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Politics and Markets: Corporate Money in American National Elections

Published online by Cambridge University Press:  27 January 2009


The current American debate about the relationship between business and government represents the most significant reopening of that issue since the New Deal. The debate is in part about government's role in the economy, but the issue of business's role in politics is being joined as well, joined in fact on several fronts. There are, of course, the polemics of corporations and their critics, in which business is cast alternately as victim and villain. The issue also divides more serious students of American politics and has fostered a wealth of theorizing about the role of the state. Finally, the issue of business influence pervades discussions about campaign finance.

Copyright © Cambridge University Press 1986

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1 Levitt, Compare Theodore, ‘Why Business Always Loses’, Harvard Business Review, XLVI (1968), 81–9Google Scholar; and Mintz, Morton and Cohen, Jerry S., America Inc. (New York: Dial Press, 1971).Google Scholar

2 Lindblom, Compare Charles E., Politics and Markets (New York: Basic Books, 1977), Chap. 13Google Scholar, and Wilson's, James Q. review of that book, Wall Street Journal, 11 01 1978, p. 14.Google Scholar See also Wilson, Graham K., Interest Croups in the United States (Oxford: Clarendon Press, 1981), Chap. 4.Google Scholar

3 For a review of this scholarship see Useem, Michael, The Inner Circle (Oxford: Oxford University Press, 1984), Chap. 1.Google Scholar

4 See Malbin, Michael J. and Skladony, Thomas W., ‘Appendix: Selected Campaign Finance Data, 1974–1982’, in Malbin, Michael J., ed., Money and Politics in the United States (Chatham, N.J.: Chatham House/American Enterprise Institute, 1984), pp. 277312.Google Scholar

5 On this point, see Andres, Gary J., ‘Corporate Involvement in Campaign Finance During the 1970's’, unpublished doctoral dissertation, University of Illinois at Chicago, 1982.Google Scholar

6 Adamany, David, ‘PACs and the Democratic Financing of Polities’, Arizona Law Review, XXII (1980), 569602Google Scholar; Jessup, David, ‘Can Political Influence be Democratized? A Labor Perspective’, in Malbin, Michael J., ed., Parties, Interest Croups, and Campaign Finance Laws (Washington, DC: American Enterprise Institute, 1980).Google Scholar

7 Frendreis, John P. and Waterman, Richard W., ‘PAC Contributions and Legislative Behavior: Senate Voting on Trucking Deregulation’Google Scholar, prepared for delivery at the 1983 Meeting of the Midwest Political Science Association, Chicago; Ginsberg, Benjamin, The Consequences of Consent: Elections, Citizen Control and Popular Acquiescence (Menlo Park. Calif.: Addison-Wesley, 1982).Google Scholar

8 Elizabeth Drew expresses these concerns clearly when she frames the question: ‘Why is all this money floating about? What do investors expect? At a minimum they expect access, but access is simply the required entry ticket for getting something done.’ Politics and Money (New York: Macmillan, 1983), p. 77.Google Scholar

9 Chappell, Henry W. Jr., ‘Campaign Contributions and Congressional Voting: A Simultaneous Probit-Tobit Model’, Review of Economics and Statistics, LXIV (1982), 7783CrossRefGoogle Scholar; Chappell, , ‘Campaign Contributions and Voting on the Cargo Preference Bill: A Comparison of Simultaneous Models’, Public Choice, XXXVI (1981), 301–12CrossRefGoogle Scholar; Kau, James B., Keenan, Donald and Rubin, Paul H., ‘A General Equilibrium Model of Congressional Voting’, Quarterly Journal of Economics, XCVII (1982), 271–93CrossRefGoogle Scholar; Kau, James B. and Rubin, Paul H., Congressmen, Constituents, and Contributors (Boston: Martinus Nijhoff, 1982)CrossRefGoogle Scholar; Silberman, Jonathan I. and Durden, Garey C., ‘Determining Legislative Preferences on the Minimum Wage: An Economic Approach’, Journal of Political Economy, LXXXIV (1976), 317–29CrossRefGoogle Scholar; Welch, W. P., ‘Campaign Contributions and Legislative Voting: Milk Money and Dairy Price Supports’, Western Political Quarterly, XXXV (1982), 478–95Google Scholar; and ‘Money and Votes: A Simultaneous Equation Model’, Public Choice, XXXVI (1981), 209–34Google Scholar; and also ‘The Allocation of Political Monies: Economic Interest Groups’, Public Choice, XXXV (1980), 97120.Google Scholar

10 The Federal Election Commission did not provide easily available data about average contributions until the 1982 election. What we have done is to compute the average contribution for those corporate PACs that were large enough in 1980 to be included in the PAC Directory and were also active in the 1982 election. If all corporate PACs were included, the distribution would be skewed even more in the direction of small average contributions. See Weinberger, Marvin and Greevy, David U., The PAC Directory (Cambridge, Mass.: Ballinger, 1982).Google Scholar

11 See Meadow, Robert G., ‘Political Advertising as Grassroots Lobbying: New Forms of Corporate Political Participation’, Social Science Journal, xx (1983), 4963Google Scholar; Sethi, S. Prakash, Advocacy Advertising and Large Corporations (Lexington, Mass.: D. C. Heath, 1977).Google Scholar

12 Esty, Daniel C. and Caves, Richard E., ‘Market Structure and Political Influence: New Data on Political Expenditures, Activity, and Success’, Economic Inquiry, XXI (1983), 2438CrossRefGoogle Scholar; Salamon, Lester M. and Siegfried, John J., ‘Economic Power and Political Influence: The Impact of Industry Structure on Public Policy’, American Political Science Review, LXXI (1977), 1026–43.CrossRefGoogle Scholar

13 Pertschuk, Michael, Revolt Against Regulation (Berkeley: University of California Press, 1982), p. 59.Google Scholar

14 Useem, , The Inner Circle, p. 140.Google Scholar

15 Handler, Edward and Mulkern, John R., Business in Politics: Campaign Strategies of Corporate Political Action Committees (Lexington, Mass.: Lexington Books, 1982)Google Scholar; Sorauf, Frank J., ‘Who's in Charge? Accountability in Political Action Committees’, Political Science Quarterly, IC (19841985), 591614.CrossRefGoogle Scholar

16 On the relative lack of class consciousness among American businessmen see Vogel, David, ‘Why Businessmen Distrust Their State: The Political Consciousness of American Corporate Executives’, British Journal of Political Science, VIII (1978), 4578.CrossRefGoogle Scholar

17 Vogel, , ‘Why Businessmen Distrust Their State’, p. 59.Google Scholar Here Vogel draws on the important work of Alfred D. Chandler, Jr., summarized recently in ‘Government Versus Business: An American Phenomenon’, in Dunlop, John T., ed., Business and Public Policy (Cambridge, Mass.: Harvard University Press, 1980), pp. 111.Google Scholar

18 Some Democratic office-holders have gone out of their way recently to support the new politics of capital formation and deregulation. Thus, another possible strategy might be to use campaign contributions as one way of winning and keeping friends of business in both parties. On the case of one member of the House whose conversion from a ‘labour Democrat’ to a ‘business Democrat’ was allegedly helped along by generous contributions from corporate PACs see Farney, Dennis, ‘A Liberal Congressman Turns Conservative: Did PACs Do It?’ Wall Street Journal, 29 07 1982, p. 1.Google Scholar

19 Reich, Robert B., The Next American Frontier (New York: Times Books, 1983).Google Scholar

20 See, for example, Lilley, William III and Miller, James C. III, ‘The New Social Regulation’, The Public Interest, No. 47 (1977), 4961Google Scholar; Weaver, Paul H., ‘Regulation, Social Policy, and Class Conflict’, The Public Interest, No. 50 (1978), 4563Google Scholar; Vogel, David, ‘The “New” Social Regulation in Historical and Comparative Perspective’, in McCraw, Thomas K., ed., Regulation in Perspective (Cambridge. Mass.: Harvard University Press, 1981), pp. 155–86.Google Scholar

21 Lilley, and Miller, , ‘The New Social Regulation’, p. 53.Google Scholar

22 See MacAvoy, Paul W., The Regulated Industries and the Economy (New York: W. W. Norton, 1979), Table 1.2.Google Scholar

23 Bardach, Eugene and Kagan, Robert A., eds, Social Regulation: Strategies for Reform (San Francisco: Institute for Contemporary Studies, 1982)Google Scholar; Lave, Lester B., The Strategy of Social Regulation: Decision Frameworks for Policy (Washington, DC: The Brookings Institution, 1981).Google Scholar

24 Wilson, James Q., ed., The Politics of Regulation (New York: Basic Books, 1980).Google Scholar

25 The term ‘iron triangle’, still frequently used in political science, may be of limited value in describing the policy process. Wilson's terminology is more appropriate. See Wilson's discussion of ‘client polities’ and ‘interest group polities’ in his The Politics of Regulation, Chap. 10.

26 Dodd, Lawrence C. and Schott, Richard L., Congress and the Administrative State (New York: John Wiley, 1979).Google Scholar

27 Vogel, , ‘The “New” Social Regulation in Historical and Comparative Perspective’, p. 174.Google Scholar

28 Marcus, Alfred A., The Adversary Economy: Business Response to Changing Government Requirements (Westport, Conn.: Quorum Books, 1984), p. 42Google Scholar, emphasis deleted. See also Heclo, Hugh, ‘Issue Networks in the Executive Establishment’, in King, Anthony, ed., The New American Political System (Washington, DC: American Enterprise Institute for Public Policy Research, 1978), pp. 87124Google Scholar; Jordon, A. Grant, ‘Iron Triangles, Wooly Corporatism, or Elastic Nets: Images of the Policy Process’, Journal of Public Policy (1981), 95125.Google Scholar

29 MacAvoy, Compare, The Regulated Industries and the Economy, Chap. 2Google Scholar, and Thompson, Fred and Jones, L. R., Regulatory Policies and Practices (New York: Praeger, 1982), Table 3.5.Google Scholar Most observers agree on the relative effects of economic regulation across different industries; agreement upon its precise extent is somewhat more difficult.

30 MacAvoy, , The Regulated Industries and the Economy, p. 88.Google Scholar

31 Mullin, Roger W. Jr., ‘The Adversary Society’, in Benton, Lewis, ed., Private Management and Public Policy (Lexington, Mass.: Lexington Books, 1980), p. 133.Google Scholar

32 See Clark, Timothy B., ‘How One Company Lives with Government Regulation’, National Journal, 12 05 1979, pp. 772–9Google Scholar; Mosher, Lawrence, ‘Big Steel Says It Can't Afford to Make the Nation's Air Pure’, National Journal, 5 07 1980, pp. 1088–92.Google Scholar

33 Marcus, , The Adversary Economy, p. 36.Google Scholar

34 Marcus, , The Adversary Economy, p. 36.Google Scholar

35 MacAvoy, , The Regulated Industries and the Economy, p. 24.Google Scholar

36 Business response to the regulations of OSHA especially follows in this vein. For instance, the foundry industry's reaction to a 1977 OSHA program, which was aimed at reducing worker injury rates, reportedly was shaped as much by the manner and presumption of OSHA personnel – termed ‘overzealous’, ‘harassing’, ‘punitive’ – as by the economic costs involved. See Mullin, , ‘The Adversary Society’, pp. 134–7.Google Scholar A similar mistrust and hostility is seen, as well, in corporate attitudes toward EPA regulations. In the words of an official from a leading chemicals producer: ‘If a trout dying of old age staggered up onto the shore, and if we were dumping water in that stream, it would automatically be [our] fault.’ Quoted in Clark, , ‘How One Company Lives With Government Regulation’, p. 776.Google Scholar

37 Schelling, for example, suggests that ‘often measures that perforce increase business costs (or internalize costs) turn out to be neutral or even beneficial to business profits’. Leone and Jackson suggest that firms may be most concerned not with the effects of regulation on their industry in general, but with how regulation will affect their position in the industry. Schelling, Thomas C., ‘Command and Control’, in McKie, James W., ed., Social Responsibility and the Business Predicament (Washington, DC: The Brookings Institution, 1974), pp. 79108Google Scholar; Leone, Robert A. and Jackson, John E., ‘The Political Economy of Federal Regulatory Activity: The Case of Water-Pollution Controls’, in Fromm, Gary, ed., Studies in Public Regulation (Cambridge, Mass.: MIT Press, 1981).Google Scholar

38 Vogel, , ‘The “New” Social Regulation in Historical and Comparative Perspective’.Google Scholar

39 See Marcus, , The Adversary Economy, p. 12.Google Scholar Marcus provides a categorization of industries subject to minimum and maximum levels of both sorts of regulation.

40 Malbin, and Skladony, , ‘Appendix: Selected Campaign Finance Data’.Google Scholar

41 The data set used in this analysis was developed from the data files available on the Federal Election Commission's 1979–80 and 1981–82 candidate and non-party committee data tapes. These files, which are huge (79,220 records for 1979–80 and 95,271 records for 1981–82) and remarkably detailed, summarize the transactions between every candidate and every political action committee in the election cycle. We used these files to obtain aggregated information for each committee. This data set was augmented with information about the Standard Industrial Codes of PACs' parent corporations, which we compiled from Weinberger and Greevy, The PAC Directory. These codes were used as the basis for determining the effects of industry on patterns of spending. For each PAC and SIC code, a value of one was assigned if the PAC's parent resided in that industry; otherwise the PAC was scored zero for that particular code. Three dependent variables – percentage spent on Republican non-incumbents, percentage spent on Republican incumbents, and percentage spent on Democratic incumbents – were regressed on the industry dummy variables.

42 Eismeier, Theodore J. and Pollock, Philip H. III, ‘Political Action Committees: Varieties of Organization and Strategy’, in Malbin, Michael J., ed., Money and Politics in the United States: Financing Elections in the 1980's (Chatham, NJ: Chatham House/American Enterprise Institute, 1984): pp. 122–41Google Scholar; Eismeier and Pollock, The Geopolitics of PACs', paper delivered at the Annual Meeting of the Midwest Political Science Association, The Palmer House, Chicago, Illinois, April 1985. In the regressions of Tables 3–6, five locations – four geographic regions plus Washington, DC – are measured by these dummy variables: EAST, PACs located in Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, or Vermont; MID, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, or Wisconsin; WEST, Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, or Wyoming; SOUTH, Alabama. Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, or West Virginia. Each PAC was coded with the value of one for its region and zero on all the other regional dummies. Spending levels for PACs based in Washington, DC, of course, are measured by the intercepts of the regressions.

43 Since all allocations for each PAC must add up to 100 per cent, it is unnecessary to present the results from four regressions. The coefficients for Democratic non-incumbents are implied by the three we have presented: the industry coefficients must sum to zero across all allocations, and the intercepts must sum to one. It is clear, too, that little practical advantage would be served by presenting four sets of coefficients, since Democratic non-incumbents received scant attention from corporate PACs in either election – most of the industry coefficients sum to zero across the three categories presented in Tables 3–6. Separate regressions were also run for Republican challengers and Republican open-seat candidates with results that did not differ materially. For the sake of simplicity we collapsed the two candidate categories into one.

44 Gopoian, David J., ‘What Makes PACs Tick? An Analysis of the Allocation Patterns of Economic Interest Groups’, American Journal of Political Science, XXVIII (1984), 259–81CrossRefGoogle Scholar; Epstein, Edward M., ‘PACs and the Modern Political Process’, in Bock, Betty, Goldschmid, Harvey J., Millstein, Ira M. and Scherer, F. M., eds, The Impact of the Modern Corporation (New York: Columbia University Press, 1984), 399496.Google Scholar

45 On the politics of oil money, see Drew, , Politics and Money, Chap. 7.Google Scholar

46 Of course, part of this dramatic change is accounted for by the fact that there were more Republican incumbents running in 1982. Yet even when candidate numbers are controlled for by dividing the percentage of total corporate PAC spending to each type of candidate by the percentage of all candidates that type comprises, differences between the 1980 and 1982 election are still apparent. For the House the ratios were: Republican incumbents, 1·84 in 1980 and 2·20 in 1982; Republican open-seat candidates, 1·70 and 1·29; Republican challengers, 0·78 and 0·43; Democratic incumbents, 1·17 and 1·24; Democratic open-seat candidates, 0·57 and 0·43; Democratic challengers, 0·06 and 0·05. For the Senate the ratios were: Republican incumbents, 1·36 in 1980 and 2·46 in 1982; Republican open-seat candidates, 0·75 and 3·04; Republican challengers, 1·88 and 0·59; Democratic incumbents, 1·00 and 0·91; Democratic open-seat candidates, 0·14 and 0·22; Democratic challengers, 0·10 and 0·06.

47 See Jacobson, Gary C., ‘Congress: Politics after a Landslide without Coattails’, in Nelson, Michael, ed., The Elections of 1984 (Washington, DC: Congressional Quarterly Press, 1985), p. 218.Google Scholar

48 Jacobson, Gary C. and Kernell, Samuel, Strategy and Choice in Congressional Elections (New Haven, Conn.: Yale University Press, 1981), p. 38.Google Scholar

49 Jacobson, and Kernell, , Strategy and Choice in Congressional Elections, p. 39.Google Scholar

50 Jacobson, and Kernell, , Strategy and Choice in Congressional Elections, pp. 40–1.Google Scholar

51 For this analysis, of course, we focus only on PACs that were active in both elections. A few PACs were active in both cycles but gave equal proportions to two or more types of candidates and thus were excluded. Total N = 724 for House elections; N = 658 for the Senate.

52 Jacobson, and Kernell, , Strategy and Choice in Congressional Elections, p. 39.Google Scholar

53 Jacobson, and Kernell, , Strategy and Choice in Congressional Elections, p. 40.Google Scholar

54 As deputy assistant to the President for political affairs Lee Atwater describes, the power of suggestion may be quite strong: ‘We have a full-time PAC operation at the Republican National Committee, under Rick Shelby. A lot of PAC money will be pumped into targeted races toward the end – between seventy-five and two hundred and fifty thousand… The congressional campaign committee and the Republican National Committee are having meetings with every PAC in town and saying, “Here's the targeted list sanctioned by the RNC, the congressional committee, and the White House”.’ (Quoted in Drew, , Politics and Money, pp. 2425.Google Scholar) Drew adds that similar briefings are held in other cities. These activities, combined with the cue-giving of such bellwether PACs as Business Industry Political Action Committee (BIPAC), may create an important network through which an army of pliable corporate PACs could be led by political professionals.

55 Schelling, Thomas C., ‘On the Ecology of Micromotives’, The Public Interest, No. 25 (1970), 5998, p. 89.Google Scholar

56 On the 1982 election, see Drew, , Politics and Money, pp. 48–9.Google Scholar In 1984 Democrats combined the marketing of their own incumbents with hints that the firms of PACs that supported Republican challengers might face a hostile audience in a Democratically controlled House in 1985. See Ehrenhalt, Alan, ‘GOP Challengers Find PACs Wary this Year’, Congressional Quarterly Weekly Reports (22 10 1984), p. 2763.Google Scholar On the circumstances of the 1984 elections, which may have led some corporate PACs of a Republican stripe to adopt a less adventuresome strategy than they did in 1980, see Jacobson, , ‘Congress: Politics After a Landslide Without Coattails’.Google Scholar

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