The rise of corporate money in politics

A couple of weeks ago, I heard the former governor and ambassador Jon Huntsman talk about the current state of U.S. politics. He argued that the biggest problem facing America’s democracy is the disproportionate influence of private money on politicians, which he effectively labelled as corruption. This claim was quite surprising. Not so much because it is new (it certainly isn’t), but because it came from a Republican. After all, the supposedly pro-business GOP has always received the lion’s share of corporate donations, a fact that put Mitt Romney at a significant financial advantage in last year’s presidential election.

Marxists tend to argue that democratic governments have always been in the hands of big capitalists, and yet the case of the United States puts this claim into question. The current influence of corporate money on politics in Washington is a distinctly contemporary phenomenon and the culmination of a development that began less than 50 years ago. The founder of modern corporate political activism was Lemuel Ricketts Boulware, vice president of General Electric in the 1940s and 50s. The post-war years were a time when unions were stronger than ever before and Keynesian demand management had pretty much become the consensus choice of economic policy. Boulware perceived this liberal consensus as an existential threat to the very future of American prosperity. Union leaders, he argued, were socialists that prevented the country “from progressing to that better material and spiritual America” of individual freedom.

His response to this threat were a number of management tactics that became known as Boulwarism. As GE vice-president, he rejected any kind of compromise with unions and spread anti-union propaganda among his employees. But, most importantly, he supported conservative politicians such as Barry Goldwater. Ronald Reagan received campaign donations from Boulware in 1966, and the then-governor of California wrote a letter to Boulware thanking him and promising that he would “fight back against government’s increasing lust for power over free enterprise”. Boulware urged other businessmen to follow his lead. Many did, and he gained an immense influence in American conservative circles. His legacy was, in the words of historian Kimberly Phillips-Fein, to instill “the sense in a part of the business community that ideological and political engagement was an appropriate, legitimate and absolutely essential part of being a businessman”.

While Boulware may have provided the ideological foundation for today’s corporate involvement in politics, the overall financial commitment by companies was still comparatively small. This changed in the 1970s. Much like their predecessors in the post-war years, many businessmen in the early 70s felt threatened by the New Left, student radicalism and the still persistent Keynesian consensus.

The lawyer and future supreme court judge Lewis Powell, who at the time sat in the board of directors of several large corporations, argued that “the overriding first need for businessmen is to recognize that the ultimate issue may be survival”. The conclusion he drew from this observation was that corporations needed to use their funds to influence politics. He published these views in a memorandum that circulated widely among conservatives. In the following years, conservative think tanks such as the American Enterprise Institute and the Heritage Foundation sprung up, financed by businessmen who, as in the case of Joseph Coors, were greatly impressed by the Powell Memorandum. The new corporate activism of the 1970s was perhaps most visible in the growth of lobbying. In 1971 only 175 companies had registered lobbyists, eight years later 650 had. Similarly, the number of PACs grew from 89 in 1974 to 821 in 1978. The 1970s also saw the transformation of the Chamber of Commerce into an effective lobbying organisation. The Chamber had 1400 Congressional Action Committees with 20 members each, who were in charge of lobbying local legislators.

The third big transformation in corporate political involvement after Boulwarism and the 1970s obviously took place in the wake of the Citizens United v FEC verdict of 2010. We all know the story of the rise of Super PACs and I won’t describe it in detail here. What is interesting is a comparison of the three transformations. Both Boulwarism and the Powell Memorandum were born out of a strong sense of threat and general weakness. Boulware and Powell believed that government and public opinion were controlled by left wing radicals and by organised labour, and that Businessmen had to pour their money into politics if they wanted to save the free market.

A case can be made that the Super PACs are ballooning in a similar environment. One only has to look at Donald Trump’s post-election twitter rant to understand how threatened many conservative businessmen feel by the most liberal president since who knows when (LBJ?). ( We tend to view corporations’ influence on politicians as a sign of their strength, and in a way it is. But history shows us that the political activism of businesses is just as much an expression of their perceived weakness.

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Filed under Economics, U.S.

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