Business Political Participation Research Paper

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While business firms play an important role in policy process in all capitalist societies the extent, nature, and impact of this participation varies both over time and among countries. Business political participation has changed significantly in the USA since the 1970s, and to a lesser extent in Europe. However the degree of political power exercised by business remains an important point of contention among scholars.

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1. Business Political Participation In Comparative Perspective

A critical factor underlying differences in national patterns of business–government relations is the extent and scope of government intervention in the economy (Shonfield 1965). The greater a government’s impact on the direction of national economic development—measured by spending, government ownership of industry, and control over capital allocation—the closer are the political ties between business and government. In capitalist nations characterized by extensive government intervention, the government will often promote the formation of business associations in order to facilitate policy coordination both with and within the private sector. The way business is organized politically also tends to mirror the structure of the public sector: the more governmental decision-making is centralized, the greater the breadth of business political associations.

On both dimensions, the USA is distinctive: government economic intervention has historically been relatively limited and public policy making is relatively fragmented. Accordingly, there is no American counterpart to ‘peak’ associations such as the German Federation of Industry, Confindustria in Italy, the Comite National du Patronat in France, the Keidanren in Japan, or the Confederation of British Industry—organizations which both represent and are able to speak for business as a whole (G. Wilson 1981, 1985).

In many capitalist nations, trade associations negotiate with the government on behalf of all firms in a particular sector. Such arrangements are often characterized as corporatist (Schmitter and Lehmbruch 1979). By contrast, trade associations in the USA rarely enjoy official or quasiofficial status and they tend to be much weaker and less inclusive than their counterparts in other capitalist nations. More generally, while business firms have become much more politically active in the USA since the 1970s, business is still less politically organized than in other capitalist nations.

The nature of the interaction between business organizations and government officials also differs in the USA. Firms in the USA typically influence public policy through ‘lobbying,’ a term which connotes an arms-length relationship between business and government. Corporations typically need to engage in pressure group politics to gain access to policy makers and shape the policy process. But outside the USA, business and political elites are more likely to come from similar social backgrounds and there is considerable movement of personnel between the two institutions. There are numerous opportunities for both formal and informal interaction between business and government officials and firms can expect to be closely consulted about policies which affect their interests. There is less need to ‘lobby’ because business organizations are themselves either a quasiofficial or official part of the public policy process.

2. Changes In Business Political Participation In Europe

However, business political participation has changed in Europe. In many capitalist societies a growing portion of firms are subsidiaries of multinational corporations whose headquarters are outside national borders. Such firms are less likely both to identify their interests with those of the nation in which their business is located and to lack the kind of informal access to policy makers enjoyed by domestic firms.

In addition, the role of government in managing the economy has declined in almost all capitalist polities: the importance of national industrial policies which required close business–government cooperation has diminished while a substantial number of government owned firms have been privatized, thus creating a more independent and pluralist business community. Both of these developments have diminished the historically close ties of business and government in a number of European countries and made the structure of business political representation more fragmented.

Within Western Europe, the increasing importance of the European Union has had a significant impact on business–government relations (Mazey and Richardson 1993, Wallace and Young 1997). The Single European Act (1987) not only significantly expanded the regulatory role of the EU, but ended the unanimity rule of the Council of Ministers. The latter constitutional change meant that each member state was no longer able to exercise a veto power over EU legislation. Accordingly, firms and trade associations could no longer rely on their influence with their national governments to protect their interests in Brussels.

The result has been a substantial increase in business political representation in Brussels. Many European-wide trade associations have been established to represent business interests in Brussels. At the same time, many large multinational firms have established their own independent lobbying operations in Brussels. The interests of 80 American firms with subsidiaries in Europe are represented by the EC Committee of the American Chamber of Commerce. In addition, many national trade associations have shifted part of their political efforts to Brussels.

In some cases, the more stable corporatist arrangements which characterized business–government at the national level have been undermined and firms and industries no longer enjoy the privileged access they had when policy making took place at the national level. The result has been an EU policy process which often resembles the American pattern of ‘disjointed pluralism’ and fluid issue networks (Streeck and Schmitter 1991). This, however, is not true of all policy areas, many of which continue to be characterized by stable policy communities which usually privilege producer interests.

2.1 Contemporary Changes In Business Political Participation In The USA

The degree and forms of business participation have significantly changed in the USA since the 1970s. During the 1950s and 1960s, business devoted relatively few resources to influencing public policy in Washington. Few large firms had Washington offices and these were typically thinly staffed. An exhaustive study of business lobbying on foreign trade policies during the 1950s found most business lobbies to be poorly financed, ill-managed, and at best only marginally effective. Indeed, only a minority of either large-or medium-sized firms regularly communicated with Congress (Bauer et al. 1993).

Certainly, many firms and industries received considerable benefits from government. For example, defense contractors benefited from procurement policies, agricultural interests received substantial price support, and the oil and textile industries, and also much of American agriculture, were protected from import competition. Many industries, such as housing and energy, received important tax preferences and a substantial portion of the American economy was regulated in ways that limited price competition and stabilized markets. However, because business enjoyed considerable public support, and nonbusiness constituencies were poorly organized, business did not need to engage in extensive political activity to enjoy a wide array of economic privileges.

2.2 The Changing Political Environment Of Business

The political environment of business began to change in the late 1960s. The social activism of the latter part of that decade reflected and contributed to a decline of public confidence in all institutions, including the large corporation. It also spawned a new political force: a loosely allied network of consumer and environmental organizations who began to pressure for expanding government regulation of business. Led by skillful political entrepreneurs such as Ralph Nader, and enjoying extensive and for the most part favorable press coverage, the public interest movement had a major policy impact (Berry 1997). From the late-1960s through the mid-1970s business experienced a series of major political defeats in Congress. New laws were passed which expanded the regulatory role of the federal government in environmental protection, consumer protection, and occupational health and safety.

Unlike previous patterns of government intervention, which had primarily affected only specific industries, the impact of the new social regulation was much broader: now, for the first time, virtually every firm faced a large and complex array of federal rules that mandated or prohibited a wide range of business decisions. The additional costs of complying with these regulations also became more burdensome following the economic downturn of the mid-1970s, which also led to a substantial increase in public hostility toward particular industries, most notably the oil industry.

2.3 Implications For Business Political Strategy

Business–government relations had previously been dominated by ‘insider politics’: corporations had secured benefits primarily by making low-visibility appeals to key legislators and administrators. But social regulation was dominated by ‘outsider politics’: it was often driven by highly visible, often emotional appeals to both public and elite opinion . To counter effectively the appeals of activists and their supporters, companies had to adopt to the ‘outsider’ strategies of their political opponents. Moreover, within Congress power became more decentralized and party discipline weakened. This meant that business could no longer rely on a handful of influential politicians or party leaders: they had to learn how to influence the votes of 535 individual legislators.

This decade also witnessed a substantial change in the regulations governing campaign contributions by business. Since the beginning of the twentieth century, corporations had been forbidden to contribute funds to candidates for federal office. However, the investigations surrounding the Watergate break-in revealed that a large number of firms had responded to pressures from the Finance Committee to re-elect the President by making illegal contributions to President Nixon’s re-election campaign. Ironically, Congress ‘cleaned up’ federal campaign finance by providing a legal vehicle for corporations to solicit funds from their executive employees and shareholders. The 1974 Federal Campaign Act Finance Amendments permitted corporations, and also other organizations, to establish political action committees (PACs). Corporations were allowed to pay the costs of establishing and administrating PACs, although they still could not contribute to them

2.4 New Forms Of Business Political Participation

As a response to these developments, business political activity both increased and became more visible (G. Wilson 1981). Between 1968 and 1978, the number of corporations with public affairs offices in Washington grew from 100 to more than 500, while many other firms employed full-or part-time lobbyists. All told, by the early 1980s nearly 2,500 business firms had some form of political representation in Washington (Vogel 1989, J. Q. Wilson 1996).

The number of trade associations also grew substantially, and many moved their headquarters to Washington in order to more effectively monitor and influence national policy. Some, such as the Chemical Manufacturers Association, the Semiconductor Industry Association, and the Health Insurance Association of America, proved highly effective. But the typical industry trade association declined in importance. This was largely the result of structural changes in the American economy which made firms more diversified. With investments in a wide variety of different industries, their interests could no longer be effectively represented by an industry-based interest group. Accordingly, many large corporations developed an independent capacity to monitor political developments and to advance their political interests (Ryan et al. 1987, Harris 1989).

In order to advance its collective interests, the business community engaged in coalition building— the identification and mobilization of large numbers of companies and trade associations who shared a common interest in a particular issue. This became a highly effective strategy to maximize the political influence of substantial segments of the business community, since it enabled many firms and trade associations to pool and coordinate their political resources. Such coalitions were often difficult to establish since many firms were reluctant to commit scarce political resources to lobby on issues in which their stake was either modest or not readily apparent. But those that were establishing were often politically effective.

Many coalitions were ad hoc in nature: they were formed to lobby on a particular issue—and then disbanded when the issue was resolved or disappeared from the political agenda. However, some business coalitions became institutionalized (Levitan and Cooper 1984). One of the most important new ‘peak’ business organizations was the Business Roundtable. It was established during the early 1970s from a merger of three ad hoc coalitions which had been primarily formed to lobby on issues affecting labor. Exclusively composed of the chief executive officers of approximately 200 of the nation’s largest corporations, it relied on the ‘unique mobilization of the talent and prestige of the nation’s top corporate heads’ to lobby government officials (Vogel 1989, p. 198).

Other more established business organizations representing large numbers of firms and industries also grew in importance. Of particular significance was an increase in coordinated political activity on the part of smaller firms. Between 1970 and 1979, the membership of the National Federation of Independent Business (NFIB), which represented smaller firms, grew from 300 to 600,000. The NFIB frequently took positions opposed to those of the Business Roundtable, which many small firms viewed as too willing to accommodate itself to liberal political pressures for government expansion.

Another dimension of business political participation focused on mobilizing the ‘grass-roots.’ By the late 1970s, corporations and trade associations were spending an estimated $850 million to help their supporters throughout the USA to communicate with, and thus influence the votes of, their representatives and Senators. Much of what Washington lobbyists now did was to identify strategies for influencing particular legislators, rather than lobby them directly. Business associations representing large numbers of smaller firms such as the National Association of Independent Businessmen and the Chamber of Commerce made particularly extensive use of grass-roots lobbying.

2.5 The Politics Of Ideas

An important component of business participation in the policy process focused on changing public attitudes toward business in general and specific policy issues in particular (Blumenthal 1986). Corporations and trade associations made considerable use of ‘advocacy advertising,’ a specialized form of institutional or corporate advertising whose purpose is to influence the public’s attitudes on issues of public policy. During the 1970s, more than 35 corporations and trade associations launched public advocacy campaigns and by the end of that decade, major corporate advertisers were spending about one-third of their advertising dollars on campaigns aimed at the public in their role as citizens rather than consumers.

The oil industry made extensive use of this advertising strategy during the 1970s to explain its position on antitrust policy, government regulation and industry profitability—all issues then much in the public spotlight as a result of the energy crisis. Steel firms purchased advertising space to explain their positions on import restrictions and pollution controls, the American Electric Power Company ran a multimillion dollar campaign opposing the use of scrubbers and the Caloric Control Council employed advocacy advertising to build a successful grass-roots campaign to enact legislation overruling the Food and Drug Administration’s ban on saccharin. During the 1990s, the Health Insurance Association of America waged a highly effective television camping against the Clinton Administration’s proposed health care plan.

The business community and its supporters also sought to influence the terms of public debate by funding research on public policy. Financial support from corporations and conservative foundations played a critical role in creating and expanding private research centers that issued and sponsored books, studies and reports that challenged liberal and left of center views on public policy. In contrast to advocacy advertising, these efforts were aimed at influencing the views of elites such as politicians, government regulators, academics, and journalists.

The Heritage Foundation, a conservative policy research institute, employed several dozen policy analysts who worked closely with the staffs of sympathetic members of Congress, tracking the progress of particular policy proposals and preparing detailed positions papers on them. The American Enterprise Institute, which became a kind of right-of-center counterpart to the more liberal and older Brookings Institution, released scores of studies, held numerous conferences, and prepared several analyses of legislative proposals—in addition to publishing seven journals and newsletters—primarily focusing on government regulation and tax policy. This research helped contribute to a more skeptical attitude about the role of government and a more positive attitude about the role of markets—first among elites and then among the public as a whole. More liberal research institutes also became more sympathetic to business perspectives.

3. The Debate Over Business Power

During the 1950s and 1960s, the scholarly consensus within both political science and sociology regarded business as an interest group which did not pose any distinctive problems for democratic governance (Truman 1951, Epstein 1969). There were dissenters, but they were a minority voice (Bachrach 1967). During the 1970s and 1980s the intellectual center of gravity of both disciplines began to shift: a considerable body of scholarship now judged ‘the large corporation’s concentration of resources and wealth (to be) an anomaly that upsets the balance between democracy and capitalism’ (Menninger 1985, p. 210).

According to the critics of pluralism, business political influence has two dimensions, one structural and the other instrumental. Structural power refers to the ability of business to shape both the terms of political debate and political outcomes by virtue of its privileged position within a capitalist system. This privileged position in turn has two roots. One is the central role of business in shaping the rate and direction of economic development. According to this analysis, if public policy does not furnish firms with sufficient inducements to invest, or alternatively if it imposes too many restrictions on their ability to accumulate capital, firms will reduce their rate of investment, thus resulting in an economic downturn. Consequently, politicians, knowing that their reelection will be adversely affected by a slowdown in economic growth, will be reluctant to support policies that might antagonize corporate investors.

Since a critical dimension of political power involves control over the political agenda and the ability to define the terms of public debate, the privileged political position of business in capitalist societies also has an ideological dimension. According to this analysis, a capitalist society is characterized by a prevailing ideological consensus that places a wide array of issues and policy alternatives off the political agenda, such as the autonomy of corporate managers, the prevailing distribution of wealth, and private ownership of the means of production—all of which protect business privileges.

While the structural dimension of business power is often exercised in subtle ways, the second, instrumental dimension of business power is more visible. It is reflected in the disproportionate resources that business has available to shape the resolution of issues that actually do come before the political process— resources which give business political advantages enjoyed by no other interest group, or the public as a whole. This dimension of business power became substantially more visible in the 1970s and 1980s as firms devoted increased resources in order to both shift the terms of public debate and affect political outcomes.

3.1 Is Business Privileged?

The claim that business enjoys a privileged political position is closely associated with Charles Lindblom, whose book Politics and Markets represents one of the most important and influential analyses of business political power published since the 1970s (Lindblom 1997). As he argues, capitalism in the USA enjoys considerable legitimacy: no political movement in the USA has seriously questioned private ownership or challenged the central role of markets in distributing wealth and privilege. However, while business certainly benefits from this characteristic of American society, it is not responsible for it. The hegemony of the ‘liberal tradition in America’ is deeply rooted in popular American culture—a culture that has long valued individual self-reliance, limited government, and private property—and which predates the rise of the large corporation (Hartz 1955, McClosky and Zaller 1984).

At the same time, American culture also contains a strong populist dimension, which, although not anti-capitalist, has periodically been expressed in considerable public hostility to the large corporation. During the twentieth century, the USA experienced four reform movements—Populism, Progressivism, The New Deal, and the public interest movement, each of which has effectively challenged a wide variety of corporate prerogatives. Moreover, in other capitalist nations, anti-capitalist movements and political parties on both the left and the right have received considerable public support, which suggests that capitalism does not enjoy equal legitimacy or hegemony in all capitalist societies.

Scholars have challenged Lindblom’s thesis with reference to the USA by citing the ability of nonbusiness constituencies to challenge effectively a wide array of corporate prerogatives during the 1960s and 1970s (Vogel 1987, G. Wilson 1981, J. Q. Wilson 1996). The effectiveness of the challenges to corporate privileges that have surfaced periodically in the USA implies that corporations, like any group of interests, must engage in interest-group politics in order to defend and advance their interests. Sometimes their efforts will be successful and other times they will not. But this does not distinguish them from any other group of interests.

Vogel claims that the power of business has varied considerably over time: it was relatively substantial in the 1950s through the late 1960s, declined through the late 1970s, and then subsequently experienced a resurgence (Vogel 1989). These fluctuations in business political influence are primarily attributed to shifting public perceptions of the performance of the economy: business tends to be more influential when the economy appears to be performing relatively poorly and is less influential when it is relatively prosperous. While this analysis does help account for many of the changes in political influence from the early 1960s through the late 1980s, it cannot account for the 1990s—when economic performance was extremely strong and yet business was able to successfully resist the efforts of the Clinton Administration to increase public social spending and expand medical coverage.

Plotke (1992) argues that the slowdown in growth and the decline in profits during the 1970s was not by itself sufficient to mobilize business politically. What was also required was an alternative vision of political economic relations which both attributed the nation’s economic difficulties to the expansion of government intervention and proposed an alternative model of economic growth and development. This ability to redefine the political agenda provided a referent for business interest formation that in turn made possible the mobilization of large numbers of disparate firms and industries. An important contribution of this perspective is to emphasize the contingent nature of business political preferences, as well as the extent to which business influence both affects and is affected by the terms of public debate.

Mucciaroni (1995) analyzed the factors that affect the ability of particular sectors or firms to maintain the benefits they receive from government. Focusing on developments in four policy areas, namely trade policy, agricultural subsidies, tax expenditures, and economic regulation, over two decades, he concluded that producer-group fortunes have varied considerably both over time and among issue areas. In three of the four policy areas, producers experienced reduced benefits due to changes in both public policy norms and the structure of political decision making.

3.2 Corporate Campaign Contributions

The number of business-sponsored political action committees grew substantially in the 1970s and 1980s. While there were no corporate PACs in 1971, there were more than 1,700 in 1992 and they gave a total of $64 million to congressional candidates. Thanks to the wealth of data available due to federal reporting requirements, few dimensions of business political participation—and power—have been studied as extensively.

One focus of this research has examined the effect of campaign contributions on the voting of legislators, from which different conclusions have been drawn. A series of studies have found that business contributions affected roll-call votes on minimum wage legislation, the debt limit, the windfall profits tax, wage and price controls, trucking deregulation, and legislation affecting auto dealers (Conway 1991). However, a comprehensive study of a number of PACs and congressional voting behavior over an 8-year period found contributions to be rarely related to congressional voting patterns.

According to Wilson, ‘a fair summary of the existing studies (reveals) there is no consistent and systematic evidence showing that PAC contributions, independent of other factors (such as constituency pressures, legislator ideology, and party affiliation), have a significant impact on voting in Congress. Some studies find some effects in some areas, other find no effect in other areas’ (J. Q. Wilson 1996, p. 430). These findings suggest that corporations often make contributions as much to gain access as to influence votes. However, other studies reach a very different conclusion, arguing that campaign contributions do represent a critical source of business power and privilege (Clawson et al. 1992, Ferguson 1995).

The extent to which firms share similar policy preferences, and are able to cooperate to achieve them, has been an important focus on scholarly debate over the political significance of business campaign spending as well as over business political influence in general. Business campaign contributions are often coordinated. For example, in the 1984 election, business contributions went overwhelming to only one candidate in almost every race, while in three out of four congressional races, large corporate PACs have given at least nine times as much to one candidate as the other (Clawson et al. 1992, p. 160).

3.3 The Extent And Significance Of Business Political Unity

This coherence, in turn, reflects not only their common interests, but also a common culture and the extent of structural ties among firms, such as loans from the same banks, sales and purchases from each other, and interlocking boards of directors. ‘Business power derives in part from this ability to achieve political unity on most issues’ (Clawson et al. 1992, p. 160). Another study found economic leverage between industries to be associated with similar patterns of donations (Mizuichi and Koenig 1986). Moreover, the American business community has numerous mechanisms that facilitate cooperation and coordination, especially under the leadership of large firms (Useem 1984).

Other scholars, by contrast, emphasize that while ‘corporate class consciousness’ does exist in the USA, it only emerges sporadically under unusual circumstances: the American business ‘community’ is more often a community in name only (Vogel 1978). The structure of the American economy is highly fragmented with firms having multiple sources of capital. Moreover, the American system of corporate governance encourages managers to support public policies that directly benefit their firms—even if such policies may not be in the interest of business as a whole. While companies may not typically give to opposing candidates, they nonetheless frequently do have opposing interests.

Many important public policies, such as trade policy, tax policy, health policy, environmental policy, and economic deregulation, divide the business community. A particularly important and long-standing division is between large firms and small businesses, with the latter often frequently opposing the more liberal policy preferences of ‘big business.’ Martin’s study of the politics of human capital investment, including the bitter debate over the expansion of medical coverage in the early 1990s, reveals sharp divisions between large and small firms which precluded the enactment of reforms that arguably would have benefited business as a whole (Martin 2000).

Ironically, the politicization of business that took place during the 1970s has exacerbated the centrifugal tendencies within American business. Because firms have become more politically sophisticated and both able and willing to devote substantial resources to influencing public policy, corporate political strategy has become more closely linked to business strategy. Firms now frequently seek to gain competitive advantages through the use of non-market strategies, which in turn increases the likelihood of policy differences among them (Baron 1995).

4. Conclusion

The latter part of the twentieth century has witnessed a substantial increase in both scholarly and popular studies of business political activity in the USA and the European Union, in large measure because this activity has become more visible. There have also been a few comparative studies of business political participation (G. Wilson 1985, 1990, Bottomore and Brym 1989). However, there remains a dearth of comparative studies of business political power and influence. Scholars who assert that business enjoys a privileged position usually assume that business is equally influential in all capitalist societies, while most empirical studies of business political influence tend to focus on only one country, or even more narrowly on specific policy areas. An important challenge of future scholarship is to compare systematically patterns of business political influence in different capitalist societies.


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