cuts to offset the tax reductions, leading to an enormous rise in the budget deficit.
Political opposition emerged on both the left and the right of the business community. On the left, the Democrats revived. A breakdown of 1984 Democratic campaign financing, done along lines of that presented for 1988 below, shows clearly how real estate interests in (primarily) the Northeast and Midwest moved to defend federal grants for urban infrastructure and mass transit from the burgeoning claims of the defense budget. (Statistical tests showed that the real estate bloc, but not the other industries that also featured high levels of Democratic contributions, only supported liberals—precisely what one would expect if competing claims on the budget were the issue.)12 And as the deficit mounted, many investment bankers (and some insurance industry figures) joined them.13
On the right, Jack Kemp emerged as a champion of a “supply-side” economics that was essentially Reaganomics with low interest rates. For business, its key claim was that if interest rates were pushed low enough, the United States could grow its way out of the deficits without any new taxes.
How the administration rode out this heavy weather bears close analysis for the light it can shed on what the Bush administration might do. To defuse protectionist sentiment, it deployed a three-pronged strategy: To the biggest and most powerful industries, notably steel and autos, it afforded continued piecemeal protection. To agriculture and some exporters, it offered limited export subsidies, either in the form of direct loans, or, in the case of some high-tech industries, funds for basic research. Finally, it pressed other countries, particularly in East Asia, to open their markets to U.S. products.
Faced with the need to hold together two blocs pulling in different directions, the administration also made a set of fundamental choices on the deficit. Because the tax cuts were so attractive to both blocs, but particularly to the protectionists, who were, after all, fated to be submerged in the long run, they provided the perfect issue over which to make a stand. Still hoping that ballooning deficits would eventually force spending cuts, the Administration proceeded, loudly and publicly, to draw a line in the sand.
To finance the deficits in the meantime, the administration devised a two-track strategy. First, it accepted “revenue enhancements” that did not threaten the sacrosanct position of the top brackets, including a steep rise in highly regressive social security taxes, which over time were intended to help close the deficit. Then, in a truly momentous decision, it elected to let foreign capital finance the deficit.
From the standpoint of the multinational bloc as a whole, this move had a compelling logic. By worldwide standards, direct investment in the U.S. economy was quite low. Direct investment, in sharp contrast to portfolio investment, is reasonably stable. Here, accordingly, was a chance to square the circle. Provided no one moved to prohibit foreign takeovers, capital could flow into the United States for years. As it did, it would support the dollar, while helping mightily to finance both the trade and the government officials. As it did these things, it would also create a more powerful lobby in the United States in favor of free trade and an integrated world economy, while also giving major foreign interests compelling reasons to let U.S. multinationals continue operating in their home territory.
As interest rates fell in the wake of the Mexican debt rescue and defense spending began to pull the economy out of its slump in classic Keynesian fashion, the administration had the satisfaction of watching its new policies pay off. The economic revival and foreign buying led to a tremendous boom in the stock market. The new wave of mergers and takeovers, in turn, further restructured industry while creating a substantial number of new fortunes in finance and commodities markets with a stake in Reaganomics.
The boom, an ingredient of the largest political business cycle since the Depression, carried the administration safely through the 1984 elections. The continued strength of the dollar, however, fueled protectionist sentiment, further inflaming relations with Japan and the Asian NICs (newly industrializing countries). By early 1985, it was obvious that something had to be done, or the whole postwar structure of multinational trade might unravel as the U.S. Congress moved to retaliate.
The administration moved on several fronts at once. First, it added wrinkles to the strategy it had employed for defusing relations with Japan in 1983–1984. It pressed the Japanese to open markets for a handful of the most impatient sectors whose support it was counting on to head off a protectionist upsurge, including telecommunications, electronics, forest products, medical instruments, and pharmaceuticals.
Next, as an alternative to “industrial policy,” the administration joined many Republican big business leaders in talking up “competitiveness,” that is, the notion that improved macro policy and some broad structural changes (such as improvements in education) that involved little direct market intervention might alleviate the overseas challenge.
Then, largely through the Pentagon (but mostly outside “Star Wars”), where, by a miracle of nomenclature, “defense”-related production direction is not reckoned as a violation of the principles of free enterprise, it announced a spectacular program of subsidies, again mostly to “swing” industries dominated by multinationals in, or potentially in, the coalition. Among these projects, which continued to be announced as Bush geared up to run for the presidency, were a $4-billion supercollider project, a five-year $1.7-billion program in computing, a dramatic new “superconductor” initiative, contracts for a fabulously expensive space station (the announcement called attention to the benefits the project would produce for the pharmaceutical and electronic industries), “Sematech,” a join venture between the government and high-tech companies, as well as other initiatives in robotics, computer-aided manufacturing, and materials science. And while the administration was taking these little-publicized moves that might someday transform the Pentagon into an American equivalent of the famous Japanese Ministry of International Trade and Industry (MITI), it moved at last to bring the dollar down.
Here, with Baker at the Treasury, a new and more delicate phase of relations with the allies began that leads directly to the policy dilemmas Bush now faces. In effect, the administration was seeking what might be termed a “kinder, gentler” dollar decline. For this to happen, the cooperation of the allies, and particularly of Japan and West Germany, was essential. Specifically, if the dollar were to decline (thus reducing the imbalance in the U.S. current account), the Japanese and Germans would not only have to agree to let their export surpluses shrink, but they would also have to expand their domestic economies to avoid a decline in total world demand. They would, in addition, have to cooperate in guarding the relative exchange rates of the major currencies, or there would be massive flight from the dollar.
Neither country was anxious to do any of this. Both had grown rich in the postwar period by pursuing strategies of export-led growth, and both now feared that an expansion of internal demand might well disequilibrate carefully struck balances of power between labor and management.
Baker, however, had several powerful incentives of his own. First, in the background there remained always the United States’ trump card, its overwhelming comparative advantage in defense. By pushing the allies to do more or, sometimes, by upping the ante of what “security” required, the United States could exercise real leverage by threatening to raise costs on the allies.
Second, there was Baker’s well-advertised policy of negotiating bilateral trade treaties with particular countries. (The most significant of these is the recent agreement with Canada, which is shortly to be expanded to embrace Mexico.) By suggesting that the U.S. might go it alone with a handful of carefully selected partners, these deals acted as a check on allied intransigence.
In the end, however, Baker’s most potent threat proved to be the simplest: the United States could simply threaten to let the exchange rate drop unilaterally if the allies would not agree to an orderly decline. Though in October 1987 this strategy of brinkmanship took the world to the edge of the abyss, when Baker and other Treasury officials publicly admonished the Germans for provoking an upcoming fall in the dollar and crash in the market, in the end it worked. After bitter internal debates, Japan expanded internal demand substantially, and dismantled a few trade barriers. Germany made rather feebler efforts to expand. The dollar continued coming down until the summer of 1988, as foreign central banks built up massive dollar reserves, in effect subsidizing (as several acute critics noted) a vigorous political business cycle for Bush to run on.14
Animated not only by its growing concern for allied harmony, but also by the unyielding pressures of the budget deficit and the plain fact that the West Germans would sell to the USSR if the United States wouldn’t, the administration abandoned its strident anti-Soviet posture. Led by new Commerce Secretary William Verity, food companies, capital goods exporters, and several business organizations, the administration began to explore avenues for increasing trade. It also, of course, negotiated the INF accord and a Soviet withdrawal from Afghanistan.
In electoral terms, there can scarcely be any question that the policy package Bush and Baker were gradually fashioning for the vice president to run on—peace and prosperity—was highly plausible, particularly if one refrained from asking awkward questions about the long run. As an early Fortune poll of top executives indicated, and the astonishingly high level of contributions revealed in my statistical study confirms, their agenda commanded the loyalty of most mainline multinationals.15
But multinationals (and allied financiers) are far from the only business groups active in the GOP. Moreover, major veins of dissatisfaction exist within the multinational bloc itself, particularly in regard to détente.
As the 1988 campaign approached, ominous signs of dissatisfaction began to appear on the right of the GOP. New York Congressman Kemp, who during most of President Reagan’s tenure in office had usually been counted Bush’s strongest prospective opponent for the nomination, stridently denounced the INF Treaty and began running furiously against détente and the “sellout” of freedom fighters around the globe.
Donald Rumsfeld, once Gerald Ford’s hawkish secretary of defense and then chief executive officer of G. D. Searle, a large pharmaceutical concern, began scouting a run, and also looking rightwards. So did another card-carrying multinational cold warrior, Haig. Pierre DuPont, a one-time moderate Republican governor of Delaware, announced his candidacy on a platform that would have warmed the heart of the elder Pierre DuPont, who as head of the family’s chemical company during the New Deal was one of FDR’s sharpest critics. Televangelist Pat Robertson also declared, on a platform that on defense and many other topics was well to the right of Attila the Hun. And, to the surprise of practically everyone who does not closely follow the political economy of the GOP, Kansas Senator Robert Dole finally came down well to the right of the Bush campaign.
Not all of these candidates were equally formidable. Kemp, for example, was strongly identified as the partisan of supply-side economics. In years past, he had also drawn important supporters from aerospace and defense enterprises for whom the deficit functions first of all as an entry in the profits column, and who clearly welcomed Kemp’s insistence that détente was a dangerous illusion. But, as earlier observed, the practical meaning of supply-side doctrines for the average business was lower interest rates. By early 1988, however, Baker had been bringing the dollar down for almost three years. With exports booming, and the economy beginning to bump up against what most business economists reckoned was full capacity (whatever the numbers of discouraged workers who no longer figured in the unemployment statistics), what was the point of a new monetary experiment? And despite the intra-party row over détente, the vice president was obviously a plausible standard bearer for defense in the fall campaign against the Democrats.
Not surprisingly, few of the Republican business leaders who had in years past been attracted to Kemp’s “exciting new ideas” were still excited by them. When Kemp unfurled the banner of aggressive free enterprise, salutes came from only a comparative handful of deregulation enthusiasts (e.g., Dow Chemical’s Paul Oreffice), anointed keepers of the supply-side flame, such as Lewis Lehrman, and as table 5.1 indicates, a fair number of PACs or executives from savings banks, utilities, and transportation companies, plus the handful of real estate contributors probably attracted by the future housing and urban development secretary’s emphasis on “enterprise zones”. The rest, sometimes after pausing respectfully, moved on.16
TABLE 5.1. Industry Contributions to Candidates by Party
Source: Based on FEC data, but including soft money; see text.
Note: (The universe of comparison is each party’s respective contributors.) Numbers in parentheses by each industry are significance levels, not strength. They indicate only positive differences from the candidate’s average-industry figures.
*Expected value of cell in chi-square less than 5, which is warning that the test has low power.
In all probability, DuPont really had his eye on either the vice presidency or on 1992 or 1996. However, save for the press (which kept hailing his iconoclasm and “courage” in tackling the sacred cows of farm subsidies and social security), the family circle (which includes a dazzling number of the Forbes 400 wealthiest Americans, who, because they are concentrated in one industry, skew table 5.1’s portrait of the chemical industry), and a surprising number of top financiers and bank executives (who, as the people most concerned with the future of the dollar in the 1990s, were perhaps making small votive offerings in honor of that “courage”), he failed to attract much support from business or anyone else.
Neither did Haig, whose appeal as a right-wing internationalist overlapped that of the later Dole or DuPont, but who also had to live down a reputation as an unguided missile. (Perhaps appropriately, the aircraft industry and a specially defined bloc of superhawks discussed below in reference to the Dole campaign backed him at a statistically significant level compared to other Republicans.) Rumsfeld, after contemplating what it now costs to run for president, thriftily called off his effort, as did Nevada Senator Paul Laxalt.
And Robertson’s campaign, for which the media and many scholars had been predicting a heavenly future, staggered under two deadly blows. First came the collapse of oil prices, which badly hurt some of his major financial backers (such as Bunker Hunt) in the sector that had over the years probably invested more in fundamentalist politics than any other. The coup de grâce to his campaign as a serious national threat, as distinct from an annoying party presence, came with the disastrous news of apparent devilish doings in Charlotte, North Carolina, by Jim and Tammy Bakker, and an unorthodox form of witness practiced in Louisiana motels by the Reverend Jimmy Swaggart.
TABLE 5.2. Party and Industry in the 1988 Election (N = 1,380)
Source: Based on FEC data, as in text.
Note: The universe of comparison is all investors in the sample.
*Statistically significant below .01.
† Statistically significant below .07.
That left Dole as the person with the best chance of stopping Bush. As all the world knows, he came within a hair of doing precisely that. Because of the light it sheds on the potential opposition the Bush presidency now faces, it is exceedingly instructive to see how he did it.
It is possible that a few people who eventually hopped on the bandwagon did so simply because they believed that Dole might run a stronger race than Bush, who was then viewed by many in his party the way many Democrats now regard Dukakis. Such cases, however, should be scattered randomly, and not be concentrated in particular sectors, and certainly not in sectors where prominent industrialists are openly campaigning for one or the other particular issue. Though my data are not perfectly adapted for this task, it is easy to show statistically that while Dole and Bush did have partially overlapping appeals, Dole very clearly succeeded in tapping sectors (and parts of sectors) with a plausible grievance against Bush.
Dole’s initial campaign impressions, for example, derived mostly from the record he had compiled as Senate Republican leader. In that role, he had pressed hard on the deficit, much harder than Bush. Indeed, as table 5.1 shows, among Republican contributors, Dole’s appeal to investment bankers and insurance executives—sellers and buyers, respectively, of long-term bonds—stands out compared to Bush’s. (For both candidates, statistical tests of significance suggest each had above-average support from investment bankers, but the results for Dole are much more impressive, whereas the results for Bush are borderline.)
As Dole kicked off his campaign, he was also known as a friend of Israel, whereas Bush’s credentials on that score, while scarcely negligible, were suspect in some quarters. Dole’s campaign contribution list also suggests a certain closeness with the commodities markets, and the Kansas senator was in any event a hero to large export-oriented farmers. The veteran member of the Senate Finance Committee also seems to have attracted support from some private hospital chains and parts of the service industry.
All this, however, provided a rather narrow base. Dole tried developing the deficit issue into a call for “burden sharing” by the European allies. This would have freed up resources for some domestic spending, which Dole pointedly observed had been neglected under Reagan. Table 5.1 suggests that some real estate magnates either got (or, more likely, sent) the message. But the rest of the business community hung back. For all the talk about how the compassionate, yet fiscally responsible Dole would make a stronger candidate against the Democrats, the plain fact was that Bush’s campaign was rolling ahead.
So, after hesitating almost interminably, Dole made a fateful choice. In a complex maneuver, in which he came out for the INF Treaty, but positioned himself as a stern critic of the other treaties the administration was talking up, he allied with the right and center-right opponents of détente. He also spoke out strongly on the importance of the American position in the Persian Gulf.
The result was a political coalition that leaves little trace in my regular industry analysis, but which shows up spectacularly when one defines a very special universe of comparison: the very largest multinational oil companies (all of them among the top twenty industrials on the 1987 Fortune list) except Occidental and Chevron (which both had major deals in progress with the USSR) plus the subset of firms in the aircraft industry whose principal business is producing major war-planes and missiles. This “industry” (or better, world-historical force), shown in table 5.1 as the MNOC-MIC “multinational oil, military-industrial complex” bloc, now swung massively for Dole.17 As Dole now rushed in on Bush, top executives and political action committees from companies such as Lockheed, General Dynamics, Northrop, and Rockwell all contributed. Henry Kissinger, the living incarnation of prudent multinational skepticism about détente, began to confer with him.18 And a remarkable number of executives from big multinational oil concerns also began donating. It is doubtful that oil-policy differences between the candidates accounted for this. Bush and Dole did not differ greatly in regard to oil policy, though as the race heated up Dole made some half-hearted and not particularly convincing noises about an oil tariff which many independents, but not most majors, supported. Along with gold, however, oil and natural gas are the principal balancing items in East-West trade. Many Europeans, indeed, take it for granted that the primary limit on how much they can sell the Soviets in the short run is how much gas Moscow can sell back to them. With oil prices already down, it is unlikely that most major oil companies not involved in deals with the Soviets relished the prospect of large-scale sales into the West any more than they did in the 1920s or 1950s, when this issue spurred major agitation in the industry.19
Preston Tisch, the brother and close business associate of Lawrence Tisch, who had recently acquired CBS, resigned as postmaster general, returned to his family’s business interests, and declared for Dole.20 Then, as the center-right criticism of Bush reached a crescendo just ahead of the Iowa primary, Dan Rather, who had previously created a stir by briefly slipping into Afghanistan, conducted a highly publicized interview with Bush about his role in the Iran-Contra affair.
Though analysts debated who won that exchange, no one disputed that Dole defeated Bush in Iowa, or, as Haig, Rumsfeld, and other multinational cold warriors came out for Dole, that he seemed on the verge of knocking the vice president out of the race. In New Hampshire, however, the Bush forces were led by Governor John Sununu, who, like Bush himself, was an ardent proponent of nuclear power (witness table 5.1’s suggestion about the utilities) and the licensing of the controversial Seabrook, New Hampshire, nuclear plant. Sununu, whose political rise began with the encouragement of a lobbyist for Westinghouse, had taken great care to organize the state. Aided by enormous infusions of cash, Bush’s campaign eked out victory there.21
As the campaign headed south, Dole then tried a classic maneuver. At least three times in the past twenty years, a right-wing candidate confronting a strong free-trader has cemented the alliance of the center with the right by explicit commitments to textiles and other protectionist industrial sectors. Now Dole came out in public for protection. Top executives from Bethlehem and USX, the automobile industry, some figures from the electronics industry almost certainly worried about the Japanese, and prominent textile leaders, including Roger Milliken (a prominent advocate of “buy American” policies) contributed to his campaign. Dole, like Richard Nixon and Reagan before him, struck a formal arrangement with Thurmond, the long-time champion of the textile industry.22
Now, however, the devastating long-term effects of the high dollar showed. After seven years of imports, and the gradual transformation of the Southern industrial structure from a heavy reliance on textiles to finance, services, and electronics, the old Southern protectionist industrial base was hollowed out. The Bush machine’s multinational juggernaut rolled over Dole, effectively destroying his candidacy.
Bush had won, and turned to face the Democrats. As usual, the situation in that party appeared confusing until one analyzed competition within the power bloc.
PAYING FOR A PARTY NO ONE CAME TO
A flashback to 1984 is a convenient place to begin. In that election, it will be recalled (indelibly by many), Walter Mondale ran on a program that eschewed many traditional Democratic verities. Instead, he promised to raise taxes to close the deficit, and—a bit less clearly—uphold “fairness” by trimming the military budget to protect some traditional often extensively urban-oriented, social programs.
Although many in the media and academia subsequently blamed the ensuing disaster on Mondale’s capitulation to the “special interests” of labor, blacks, and women, these groups were certainly not responsible for the disastrous tax pledge or the related rejection of bold proposals for tax simplification. Instead, the Democrats’ campaign strategy matched the interests of the two major components of Mondale’s business bloc. These were investment bankers, who as sellers of long-term bonds were in white heat about the ballooning deficit, and real estate magnates (mostly in the Northeast and Midwest, plus San Francisco and a few other places outside the Rust Belt), whose building projects depended on continuing federal aid for infrastructure and mass transit.
Because funds for the cities competed dollar for dollar with military spending, the real estate interests genuinely could not afford to back conservative Democrats inclined to indulge the defense establishment. As a consequence, in 1984 the real estate bloc was greatly underrepresented among contributors to conservative Democratic presidential candidates and overwhelmingly concentrated on relatively “liberal” presidential candidacies. (Many, indeed, had earlier helped to finance the antinuclear movement.) These same interests, of course, would have lost heavily had tax simplification removed the tax code’s special treatment for real estate. (Eventually, it did, and they were hit with enormous losses.)23
A notable advantage the U.S. political system affords large investors is that most of the risk accrues to the politicians who take the cash rather than to the investors who disburse it. The 1984 landslide accordingly buried Mondale, but not the investment bankers and developers. They remained available, indeed, tirelessly active, as tables 5.1 and 5.2 indicate. The task facing Democratic presidential aspirants in 1988, therefore, was to find strategies that promised to bring these blocs on board while, if possible, broadening their appeal.
In 1987, this did not appear easy, though it was certainly less difficult and risky than attempting to run with less money and trying to revive the party’s traditional bases of mass support. Investment bankers like Roger Altman (previously Carter’s assistant secretary of the treasury; in 1984 at Lehman Brothers; and by 1988 a top executive of the Blackstone Group, an elite new house organized by Peter Peterson, well-known as a critic of the deficit) and Goldman, Sachs’ Robert Rubin, who had both flown out to Minnesota to press Mondale on the budget, still had deficit reduction as a top priority. Increasingly prepared to tolerate limited forms of government intervention on behalf of “competitiveness,” such financiers retained an abiding interest in free trade and the future flow of investment capital from Japan to the United States. Most also retained a deep fear of inflation (and thus of monetary ease) while preserving an attachment to one legacy of the New Deal: the Glass-Steagall Act, which prevents commercial banks from entering investment banking.24
Few of these issues had any mass appeal, however. Accordingly, Democratic candidates had little choice but to focus on U.S.-Soviet relations or the military budget, if they expected to have anything to offer the electorate (and the real estate bloc) at all.
Here, too, however, would-be candidates faced powerful constraints. Although many financiers and other business groups sympathized with détente (indeed, a few strong critics of the Reagan administration’s Soviet policy, such as IBM’s Thomas J. Watson, had supported Mondale in 1984) and were openly organizing to cut the military budget, the top priority of most remained deficit reduction and, usually, dollar stability. In addition, most members of this bloc—in addition to many defense contractors that retained powerful positions within the party’s right wing (contributing to such groups as the newly organized Democratic Leadership Council [DLC])—certainly appreciated the role military force plays in U.S. calculations vis-à-vis Japan, the Third World, the Middle East, and Europe, as well as the USSR.
Not surprisingly, more than one prospective candidate contemplated the alternatives, and then decided that discretion was the better part of valor. New Jersey Senator Bill Bradley, for example, was enormously popular on Wall Street. But, as Morgan Stanley’s Richard Fisher and other investment bankers talked up his candidacy, Bradley backed off. Similarly, Mario Cuomo, advised by a virtual Milky Way of international financial stars, including Anthony Solomon, Peterson, Felix Rohatyn, and James Robinson, also drew back, after what appears to have been a policy clash with at least some of the real estate bloc. And Georgia Senator Sam Nunn, a champion of military spending, resisted a vast media buildup (in which CBS played a prominent role) and prudently took himself out of contention.
As the campaign wore on, other, perhaps less perspicacious, candidates probably wished they had emulated the trio of reluctant dragons. Even before the monkey business on the Monkey Business, for example, it was apparent that Gary Hart’s 1988 campaign—which prominently featured a call for an oil import fee—was failing to attract much business support outside of the oil-producing states (where multimillionaire Texas Lieutenant Governor William Hobby had endorsed him, as did several prominent oilmen) and a handful of investment bankers (table 5.1) and venture capitalists enthusiastic about his detailed and rather far-reaching proposals for combining industrial policy with an open world economy.25
Similarly, former Arizona Governor Bruce Babbitt positioned himself as the campaign’s enfant terrible, but to little avail. Reeling off a host of ideas that the media kept calling “exciting,” Babbitt succeeded in attracting contributions from some very well-placed supporters (including David Rockefeller, a leading figure on the Trilateral Commission, on which Babbitt himself had served). Table 5.1 suggests also that he had some appeal to real estate. Although the significance level just fails to make the table, it is interesting to note that firms in the category I call “media/communications” contributed disproportionately to Babbitt. Strikingly, he also benefited from what one statistical study of campaign coverage concluded was more favorable press coverage than any other candidate received.26 But the public was less entranced by the value-added tax and other notions that Babbitt put forward than was this rather thin slice of big business, and Babbitt’s vigorous, frequently very amusing, campaign failed to catch fire. By the Iowa primary, Babbitt’s fund-raisers had obtained commitments for major new funds, provided that he finished at least fourth. When he just barely failed to do so, his campaign collapsed.
The structural dilemmas of how to retain support from both investors and voters also destroyed the candidacy of Illinois Senator Paul Simon. Announcing himself an unreconstructed New Deal Democrat, Simon initially attracted support from leading developers—the only segment of the business community (aside, obviously, from the very special case of defense) where the notion of federal spending was still popular. He also got some support from concerns in the food and grain business—where advocates of friendlier relations with the USSR have often found friends in recent years.27 To this base, he added many American friends of Israel, Jews and Gentiles alike. (Simon was co-sponsor of a resolution to expel the United Nations office of the Palestine Liberation Organization from the United States.)
It is interesting to speculate what might have happened had Simon persevered in his support of the New Deal and economic equity. Possibly, his candidacy might have taken off like Jackson’s. But he did not. Although polls show that more than three-fifths of the public favor a federal job guarantee, and the balanced budget multiplier is a standard result in orthodox economic theory, the media and more conservative Democrats ridiculed Simon’s program for full employment. Virtually questioning his intelligence, they patronized him, and frequently implied that the program would fatally swell the deficit.28 Instead of striking back vigorously, Simon elected to keep raising money from essentially conservative real estate magnates like Donald Trump, from the Chicago commodities exchanges, and from similar sources. He toned down his campaign, running mainly on symbols like the bow tie. Probably only a fraction of the population figured out what he stood for before his candicacy ran out of money.
By then, however, Missouri Congressman Richard Gephardt was on center stage and alarm bells were ringing from New York to Tokyo. A founder of the conservative DLC who had voted for the 1981 tax cuts and championed military spending, Gephardt originally appeared to be just another member of the growing bloc of “neoliberal” congressmen who wanted to move the party to the right.
The high dollar, however, devastated agriculture and much of industry in middle America. After the collapse of oil prices in the late winter of 1985–1986, many congressional Democrats whose districts were not sharing in the relative prosperity of what many were then referring to as the “bicoastal economy” began casting about for a program. Stimulated at least in part by Jim Wright, the new House speaker, whose Texas district faced severe economic dislocation, this group gradually began to evolve a program.
This program had three main planks. The first was a plan for cartelizing farm prices. Trumpeted as a means of saving the family farm, the program in fact had broader objectives. By guaranteeing product prices, it would halt the erosion of real estate prices and provide more income for distressed farm regions. This, in turn, would stabilize conditions for lenders in the region, many of which were facing bankruptcy.
A second part of the program was a tariff on imported oil, which would accomplish for the oil patch what the farm program would do for the farm states.
The third part of the program was the famous “Gephardt amendment,” added by Wright and Gephardt to the pending trade bill. The amendment required countries, such as Japan and Korea, which consistently export more goods to the United States than they buy from it, to reduce those trade surpluses by 10 percent per year, or their goods would be subject to new penalty duties designed to force the adjustment.
From the moment it was introduced, the measure was a lightning rod for free-traders, who insisted that it represented a modern version of the notorious Smoot-Hawley tariff and a capitulation by the Democrats to the AFL-CIO.
The latter charge, at least, was simply not true. The bill was in fact a shrewdly designed measure to attract back to the Democrats a part of the business community that seemed, in 1986–1987, to be potentially movable. Part of a series of other congressional Democratic initiatives that included a major report on the status of American high-tech industries and studies highlighting what was said to be a growing disparity of incomes within the workforce, the amendment appears actually to have been promoted by lobbyists for companies that were worried about the Japanese challenge, such as Motorola, or that wanted to force open the Japanese market, such as Monsanto (located in the same city as Gephardt’s district, it donated a set of silicon wafers to Gephardt for distribution to House members as an attention-getting device in the days before the vote). Obviously, some protectionists did support the bill: Lee Iacocca was certainly not hoping to pry open the Korean market to $48,000 Chryslers when that corporation came out for the bill, nor were the United Auto Workers.29
Exceptionally well conceived in its early stages, the movement to make Gephardt president got under way early. Long before he declared his candidacy, many businesses—especially agricultural creditors, including a striking number of insurance companies, along with various manufacturers—had contributed to his PAC. Then the congressman distributed the money to his colleagues running for reelection in 1986 and after. When Gephardt finally declared, an impressive phalanx of his House colleagues then turned around and endorsed him.
The campaign itself also raised considerable money from manufacturing concerns that had not recently—or, probably, ever, in some cases—aided a Democratic presidential candidate. Monsanto, Ralston-Purina, NCR, and other companies (or their executives) contributed. It is interesting to note that although Gephardt did comparatively little talking about military spending, he was the only Democrat who attracted any significant support from the defense industry (see the entry in table 5.1 for “aircraft”). A number of prominent auto industry figures contributed, including not only executives from General Motors but Iacocca himself. In a nice regional touch, Detroit Edison executives also contributed.
Save for a handful of concerns that hoped to use the bill as a wedge to open up Japan, however, the multinational community was terrified by Gephardt’s trade policy. Not surprisingly, according to statistical studies of the campaign, the most multinational of all American industries, the prestige media, flayed Gephardt.30
Blasted by the press and cut off because of his support for trade restriction from most major sources of funds, Gephardt radicalized his appeal. He began carrying around a copy of a book highly critical of the Federal Reserve’s relations with large banks, William Greider’s Secrets of The Temple, and he started to denounce an unfeeling “establishment.”
Popular response to his campaign was phenomenal. But perhaps because of the blurred image he had on defense issues, he was not able to break through to one big constituency in particular that perhaps might have shared his new interest in “populism”—real estate—and he faced increasing difficulty raising money.31 When the campaign turned South and for the first time faced an expensive multistate media buy-out, it began to disintegrate. For a while it coped by aggressively soliciting from corporate lobbyists. But it simply could not find the funds to compete all over the South.
Tennessee Senator Albert Gore had earlier entered the race upon the entreaties of (mostly Northern) businessmen who had previously failed to persuade Arkansas Senator Dale Bumpers to take the plunge. Subsequently Gore had allied himself with the champions of military spending and the Likud party’s interpretation of Israeli security. Although hyped by much of the media as a uniquely Southern candidate, in fact the former liberal’s conservative volte-face and alliance with local machines and utilities (table 5.1) did not sit well in his own region.
With polls taken shortly before “Super Tuesday” raising the possibility that the only Southern feature of his campaign might be that it would soon be gone with the wind, Gore did not stand on principle. Making timely use of Yankee lucre, he was born again at the last minute as a populist à la Gephardt. Connoisseurs who treasure the memory of H. L. Mencken will regret that no polling agency thought to ask how many Southern voters in fact thought they were voting for the elder Gore, a famous New Deal senator who now graced the board of Occidental Petroleum, but the switch in the nick of time saved Gore, and it almost certainly helped put Gephardt out of the race.32
Either because it was almost uniquely short-sighted or, perhaps, always represented less a real campaign than a device for tying up the convention for someone else’s benefit, the Gore campaign had never bothered to organize most areas outside the South. As a consequence, aside from New York state, where his campaign famously allied itself with Mayor Edward Koch, Gore swiftly disappeared as a factor in the race, turning the campaign into a two-man contest between Jackson and Dukakis.
One could analyze this, the most dramatic part of the campaign forever—but from the standpoint of political economy, the broad pattern is cut and dried. In 1984, Jackson’s campaign received minor assistance from a few American multinationals that do business in the Third World, and which have historically cultivated ties with parts of the African-American community. (Atlanta-based Coca-Cola is perhaps the outstanding example.) It also received some aid from some multinationally oriented foundation personnel (e.g., David Rockefeller Jr.), some prominent Americans who have long advocated a change in U.S. policy toward the Middle East (e.g., former U.S. ambassador to Saudi Arabia James Akins), and many African-American business figures.33
As important as this support undoubtedly was, however, the plain fact is that it did not add up to much. Even if one reckons in the controversial grants to Operation Push from the Arab League, Jackson’s 1984 campaign was far underfunded by comparison with that of virtually every other major candidate.
The same was true of the 1988 campaign, particularly in its crucial early stages. Here, again, it is clear that some money arrived from Arab-Amerians and others concerned with changing American policy toward the Middle East,34 as well as from two distinguishably different African-American business groups: professionals who have risen to responsible positions within American big business, and entrepreneurs, whose companies tend to be much smaller. But in 1988, support from foundations or major corporations appears to have amounted to even less than in 1984. The campaign’s organizational base was essentially elsewhere—in what remains of the civil rights movement, and part of organized labor.35
Later, the Jackson campaign clearly did receive some support from parts of Wall Street (where there is considerable sympathy for Jackson’s plea for more attention to the Third World, if not for other parts of his message, and where there is some evidence that his relative silence on the role of the Federal Reserve and high interest rates was noted). That part of the American establishment that favors a shift in American policy toward the Middle East also, at least intermittently, talked up Jackson’s role in the party—once it was clear that he could not be nominated.
Virtually everyone else in the party, however, quickly closed ranks against Jackson, in favor of his remaining opponent: Dukakis.
This was no accident of circumstance. Standing originally in the shadows of Bradley, Cuomo, and Senator Joseph Biden, Dukakis shared their appeal to investment bankers worried about free trade and budget deficits. In due course, many of the leading Democratic stars of Wall Street began contributing: Not only Rubin and Altman, but also John Gutfreund, chair of Salomon Brothers, and Rohatyn, among many others. As supporters befitting a candidate who took public transit to work every morning, many real estate developers also pitched in, including several members of the Dunfey family who had prominently backed the early antinuclear movement, and Alan Leventhal. (Compare, in table 5.1, the striking similarities between Biden and Dukakis in their overlapping appeals to both investment banking and real estate, if not the chemicals industry—Dukakis was not, after all, a senator from Delaware.)
To this base (and the Greek entrepreneurs beloved of so many newspaper “analyses” of the Dukakis campaign) reminiscent of Mondale, however, Dukakis quickly began adding other sectors. In sharp contrast to Mondale, who by no means succeeded in unifying the Minneapolis business community around him in 1984, Dukakis won support from many of the most influential concerns in the Boston area, including the fabled “Vault” of major banks and most of the Massachusetts High Tech Council.36
Indeed, his campaign strongly attracted high tech and computer firms.37 Hale & Dorr attorney Paul Brountas, who conducted the vice presidential search for Dukakis and is usually numbered among his closest friends, is widely recognized as a leading specialist in high-tech law, and has long been close to the leadership of the High Tech Council, as well as to many of its individual firms, such as Analog Devices.
Promoting the kind of (limited) business-government-academe partnership that these threatened sectors now find so attractive, Dukakis’s fund-raisers ranged over the entire country. Aided by the head of Prime Computer and others, the campaign made early inroads into California’s Silicon Valley. There, Regis McKenna, a leading public relations consultant to the industry, who in 1984 had aided the Hart campaign, became an early donor.
Uniquely among the white candidates, Dukakis also began a major campaign around health issues. Although one is not used to thinking of this sector as part of the high-technology economy, in fact medical instrument companies, research hospitals, and biotechnology concerns are as much a part of high tech as any defense contractor. Dukakis’s best-known initiative on this front, a bill to phase in universal health insurance in Massachusetts, was attacked by doctors but supported by other parts of the health industry, including hospitals after they were released from most cost controls. Other supporters of the bill hailed it as part of a long-term effort to shore up the state’s position in the increasingly hot competition for world leadership in biotech industries.
Throughout his campaign, Dukakis periodically called for a national version of the Massachusetts plan. While this figured to attract voters, for whom a long stay in the hospital often means bankruptcy, it also had plenty of powerful, well-funded business support. Even a cursory glance at FEC records of Dukakis’s swelling campaign chest shows an outpouring of donations from at least some personnel in parts of the insurance industry,38 notably Blue Cross companies from around the country. Dukakis himself owned a small amount of stock in a company controlled by a high-tech industrialist whose foundation has made major efforts to place health care on the national agenda.
The campaign’s efforts to tap parts of what might be termed the “medical-industrial complex,” however, along with its commitments to housing and mass transit (if not, perhaps, to “cities” on the scale of the old federal programs) greatly narrowed its room for maneuver in regard to the issues and sectors that often make or break presidential campaigns: defense and military spending.
Not surprisingly, Dukakis moved very cautiously in this area. Early in the campaign, precisely as one would expect from a candidate with his business base, he appeared skeptical of military spending. Not only did he sharply criticize aid to the Contras, but he also came out against additional testing of virtually all new strategic weapons systems. He also attacked “Star Wars” and opposed both the proposed single-warhead Midgetman missile and the Reagan administration’s own version of mass transit—the famous, and fabulously expensive, scheme to base the MX missile on underground railway cars. No less predictably, representatives of the defense (aircraft) industry in my sample refrained disproportionately from contributing to Dukakis’s campaign.
In the latter stages of the race, this led to heavy criticism from the party’s right wing, as well as some scarcely veiled hints in the Wall Street Journal and elsewhere that Dukakis consider the virtues of emulating Kennedy’s 1960 campaign (which famously highlighted a bogus missile gap) and tack to his right, perhaps by selecting Nunn as his running mate.
In a series of slow steps, the Dukakis campaign proceeded to do precisely this. Coming out flatly against Jackson’s demand for major cuts in defense spending, Dukakis announced his determination to hold defense spending steady in real terms over the next few years—a position that distinguished him from the hard right, but which was in fact rather close to the position Defense Secretary Frank Carlucci pursued after taking over from Caspar Weinberger. In a critical signal of his intentions on military spending, Dukakis ruled out fast-track arms negotiations with USSR President Mikhail Gorbachev—a position that was then being embraced by a wide range of establishment figures, from Cyrus Vance to Kissinger, and which briefly plunged German-American relations into crisis after the election. In negotiations over the Democratic platform, Dukakis also surprised the Jackson forces by backing off his earlier positions against the Contras. He also strongly opposed Jackson’s resolution on the Middle East, which, along with Dukakis’s declaration that the United States should recognize Jerusalem as the capital of Israel and assiduous work by several members of his finance committee, helped bring over to him many supporters of Gore.
In a major speech to the Atlantic Council, Dukakis also vigorously promoted a new conventional defense initiative—and “conventional” here meant “high tech,” since no U.S. defense planner contemplated trying to go one-on-one with Soviet forces. Perhaps not surprisingly, Raytheon, the giant, Boston-based defense contractor whose chief contributed to the campaign, later told the Boston Globe that it expected few problems if Dukakis were elected, while other electronics industry spokespersons in New England openly predicted that the stress on conventional weapons would lead to new business.39
And of course, Dukakis eventually selected as his running mate Texas Senator Lloyd Bentsen, champion of a bristling national defense, the Contras, oil import levies, the 1981 tax bill, the MX, and the B-1, and a representative of a state whose business elite has been selfconsciously modernizing around high tech and biotechnology. Because Bentsen could hardly fail to look good next to Dan Quayle, his selection as vice presidential candidate was never really scrutinized, nor did many connect the choice to the disastrously muted tone of the Democratic campaign. Nevertheless, as the cleanup began from the bash at the Democratic Convention celebrating the historic Boston-Austin axis cosponsored by America’s largest natural gas pipeline concern, it was already clear that the candidate would have nothing to say to the electorate in the fall. Like Carter and Mondale before him, admission to the real party was by invitation only—and invitations were only going to major donors; voters needed not apply.
Not surprisingly, the electorate was less than entranced. The Dukakis campaign had already puzzled and angered many of its supporters within the Democratic party by its insulting treatment of Jackson, its coolness to organized labor, and its repeatedly expressed disdain for traditional Democratic verities. Now to almost everyone’s surprise, the Massachusetts governor declined to counterattack when challenged by the GOP. Day after bewildering day, neither he nor anyone else in the entourage had anything to say. Flinching at the very mention of what rapidly became known as the “L-word” (“liberal”), the campaign disdained to defend its standard bearer’s patriotism, and backed away from an earlier commitment to Jackson to vigorously register new voters.
While top campaign officials warned about the dangers of pandering to electoral passions that might win votes, the governor’s camp turned a deaf ear to widespread pleas to spotlight economic issues of concern to average voters, such as international trade or mounting evidence of growing disparities in income. Instead, until a fortnight before the election, the candidate and the party held firmly to Aesopian rhetoric about “values” and “competence.” The eleventh-hour rediscovery of the New Deal sent the Massachusetts governor’s poll ratings up smartly, but by then it was too late. Whereas in the spring, people who believed the economy would remain “about the same” mostly preferred Dukakis to Bush, by November the reverse was true—even though only a third of this pivotal middle group asserted they were voting to continue the Reagan legacy. (Those who had managed to persuade themselves that the economy would be better were voting overwhelming Republican; those who believed the economy would be worse, Democratic.) Dukakis lost, as voter turnout in many regions of the country fell to levels not witnessed since the 1820s, when property suffrage restrictions were in force.40
ACKNOWLEDGMENTS
Early versions of this paper were presented to the Seminar on International Political Economy of the University of Chicago, the Johns Hopkins University’s School of Advanced International Studies at Bologna, and also at Bard College, Hobart and William Smith Colleges, Colgate University, New York University, Bentley College, the Boyden Seminar of the University of Massachusetts, Boston, a plenary session at the 1989 Annual Meeting of the Midwest Political Science Association, and several conferences in Bonn and West Berlin organized by the Friedrich Ebert Stiftung. I am grateful to a number of the participants in these sessions for helpful comments. It is also a pleasure to acknowledge special debts to Stanley Kelley, John Geer, Walter Dean Burnham, Ben Page, Rick Pullen, and Paul Perry, for data or other assistance; to Erik Devereux, John Havens, and particularly Goresh Hosangady for advice on statistical methods; and to Bruce Cumings, James Kurth, Robert Johnson, David Hale, Alain Parguez, Joel Rogers, and Sherle Schwendiger for many discussions.