CAN BUSINESS CAN BUSINESS GOVERN GOVERN

AMERICA?AMERICA?

Rising Productivity, Rising Productivity, Stagnating Stagnating

CompensationCompensationHourly Productivity

Median Male Hourly Compensation

Median Hourly Compensation

http://www.washingtonpost.com/blogs/wonkblog/files/2013/01/infant-mortality-2.png

Policy FeudalismPolicy Feudalism

Prosperous Societies NeedProsperous Societies Need a lot of Government a lot of Government

Crucial Characteristics are very high levels Crucial Characteristics are very high levels of Complexity and Interdependence. of Complexity and Interdependence. Knowledge generation and innovation are Knowledge generation and innovation are central to expanding prosperitycentral to expanding prosperity

Public GoodsPublic Goods Huge Externalities, both Positive and Huge Externalities, both Positive and

NegativeNegative Macro-StabilizationMacro-Stabilization Information Asymmetries and MyopiaInformation Asymmetries and Myopia State Capacity Needed to Guard Against State Capacity Needed to Guard Against

Capture (rent-seeking)Capture (rent-seeking)

Eric Johnston, President of Eric Johnston, President of the U.S. Chamber of the U.S. Chamber of

Commerce, 1942-1946Commerce, 1942-1946 Collective bargaining is Collective bargaining is ““an established an established

and useful reality.and useful reality.””

Business should support the new Business should support the new capitalism, capitalism, ““stripped of the ancient stripped of the ancient prejudices against organized labor, prejudices against organized labor, government activity, and community government activity, and community planning.planning.””

Factors Conducive to Factors Conducive to Business Support for the Business Support for the

Mixed Economy IMixed Economy I OPPORTUNITY (OPPORTUNITY (““Organizational SlackOrganizational Slack””))

Limited foreign competitionLimited foreign competition Managerial autonomy (Managerial autonomy (““stakeholder capitalisstakeholder capitalis

mm ””))

ADVANTAGEADVANTAGE Perceived benefits of public goodsPerceived benefits of public goods Competitive edge (e.g. large firms and Competitive edge (e.g. large firms and

regulation)regulation) Possibilities for rent-seekingPossibilities for rent-seeking

Factors Conducive to Factors Conducive to Business Support for the Business Support for the

Mixed Economy IIMixed Economy II CONSTRAINTCONSTRAINT

Countervailing Power (e.g. Unions)Countervailing Power (e.g. Unions) Strong and Legitimate (Post-War) StateStrong and Legitimate (Post-War) State Party System (e.g. moderation of the Party System (e.g. moderation of the

GOP)GOP)

U.S. Business and Neo-U.S. Business and Neo-LiberalismLiberalism

Declining OpportunityDeclining Opportunity Financialization and Financialization and ““Shareholder ValueShareholder Value”” Shortened Tenure of CEOsShortened Tenure of CEOs

Declining Advantage in a Globalized Declining Advantage in a Globalized EconomyEconomy Edge over domestic competitors less relevantEdge over domestic competitors less relevant Increased incentives to free-rideIncreased incentives to free-ride

Declining ConstraintDeclining Constraint Weak unionsWeak unions Weak state (gridlock, obstruction and drift)Weak state (gridlock, obstruction and drift) Permissive GOPPermissive GOP

The Politics of DriftThe Politics of Drift

“In all cases where justice or the general good might require new laws to be passed, or active measures to be pursued, the fundamental principle of free government would be reversed. It would be no longer the majority that would rule: the power would be transferred to the minority.”

—James Madison, Federalist #58

Mann and OrnsteinMann and Ornstein““The Republican Party is an insurgent The Republican Party is an insurgent

outlier. It has become ideologically outlier. It has become ideologically extreme; contemptuous of the inherited extreme; contemptuous of the inherited social and economic policy regime; social and economic policy regime; scornful of compromise; unpersuaded by scornful of compromise; unpersuaded by conventional understandings of facts, conventional understandings of facts, evidence, and science; and dismissive of evidence, and science; and dismissive of the legitimacy of its political opposition, the legitimacy of its political opposition, all but declaring war on the governmenall but declaring war on the government.t.””

A Tale of Two A Tale of Two Associations:Associations:

The Business Roundtable The Business Roundtable and the U.S. Chamber of and the U.S. Chamber of

CommerceCommerce

BR: Elite NetworkBR: Elite Network Very Powerful in the 1970s and early 1980s; Very Powerful in the 1970s and early 1980s;

““Learjet LobbyingLearjet Lobbying””; resistant to overt ; resistant to overt partisanshippartisanship

By early 1990s neither non-partisanship nor By early 1990s neither non-partisanship nor reliance on sustained direct action by reliance on sustained direct action by ““corporate corporate leadersleaders”” remain viable organizing principles remain viable organizing principles

A weakened BR now focuses on issues directly A weakened BR now focuses on issues directly influencing the bottom lines of member firms influencing the bottom lines of member firms (e.g. tax treatment of foreign earnings) and (e.g. tax treatment of foreign earnings) and personally beneficial to CEOs (e.g. resisting personally beneficial to CEOs (e.g. resisting closer regulation of stock options and corporate closer regulation of stock options and corporate governance)governance)

In 2010 the BR appoints a former GOP governor In 2010 the BR appoints a former GOP governor (John Engler) as its new President(John Engler) as its new President

USCC: Delegated USCC: Delegated GovernanceGovernance

Turn to Moderation in the Early 1990s Turn to Moderation in the Early 1990s leads to Backlash (John Boehner: It is leads to Backlash (John Boehner: It is ““the the ChamberChamber’’s duty to categorically oppose s duty to categorically oppose everything that Clinton was in favor of.everything that Clinton was in favor of.””))

New Leadership (Donohue) aggressive New Leadership (Donohue) aggressive practitioner of organized combat.practitioner of organized combat.

Much more conservative policy agendaMuch more conservative policy agenda Tight linkages to GOPTight linkages to GOP Huge Expansion of ResourcesHuge Expansion of Resources Willing Supporter of Rent-seeking (and a Rent-Willing Supporter of Rent-seeking (and a Rent-

seeker Itself!)seeker Itself!)

Chamber of Commerce Chamber of Commerce LobbyingLobbying

1998-20121998-2012

Average Income (After taxes, including public and private benefits; 2007 dollars)

Top 1 %Top 1 %’’s Share (Excl. Capital s Share (Excl. Capital Gains)Gains)

“It would be popular for me to stand up and say I’m going to give you government money to pay for your college, but I’m not going to promise that. Don’t just go to one that has the highest price. Go to one that has a little lower price where you can get a good education. And hopefully you’ll find that. And don’t expect the government to forgive the debt that you take on.” –

Mitt Romney, March 2012

ADDITIONAL SLIDES….ADDITIONAL SLIDES….

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