Why Trump won in 2016 and lost in 2020

Donald Trump would have won the 2020 election if not for the Covid pandemic and the Black Lives Matter protests, according to political scientist Thomas Ferguson.

He explained why in an academic paper he co-wrote in November and an interview a couple of days ago on Paul Jay’s theAnalysis podcast.

Ferguson is known for his “investment theory of political parties.”  He sees American politic as a conflict between powerful economic interests, not between voting blocs.  The economic interests select and invest in candidates; the public gets to choose between the candidates the investors select.   

Trump was on the verge of losing in 2016 and was saved by a last-minute surge in campaign funding by wealthy donors who feared he would take the Republican Party down with him, Ferguson said.

Trump got campaign support from the oil and gas, coal mining, timber, agri-business industries, which he favored, The Koch brothers, for example, get their wealth from energy and other resources industries. 

I notice that these industries are based in parts of the USA in which states are over-represented in the Senate and Electoral College in proportion to their populations.  This was a big factor in 2020.

While Trump appealed to racial and nativist prejudice, Ferguson said this did not determine the outcome.

His protectionist trade policies were popular with industrial workers as well as manufacturing CEOs.  He got support from farmers because his administration compensated them for losses as a result of trade wars with China.  

All these things, together with the relatively good performance of the economy, put Trump in a good position to win in 2020, Ferguson said.

But his ineffective response to the Covid crisis cost him support from corporate executives and also college-educated Republicans who otherwise might have voted for him out of party loyalty.

The voters’ response to the 2020 strikes and protests movements is interesting and not easy to explain.  Usually, when there are civil disorders, there is a backlash in favor of the police and law-and-order.  This time was different.

Ferguson’s analysis showed that there was a correlation between counties in which there was an upsurge in Black Lives Matter, environmental and others kinds of protests, and counties in which there was strong support for Joe Biden.  The only exception to this were counties with large Hispanic populations.  Also, there was no correlation between Biden voting and wildcat labor strikes.

The point is that it is premature to count out Donald Trump and his followers.  President Biden and the Democrats need to do more than just be anti-Trump if they are to retain office.  They can’t afford to let the economy falter or Covid spread. [*]

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Is the USA a democracy?

Paul Jay asked Ferguson whether he thinks the USA is a democracy.  Ferguson said democracy is an “honorific” term, not an analytical term.  No voting system, in and of itself, can empower the public to overcome the enormous concentration of wealth that exists in today’s USA, he said.

He said wage-earners in the USA and other rich Western countries do still have more rights than they do in Russia or China (although Ferguson acknowledged China’s economic achievements.)

And political disorder in the United States has not yet reached the point as it did in the late Weimar Republic, where political killings by para-military militias were an almost daily occurrence.

It’s still the economy, stupid

Bill Clinton and Barack Obama were elected President primarily because of the economic failures of their predecessors.  Each of them faced a backlash in the midterm elections following their victories, at least partly because of their economic policies.

The same thing will happen to Joe Biden unless he can act decisively and quickly to meet the impeding economic and pandemic crises, according to political scientist Thomas Ferguson in an interview with podcaster Paul Jay. 

Clinton ran in 1992 on the slogan, “It’s the economy, stupid.”  But during his two years, he did little to improve the economy.  He pushed through the North American Free Trade Agreement, which had been part of the Reagan agenda and was opposed by organized labor.  He failed to get Congress to even consider a health insurance reform bill.  Republicans won control of both houses of Congress in 1994

Obama was elected during the 2008 recession.  His administration rescued failed banks, but did not fully implement a law to rescue victims of foreclosures.  Republicans won control of the House of Representatives in 2010.

The decisive factor in the 2016 election was the voters, of all races, who supported Obama in 2008 and 2012, but either voted for Trump and declined to vote at all in 2016. 

The notion that racism and sexism were the primary factors driving the Trump vote is not borne out by the data, he said.  Economics was very important too.  Trump’s promise to revitalize manufacturing and impose tariffs on imports gave him just enough votes to squeeze out a majority in key industrial states.

The rural working-class found their lives a little better under Trump and don’t believe the Democrats care about them.  Some of this was the momentum of the economic recovery that had begun under Obama.  Much of it, according to Ferguson, was due to the Federal Reserve System artificially pumping up the economy by holding down interest rates.

He said polls indicate Biden’s margin of victory came from voters in the income brackets between $100,000 and $200,000—not the ultra-rich, but not the wage-earning class, either—who are uncertain about their economic future.  Biden’s message was reassurance and a promise of economic stability.

Trump’s gains among Mexican-American voters along the Texas border were due to so many of them working in the oil and gas industry, he said; some of them found construction work in building Trump’s border wall.

The received wisdom is that big business leaders supported Biden over Trump because they thought Trump is too erratic.  Biden did get a lot of campaign contributions from Wall Street, but much of corporate America supported Trump—the oil and gas industry, the pharmaceutical industry and pollution-heavy industries such as pulp and paper making.

The Democratic Party never was a labor party

Political scientist Thomas Ferguson is the leading U.S. expert on money in politics.  In his book, Golden Rule: the Investment Theory of Party Competition and the Logic of Money-Driven Political Systems, he argued that national elections are always about conflicts between different economic interests, never about conflicts between working people and business in general.

There has never been a strong U.S. labor party along the lines of the British Labor Party or French Communist Party, which is explicitly anti-capitalist and pro-labor.

Political campaigning in the United State is expensive and, paradoxically, democratic reforms such as direct election of Senators and nomination of candidates through political primaries, have made it more expensive. 

Senator Bernie Sanders tried to create an alternative financing plan based on small donors.  It was remarkable that he got as far as he did, but he was crushed in the end.

This does not mean that issues on national elections are meaningless.  Rank-and-file voters have a stake in issues such as loose money vs. tight money, public works projects vs. budget austerity, free trade vs. protectionism, monopoly vs. anti-trust policy, etc.  It is just that none of these issues get traction unless there is a business interest behind it.

Even the Populist Party of the 1890s, which sought to unite farmers, wage-earners and small-business owners against corporate monopoly, got the support of silver mining interests, based on its plan to increase silver money, and it got its strongest support in mining states.

Franklin D. Roosevelt’s New Deal never was anti-business, Ferguson said.  Organized labor did have a seat at the table of power during FDR’s administration, which is more than it had before or since, but it was never the dominant power.

Roosevelt took power in 1933 when the U.S. economy was in a state of collapse.  Many Americans, including representatives of big business, were willing to grant him the powers of a dictator.

He pushed through the National Recovery Act, aka “the first New Deal,” which attempted to stabilize the economy by organizing it as government-regulated monopolies, which prices and wages fixed by government.  The NRA failed, and also was rejected as unconstitutional.

FDR also pushed legislation for public welfare and to empower labor unions, such as the new CIO (Committee for Industrial Organization, then Congress of Industrial Organizations).  Business interests were split on this program.  They didn’t want to give high wages to their employees, but they did want their customers to have high disposable incomes.

In general, Ferguson said, labor-intensive business interests opposed the New Deal and capital-intensive industries, including the domestic oil industry, supported it.

The business community also split over free trade and protectionism.  One of FDR’s first actions was to take the U.S. off the gold standard, which meant a fall in the exchange rate for the U.S. dollar against foreign currencies.  That was bad for banks and other lenders, but good for exporters, again including the oil industry.

Roosevelt got authority to negotiate reciprocal trade agreements with individual foreign countries.  The U.S. lowered its tariffs in exchange for foreign countries lowering theirs.  Ferguson said this was highly popular among businesses that sold abroad.

The truth about the New Deal

A little long for something to watch on a computer screen, but worth watching even if you quit about the first 20 or 20 minutes.

[Added 10/21/2020]  The political scientist Thomas Ferguson is the foremost U.S. analyst of money in politics.  In his book, Golden Rule: the Investment Theory of Party Competition and the Logic of Money-Driven Politics, he said that Democrats and Republicans primarily represent competing business interests and only incidentally competing sets of voters.

Campaigning costs so much that nobody can run for high public office without the backing of monied interests or being extremely rich themselves.  So the there is an informal “money primary” before candidates put themselves before the voters in the official primaries.

But even the voter choice of competing business interests is partly an illusion, according to Ferguson.   In national elections, with rate exceptions, the candidate that spends the most money wins. 

For what it’s worth, Joe Biden at this moment is outspending Donald Trump, which he might not have been able to do if he had gone against Wall Street, Silicon Valley, the fossil fuel industry and other entrenched business interests.

Bernie Sanders, by turning to small donors, tried to create an alternative to funding from big-money interests.  Just because he took this approach, he was long treated as a fringe candidate by major newspapers.

Sanders and many other progressives look back to the Franklin D. Roosevelt’s New Deal as a time when government actually represented working people.  Ferguson, in this interview, says the truth is more complicated.

Unlike in Germany, France, Britain and many other European countries, labor unions in the United States were never powerful enough to have their own political party.  FDR’s New Deal was a coalition of business interests that benefited from free trade, such as the oil industry, and desired a revival of consumer spending more than they objected to social welfare spending.

The power of labor unions during the 1930s and 1940s came primarily from their success in organizing previously unorganized workers, Ferguson said.  The Wagner Act and other pro-labor laws helped, but would not have empowered labor by themselves.

The New Dealers, for all their concessions to racism and their other flaws and compromises, did enact programs of great and continuing benefit to all Americans, including African-Americans. 

But the alignment of political forces today is different from what it was in the 1930s, Ferguson noted.  For example, international economic competition was not important in the 1930s, but it is a vital issue today.  History may rhyme, but it doesn’t repeat.

The economic consequences of the lockdown (3)

The best thing I’ve read so far on this topic is an interview of Thomas Ferguson by Paul Jay.

They’re both interesting characters. Ferguson is a professor emeritus of political scientist and the best U.S. expert on money in politics.

Paul Jay

Paul Jay, along with Sharmini Perez, is a co-founder of The Real News Network, an alternative web-based news site.  Last summer they left or were ejected from the organization for reasons unknown to the public.  Jay has started a new podcast called theAnalysis.news.

In the interview, Ferguson made the point that, in the recent bailout, Congress chose to bail out big businesses with the expectation that this would enable them to hire laid-off and idled workers.

Instead, he said, most of the CEOs decided to keep the money and let working people fend for themselves.  Ferguson said it would have been far better to provide individual relief.  They would have spent money and helped to revive the economy when the lockdown ended.

Congress also should have provided aid to cash-strapped state, county and municipal governments, he said.  One economic effect of the lockdown has been to choke off tax revenue they need to provide essential services.  The federal government, unlike the states, has the power to create money and isn’t limited, as many states are, by constitutions requiring balanced budgets.

LINKS

Big Business Takes Cash As Workers Laid Off, States and Cities Go Bust, an interview of Thomas Ferguson by Paul Jay for theAnalysis.news.  A bit long, but comprehensive and highly recommended.

2016 and all that

Populism is the expression of the righteous anger of the common people against injustice or perceived injustice.

Right-wing populism is the re-direction by the holders of wealth and power away from themselves and toward scapegoats.

The great political scientist Thomas Ferguson and his team of researchers recently published new studies of how right-wing populism operated in the 2016 national elections.

Several studies assert that supporters of Donald Trump are motivated primarily by racial anxiety and not be economic anxiety.  The conclusion they draw is that the Democratic Party does not have to become more populist in order to win elections.

Ferguson’s team says the truth is more complicated.  Racial anxiety and economic anxiety are not all that separate, they wrote.

Donald Trump told his supporters that their economic woes were due to immigration and foreign trade, and promised to fix both.  These are legitimate economic issues.

Many working people feel, for understandable reasons, that competition with foreign workers—both workers in foreign sweatshops and unauthorized immigrants in the USA—is driving down thrown wages.  I have to say that, as President, Trump has tried to keep his promises to try to restrict immigration and imports.  He has acted in a crude and counterproductive way, but he has acted.  These issues can no longer be ignored and will have to be rethought.

That’s not to deny that Trump also has tried to stir up animosity against African-Americans, Mexicans and Muslims.  But he also promised to launch a trillion-dollar infrastructure program, protect Social Security and Medicare and replace Obamacare with something better.

2016 and the fight against the money power

Political scientist Thomas Ferguson has spent his career tracing the influence of money on U.S. national politics.   In this interview from last week, he said the big story of the 2016 election is that it is politically possible to defeat big money.

Bernie Sanders raised 60 percent of his funds from small donors, who gave $200 each or less, Ferguson said.  This is unprecedented.  He said Sanders could well have won the Democratic nomination and the general election if he had started earlier and done things differently.

But even in defeat, he said, Sanders showed it is possible to fund a national political campaign without going to the wealthy and corporate donors that the leaders of both political parties depend upon.

Ferguson is noted for his “investment theory of political parties”—that wealthy interests invest in political parties and candidates, and that the only political issues that elections decide are issues on which the big donors disagree or that they don’t care about.

He says there are basically two elections.  There is the informal money election, conducted by big donors, which winnows the field   Then there is the actual vote, which chooses among the candidates pre-selected by the money election.

What Sanders—and also Trump, to an extent—showed is that large numbers of small political “investors” can offset the few big donors.   Sanders was the equivalent of an entrepreneur who funded a start-up with a GoFundMe fundraiser.

Trump himself raised 40 percent of his campaign funds from small donors, which is unprecedented for a Republican, Ferguson said.   But most of that was before he won the Republican nomination.

Starting in August, big money started to roll in—especially from Rustbelt manufacturing interests, who liked Trump’s promise to raise tariffs against foreign imports, and also from such far-right figures as Sheldon Adelson, Peter Thiel and Robert and Rebekah Mercer.

Hillary Clinton received most of the donations that came from Wall Street and the defense and aerospace industries.

Thomas Ferguson on the Democrats’ future

Political scientist Thomas Ferguson is always worth reading and listening to.  In this interview with Paul Jay of the Real News Network, he said the Democratic formula of “Wall Street plus identity politics” is dead.

That formula is to take Wall Street money and then champion the interests of women and minorities in ways that don’t threaten Wall Street’s profits.

The problem from the standpoint of the Democrats is that so many people—including women and minorities—are more worried about keeping their jobs, earning a decent wage and paying their bills than they are about Donald Trump’s offensive way of speaking.

But it’s hard to do anything about jobs, wages and debt and stay in the good graces of big donors.

He said Donald Trump could be a popular and successful President if he follows through on certain of his campaign promises, particularly the one to begin a major public works—that is, infrastructure—program.

Is there a chance he would do that?  Too soon to say, Ferguson said.

LINKS

Democrats, Trump and the Ongoing Dangerous Refusal to Learn the Lesson of Brexit by Glenn Greenwald for The Intercept.  (Hat tip to Tim Mullins)

Three good articles about the political scene

The U.S. Presidential election campaign offers a choice between a candidate of the status quo, and a candidate who represents a leap in the dark.  Here are three good articles about why voters might risk a leap in the dark.

Defying the Investors: Thomas Ferguson on how voter alienation from corporate candidates produced this year’s dizzying election results, an interview in Jacobin magazine.  (via Mike the Mad Biologist)

The Terrible Cost to Democrats and Our Nation of Ignoring Tom Frank’s Warnings by William K. Black for New Economic Perspectives (via naked capitalism)

Why Trump Wins: He knows border wars have replaced culture wars by Scott McConnell for The American Conservative

The most costly off-year election in U.S. history

Some $3.67 billion was spent on the 2014 U.S. election campaigns up until 60 days before the election.  When the final figures are in, it will be more than $4 billion—making 2014 the most expensive mid-term election year in history.

Political scientist Thomas Ferguson, an expert on money in politics, explained the significance of that fact in an interview for the Real News Network.  My takeaways from the interview:

• The big money went predominantly to the Republicans, but Democrats got a lot, too.
• Republicans benefited from the low voter turnout, which was the lowest in many years.  They won with the support of probably 18 to 20 percent of American voters.
• The low turnout reflected disillusionment with both parties, but also, to an unknown degree, artificial difficulties in voting aimed at minorities, young people and poor people.
• The right-of-center Democratic leaders are Republicans light, and are more concerned with keeping control of the Democratic Party than defeating the Republicans.
• The election was a rejection of the failed economic policies of the Obama administration, but the result will be a return to the similar but more extreme failed policies of the George W. Bush administration.
• Americans are disillusioned with both parties.  American politics is due to get weird.

Tom Ferguson on Piketty and the Democrats

How big money keeps populism at bay

The Democratic Party is in deep trouble going into the 2014 elections, and it’s not solely due, or even mainly due, to gerrymandering, voter suppression or other dirty tricks by Republicans.

Thomas Ferguson

Their main problem is that the Obama administration is five years old, and there has been no economic recovery for the vast majority of Americans.  While Democrats can justly claim that the economic crash is due to the policies of the Bush administration, voters have a right to expect that by now, the Obama administration would have offered an alternative.

Recognizing the problem, President Obama has started talking about income inequality, and trying to re-energize the Democratic base of support — union members, working women, Hispanic-Americans and African-Americans.   The problem for the President and for Democrats generally is how to do this without jeopardizing their support from big-money donors whose contributions they need to win.

This is a tightrope that Obama has been able to walk so far.  The question is how long he can get away with it.

Political scientist Thomas Ferguson, who is known for his “investment theory” of political parties, and fellow academics Paul Jorgensen and Jie Chen recently published an analysis which concluded that the 2012 elections were basically a contest between different factions of the upper 1 percent of income earners.

Nearly two-thirds of itemized contributions to the Obama campaign and more than 70 percent of itemized contributions to the Romney campaign came from donors who contributed $10,000 or more.  Roughly the same breakdowns held for the proportions of total contributions in amounts of $500 or more.  Obama received more small donations than Romney, but both got the bulk of their funds from big donors.

That’s not to say nothing was at stake.  Republican candidates tend to get the support of the oil and gas industry; Democrats the telecommunications and computer industry.  Wall Street shifts back and forth between the two parties, but exercises strong influence over both.

The 2014 congressional elections will be the same, only worse, Ferguson, Jorgensen and Chen predicted, since recent court decisions have removed the last vestiges of restrictions on campaign contributions.

Thomas Frank wrote an eloquent article recently in Harper’s magazine, indicting college-educated progressive Democrats for their passivity and their disconnect from the concerns of working people.  He wrote that they are waiting for the Republican Party to be destroyed by the Tea Party movement, just as in earlier eras they waited for the GOP to be destroyed by George W. Bush, Newt Gingrich, supply-side economics, Watergate and Barry Goldwater.

The Democrats’ problem is not just the power of money.  It is that, for many Democrats, the power of money is not an issue.

Thomas Ferguson on the choice of Paul Ryan

Thomas Ferguson, a political scientist at the University of Massachusetts at Amherst, Boston, is one of the most astute political observers I know about.  He is going to be a regular on the Real News Network.  I’m just now catching up with his first broadcast, which was last Friday.  Here it is.

Click on Paul Ryan – Insider Trading and Attacks on Medicare for a transcript of the broadcast.

Click on The investment theory of politics for my account of Ferguson’s idea that American political parties represent conflicting business interests rather than the public, and that voters only get a choice on issues that don’t affect corporate profits or on which corporate interests are in conflict.  In the post, I review Ferguson’s 1995 book, Golden Rule: the Investment Theory of Political Parties and the Logic of Money-Driven Politics.

Click on Business, not politics, driving nation rightward for my review of Right Turn: the Decline of the Democrats and the Future of American Politics, which Ferguson co-authored with Joel Rogers in 1986.

Unfortunately both books are out of print and a lot of his current writing is in scholarly publications not available on-line, so the Real News Network is doing a good service to the public by giving Ferguson a public platform.

[8/26/12]  I had hoped to post a follow-up interview with Thomas Ferguson this weekend, but it didn’t happen.

A crisis in democratic governance

What to do about a Congress for sale

Congress for sale: The new money game

Big money has always influenced American politics.  But today this power of money has reached heights not seen since the Gilded Age of corruption in the late 19th century.  Political scientist Thomas Ferguson, in a paper entitled “Politicians Never Bowl Alone,” published earlier this year, spelled out how the new money game originated in the 1990s and how it works.

[House Speaker Newt] Gingrich and his leadership team, which included Dick Armey and Tom (“the Hammer”) DeLay …implemented a formal “pay to play” system that had both inside and outside components. 

On the outside, DeLay and other GOP leaders, including Grover Norquist, who headed Americans for Tax Reform, mounted a vast campaign (the so called “K Street Project”) to defund the Democrats directly by pressuring businesses to cut off donations and avoid retaining Democrats as lobbyists.

Inside the House, Gingrich made fundraising for the party a requirement for choice committee assignments.  The implications of auctioning off key positions within Congress mostly escaped attention, as did the subsequent evolution of the system into one of what amounted to posted prices ….

The K-Street project ultimately fizzled.  Big donors were unwilling to give up the power to influence both parties.

By contrast, the changes in House procedures and rules that the Republicans instituted proved durable.   Democrats rapidly emulated the formal “pay to play” system for House committee assignments, leading to a sharp rise in campaign contributions from members of Congress of both parties to their colleagues and the national fundraising committees.  Soon leaders of the Democrats, too, were posting prices for plum committee assignments and chairmanships.  They also centralized power in the leadership, which had wide discretion in how it treated bills and more leverage over individual members.

I don’t think it is a coincidence that the rise of “pay to play” coincided with the financialization of the U.S. economy and the growing concentration of income among 1 percent of Americans.

Congress for sale: Posted prices

Political scientist Thomas Ferguson says that committee assignments and chairmanships in the House of Representatives are not only for sale, they have posted prices, just like in Target or Wal-Mart or Best Buy.

Under the new rules for the 2008 election cycle, the DCCC [Democratic Congressional Campaign Committee] asked rank and file members to contribute $125,000 in dues and to raise an additional $75,000 for the party.  Subcommittee chairpersons must contribute $150,000 in dues and raise an additional $100,000. Members who sit on the most powerful committees …. must contribute $200,000 and raise an additional $250,000.  Subcommittee chairs on power committees and committee chairs of non-power committees must contribute $250,000 and raise $250,000.  The five chairs of the power committees must contribute $500,000 and raise an additional $1 million. 

House Majority Leader Steny Hoyer, Majority Whip James Clyburn, and Democratic Caucus Chair Rahm Emmanuel must contribute $800,000 and raise $2.5 million.  The four Democrats who serve as part of the extended leadership must contribute $450,000 and raise $500,000, and the nine Chief Deputy Whips must contribute $300,000 and raise $500,000. House Speaker Nancy Pelosi must contribute a staggering $800,000 and raise an additional $25 million.

           ==Marian Currinder, Money in the House (2008)

The sequel, according to political scientist Eleanor Powell of Yale, was that half the committee chairs failed to meet their fund-raising goals.  While committee chairmanships and assignments were not solely based on fund-raising benchmarks, those who failed were in jeopardy of losing their seats to more junior House members with more fund-raising prowess.

Business, not public, driving nation rightward

 The political realignment of the Reagan years was a realignment of business interests and not of voter sentiment.  So argued Thomas Ferguson and Joel Rogers, in their 1986 book, Right Turn: the Decline of the Democrats and the Future of American Politics, a book as enlightening now as it was when it was published 25 years ago, because the situation they describe has not changed.

Public opinion polls in the 1980s showed that a majority of voters favored Social Security and Medicare, gave full employment a higher priority than balanced budgets or lower taxes, believed workers have a right to join labor unions, and had no enthusiasm for getting bogged down in foreign wars—as they still do.

How, then, did Ferguson and Rogers explain Ronald Reagan’s landslide victories in 1980 and 1984?  They said this was a reflection of the unpopularity of the Democrats than allegiance to the Republicans.  Jimmy Carter was rejected because he was unable to deal with stagflation and rising oil prices, and because he supported the tight-money program of Federal Reserve chair Paul Volcker, which brought inflation under control by measure Volcker knew would casue a recession.  Walter Mondale was rejected because his only substantive campaign promise was to raise taxes.

If voter sentiment did not change, what caused the Reagan revolution?  Ferguson and Rogers said business interests realigned as a result of rising oil prices and increased international economic competition in the 1970s.

One consequence was a conflict of interest between the oil industry and manufacturing industry, leading to a majority of oil men shifting their allegiance from the Democratic to the Republican party.  Another was a slowing of U.S. economic growth, resulting in a hardening of corporate attitudes toward taxes, labor unions, environmental and health regulation.  In an era when U.S. economic supremacy was unquestioned, these costs could be passed on to consumers; in an era of intensified global competition, this was not possible.  The result of the Reagan revolution and the pro-corporate movement that followed was that the corporate elite received almost all the benefits of what economic growth there was.

Ferguson and Rogers dismiss the idea that the Reagan administration reflected a change in economic philosophy.  If you examine the Reagan policies in detail, they wrote, they consist of payoffs to constituencies, not implementation of a philosophy.  The Star Wars defense plan was a payoff to the aerospace and computer-electionics industries.

The Democrats were unable to challenge this because their party was (as it still is) beholden to Wall Street.  Bankers and financiers fear inflation above all else, because it reduces the value of their assets, and so favor balanced budgets and spending restraint.  This is why Carter supported Volcker and Mondale advocated a tax increase to balance the federal budget, and why Clinton and Obama gave priority to fiscal probity, and why Democrats have a better overall record than Republicans as budget balancers.

The investment theory of politics

I respect honest politicians who do what is right but unpopular.  I understand pragmatic politicians who do what is wrong but popular.   I can understand why politicians refuse to enact laws that are desirable but unpopular.  But what we have now are politicians who are refusing to do things that are obviously necessary and highly popular, such as break up and rein in the “too big to fail” banks.   Why would they do that?

Some light is thrown on this by a book I read recently, Golden Rule: the Investment Theory of Political Parties and the Logic of Money-Driven Political Systems, by a political scientist named Thomas Ferguson.  I became interested in Ferguson’s ideas when I saw him on the on-line Real News Network.

Golden Rule was published in 1995, and incorporates articles published before then, but it is highly relevant.   Ferguson’s analyses of the 1988, 1992 and 1994 elections, with name changes and minor rewrites, could just as easily have been written about the elections of 2004, 2008 and 2010.

Ferguson’s Golden Rule is “to understand who rules, follow the gold.”  This idea is hardly original with him, he did this on a much more granular level than most people.  He contended American politics is about policies—high tariffs vs. free trade, loose money vs. tight money, industrial policy vs. unregulated free enterprise—that some business interests favor and others oppose.

Businesses invest in candidates and political parties, and expect a return on their investment.  Since they have conflicting interests, the public gets to throw its weight onto one side or the other.   But proposals that are adverse to business as a whole don’t get on the public agenda.  According to Ferguson, no political party has ever supported a measure adverse to a business or corporate interest, unless there was some other business or corporate interest behind it.

Ferguson’s research explains a great deal that is otherwise hard to understand—why Bill Clinton, like Barack Obama, ran on a platform of economic growth and then abruptly changed to George H.W. Bush’s priority of bringing down the federal budget deficit.  It is because he could not afford to antagonize Wall Street financial institutions, such as Goldman Sachs.

Rep. Rahm Emanuel once reportedly told his staff:

• The first third of a campaign is money, money and money.
• The second third is money, money and press.
• And the last third is votes, press and money.

By this account, money is six times as important as votes.  That is why there is bi-partisan support for such unpopular policies as the North American Free Trade Agreement, the bank bailouts and “reform” of Social Security.

The influence of corporate wealth is more than just campaign contributions, or even financing right-wing magazines, TV networks, research institutions and advocacy groups.  Wealthy people and organizations have ready access to information that the middle-class voter does not see or even know about.  They understand where their interests lie, and exactly how those interests are affected by governmental action, which is difficult for the average voter to learn. Members of the corporate and financial elite are personally acquainted with members of the political and intellectual elite.  They interact with each other and influence each other, away from the eyes of the public.

Tom Ferguson on money and politics

Tom Ferguson, a professor at the University of Massachusetts and a fellow of the Roosevelt Institute, has a lot of good sense and good insight on politics and the economy.  Here he is in an interview with the Real News network in April.

Contrary to what the caption says, he is a professor of political science, not economics, but his real subject is what use to be called political economy—now public policy affects the economy.