Friday, November 2, 2012

Obama, Romney and Mancur Olson

I posit that today in America the debates, the stump speeches and the TV ads all have almost nothing to do with how a given candidate actually governs. The stakes are simply so high that one should expect that what is really important is not the hyper-marketing that each candidate projects (now very often differing from audience to audience) but rather commitments made to those expending large sums to propel "their" candidate into office. The voting public has no ability to force elected officials to respect campaign rhetoric and promises. In today's money driven political system the best way to determine what a candidate intends to do if elected is to focus on the money behind the candidate. Large contributors hold enforcement mechanisms that the public does not.

First, almost always politicians must return to the money trough again and again. On the other hand, the public has a notoriously short memory and 85-90 percent of the vote is locked-in to either the GOP or the Dems. So, most voters will stick with their guy regardless of whether the candidate is an etch-a-sketch.

Second, over time these candidates become more dependent upon big money interests than mere campaign contributions may reveal. Their entire social and professional network will ultimately consist of those who will help them most--and that inevitably means well-connected wealthy people like CEOs. After all, its fun to hob-knob with wealthy folks, and who wants to alienate their rich friends?

Third, it hard to overstate the impact of the Citizens United decision. For example, Chevron just gave a pro-GOP Super PAC $2.5 million. Corporate titans can now make or break politicians, their friends, their family and their followers. Few would risk the wrath of the new potentates.  They now have the power to crush opponents right up to election day.

All of this gives our so-called leaders powerful incentives to tell the voting public whatever they want to hear while doing what is needed to assure the continue flow of corporate patronage for themselves and their pals.

Rather than thinking of politicians as autonomous agents with the power to unilaterally change the fundamentals of our society, we should understand that the higher they reach on the political ladder the more likely it is that they succumb to clear incentives to guard the interests of the most privileged in our society, especially under conditions of high inequality. This is the basic teaching of Mancur Olson. As more wealth is concentrated in fewer hands the costs of organizing politically plunge because fewer numbers means lower organizational costs and less temptation toward free riding. Notably, Olson suggested that in a democracy the voters can resist the tendency of special interests to subvert law and regulation for profit (and incidentally destroy capitalism by rigging the system). Voters need only to recognize the negative economic influence of concentrated interests, and vote against the candidate most beholden to such interests.

We live in the age of a new corporatocracy dominated by CEOs. And, as the chart below makes clear, today CEOs of large public firms make more money and control more wealth than any class of royalty from our feudalist past:

Basically since the mid-1980s, CEO compensation has increased by a factor of 10 in real terms. In 2011, executive compensation set new records. So, the real question facing voters today s whether they vote for candidates supported more by big money or candidates supported less by big money. Or, stated differently, the question is which candidate is beholden to which CEOs.

I made this very argument on the NYU Press blog where I tied my forthcoming book, Lawless Capitalism, in a concrete way into the election. My argument there focused on the financial sector which expended $52,000,000 to elect Mitt Romney (compared to $19 million for Obama). So, big finance is behind Romney loud and clear. All voters in favor of more lax financial regulation and letting the megabanks run amok again should definitely vote for Romney.

The next most important difference in funding sources is Big Oil. Here, Romney holds a 5 to 1 fundraising advantage. So what would Big Oil CEOs want? High gasoline prices lead to high CEO compensation. Naturally then CEOs of big oil companies want price spikes in gasoline.

Obama's number one industry is education where he holds a 6 to 1 fundraising advantage over Romney. Both Harvard and the University of California rank on Obama's top 5 sources of support. (Romney's top 5 supporters are all megabanks). Does this mean more money for basic research, more financial aid for students, loan forgiveness programs or something else? Hard to say. It could just be a bunch of professors expressing their own political preferences.

But one thing is certain. Romney is funded more by large contributors and Obama is funded more by small individual contributors, as is clear from this webpage.

Further, it is certain that President Obama will not need to raise any more money after November 6.

It is therefore fair to say that Governor Romney is the candidate of big corporate money, especially the megabanks and Big Oil. He is the candidate of the CEOs.

1 comment:

  1. Agreed. I was surprised at the number of law faculty--highly educated, tough-minded, and cynical, supposedly--who believed and/or continue to believe that President Obama could "unite" the country. Perhaps I dismissed such assertions as rhetoric because I believe no matter how much one person extends the olive branch, divisions over faith-based, race-based and economic-based issues will not heal in a mere 4 years. Will the divisions heal in 8 years? Probably not. But hopefully the nation is on the road to health.

    In Governor Romney’s case, the big money supporters’ agenda seemed clear. Let’s see how much President Obama’s big money supporters’ attempt to push forward an antiregulatory agenda.