The Political Economy: Readings in the Politics and Economics of American Public Policy

Readings in the Politics and Economics of American Public Policy

Thomas Ferguson, Joel Rogers

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781315495798
• Edition: 1
• Topic: Economía
• Subtopic: Política comercial

The Political Economy is ideally suited as a supplementary text for courses in American government and politics, policy studies, business-government relations, and economic issues and policy making. It integrates selections from the very finest new and classical works of political and economic analysis, by distinguished scholars, into a comprehensive overview of the American political system.

1

STRUCTURE

Markets, Politics, and the Constraints of Capitalist Democracy

The essays in this section all deal with the basic structures governing political power and conflict in advanced industrial market societies. Charles Lindblom explores the different logics of decision making and control in market and public arenas. Anthony Downs highlights the rationality of the ordinary citizen’s abstention from political activity. Michal Kalecki points out the barriers to achieving full employment within a capitalist economy. Finally, Fred Block attempts to identify the structural mechanisms that shape the workings of the capitalist state.

1.1

The Market as Prison

CHARLES E. LINDBLOM

Charles E. Lindblom takes up a topic “ordinarily brushed aside as an embarrassing feature of ostensibly democratic systems,” namely the degree to which public policy is blunted and constrained by the peculiar demands and structure of market systems. While the behavior of public officials is susceptible to direction through commands, Lindblom argues, the behavior of market actors can, by definition, be directed only through inducements. This difference produces an important and self-enforcing asymmetry in the distribution of power within market systems. Unless market actors can be enticed to do something, they simply will not do it. But if, as is commonly the case, market actors wield important decision-making authority, and they choose not to do something (e.g., invest, hire workers, curb industrial pollution), the consequences of their choice can easily undermine the authority of the public system of decision making, as well as the welfare of the society as a whole. The position of powerful private market actors is thus different from the position of all other participants in the political economy. It is specially privileged, and this privilege may be thought of as a wide dispersion to the business community of veto power over the decisions of public policy. But Lindblom goes on to argue that the incarcerating effect of market structures, their “automatic punishing recoil” against disfavored public policy, would persist (though it might be mitigated) even within regimes featuring public ownership of the productive apparatus. He concludes with remarks on an additional imprisoning effect of market structures particularly appropriate to the beginning of this volume: that which their bare existence seems to exert on conventional social science thinking about the nature and distribution ofpolitical power.

Suppose—just to limber up our minds—that we faced the fanciful task of designing a political system or a political/economic system that would be highly resistant to change. How to do it? One way that can be imagined—but only imagined—is to design institutions of such excellence as would satisfy us without further amendment and would do so under all possible circumstances in a rapidly changing world. To identify such a possibility is to discard it as hopelessly visionary. Another possibility might be somehow to place all power in the hands of a despot or oligarch, who would thereafter deny citizens any capacity for changing the system. But doing so would of course enable the elites to change the system, and we know that some elites are more eager for change than some masses.

Another possibility is simple and fiendishly clever. It is to design institutions so that any attempt to alter them automatically triggers punishment. By “automatic” I mean that the punishment follows from the very act intended to change the system. Punishment does not wait for anyone’s deliberation on whether the change is acceptable or not. Such a change-repressing system would be all the more effective if the punishments were strong; if they took the form of over-responses, like the tantrums of a spoiled child raging at even mild attempts at parental control.

How fanciful is that possibility? It is not at all clear how such a simple concept could be made effective in actual practice. Consider some of our institutions. There seems to be no way to make such a mechanism work in the case of schools. We are indeed sometimes punished in our attempts to improve them in that the attempts sometimes fail and make the situation worse. But that is not a built-in feature of the school system or of our attempts to improve it. There may be no way, even if we sought one, to build in an automatic punishing recoil. The same seems to be true for labor unions. Unions possess a capacity for retaliatory punishment through strikes, but it is a weapon they must use sparingly. And it is a weapon rarely used to punish attempts of society to change the institutional role of unions but is instead largely an adjunct to bargaining over terms of employment for members. There appears to be no easily perceived possibility for automatically punishing ourselves every time we try to legislate on unions.

If we go down the line of social institutions, the possibilities for repressing change through an automatic punishing recoil appear to be either nonexistent or impossible to imagine. For the church, the family, or the various institutions of government, for example, unpunished change continues in fact from year to year even if, again, we may sometimes construe a failure in reform as a punishment. No method for guaranteeing automatic punishment is in evidence.

When we come, however, to that cluster of institutions called business, business enterprise, or the market, just such a mechanism is in fact already operating. Many kinds of market reform automatically trigger punishments in the form of unemployment or a sluggish economy. Do we want businesses to carry a larger share of the nation’s tax burden? We must fear that such a reform will discourage business investment and curtail employment. Do we want business enterprises to reduce industrial pollution of air and water? Again we must bear the consequences of the costs to them of their doing so and the resultant declines in investment and employment. Would we like to consider even more fundamental changes in business and market—worker participation in management, for example, or public scrutiny of corporate decisions? We can hardly imagine putting such proposals as those on the legislative agenda so disturbing would they be to business morale and incentive.

In the town in which I live, a chemical plant discharges something into the atmosphere that carries both a bad odor and irritants to the eyes. Town and state governments are both reluctant to put an end to the problem for fear that the plant will find it advantageous to move to a new location in another state. Nationally, we have recently seen that a re-invigorated Federal Trade Commission has been crippled by new restrictive legislation and presidential instructions for fear that effective regulation of monopoly by the Commission will undercut business incentives to invest and provide jobs.

All this is familiar. One line of reform after another is blocked by prospective punishment. An enormous variety of reforms do in fact undercut business expectations of profitability and do therefore reduce employment. Higher business taxes reduce profitability. Bearing the costs of pollution control reduces profitability. Building safer automobiles reduces profitability. Countless reforms therefore are followed immediately—swiftly—by the punishment of unemployment.

Change is repressed, not wholly stopped. Businessmen sometimes learn to live with reforms. Sometimes also we escape the punishment because we attach to the reforms new offsetting benefits to business to keep up their incentives to provide jobs. To a growing number of environmental controls over business we attach new tax benefits or, as in the case of Chrysler, new loan guarantees. But the conflict between reform and its adverse effects on business that punish us through unemployment is a long standing and real repressant of change. As for the ubiquity of punishment, its swiftness and severity, there is nothing like it elsewhere in the social system. Nowhere else is there so effective a set of automatic punishments established as a barrier to social change.

Business people often exaggerate the conflict. Chrysler, for example, argued that its financial difficulties, for which it sought relief from government, were largely caused by environmental regulations, which is almost certainly not the case. And business people often predict dire consequences from regulations that they know they can accept if they must. Nevertheless, change in business and market institutions is drastically repressed by the frequency with which change will in actual fact produce unemployment. This is a familiar phenomenon as old as markets themselves.

Punishment is not dependent on conspiracy or intention to punish. If, anticipating new regulations, a businessman decides not to go through with a planned output expansion, he has in effect punished us without the intention of doing so. Simply minding one’s own business is the formula for an extraordinary system for repressing change.

The mechanism that accounts for this extraordinary state of affairs is the same one that I referred to in Politics and Markets¹ to explain the related phenomenon of the privileged position of business in the political system of all market oriented societies. In all market oriented societies, the great organizing and coordinating tasks are placed in the hands of two groups of responsible persons, functionaries, or leaders. One group consists of government officials at sufficiently high levels. The other group consists of business people. The tasks assigned to business people are of no less importance than those assigned to government officials. To business people is assigned the organizing of the nation’s work force, and that task in itself is perhaps the largest and most basic specific problem in social organization faced by any society. Businessmen direct capital accumulation, income distribution, and resource conservation, as well as discharge more particular tasks such as organizing the production of steel, bicycles, armaments, pots and pans, and housing. Businessmen also undertake specific coordinating tasks as, for example, the bringing of farm products to urban consumers.

The defining difference between a government official and a business entrepreneur is not that one discharges important functions and the other only secondary functions, for both perform major and essential services for society. The difference is that one is directed and controlled through a system of commands while the other is directed and controlled by a system of inducements. Why societies use both systems of direction and control is a long story that we shall not undertake. But a market society is one that makes heavy use of an inducements system for directing and controlling many of its major leaders. Market systems are inducement systems. Put out of your minds the question of whether or not societies ought to use inducement systems for controlling and directing top leadership. The fact is that some do, and that is what market systems are.

Playing their roles in a command system, government officials can be commanded to perform their functions. Playing their roles in an inducement system, business people cannot be commanded but must be induced. Thus inducement becomes the nub of the automatic punishment system. Any change in their position that they do not like is a disincentive, an anti-inducement, leading them not to perform their function or to perform it with less vigor. Any change or reform they do not like brings to all of us the punishment of unemployment or a sluggish economy.

Again, the system works that way not because business people conspire or plan to punish us, but simply because many kinds of institutional changes are of a character they do not like and consequently reduce the inducements we count on to motivate them to provide jobs and perform their other functions.

The result is that across the entire array of institutional changes that businessmen themselves do not like, an automatic punishing recoil works to repress change. In that broad category, change—and often even the suggestion of change—adversely affects performance, hence adversely affects employment. Anticipations of change are enough to trigger unemployment.

Children may sulk when they do not like the way they are being treated. Professors may grumble. Workers may slow their work. But their responses differ from the responses of dissatisfied businessmen in a critical way. The dissatisfactions of these other groups do not result in disincentives and reduced performance that impose a broad, severe and obvious penalty throughout the society, which is what unemployment does. A generalized gradual slowdown of workers, if it were to occur, would ordinarily be neither measurable nor observable. Any general business slowdown is measurable and hurtful in jobs lost, and almost everyone is aware of it. A specific localized work slowdown or stoppage—say, a decision of trainmen to work by the rule-book so assiduously as to paralyze rail traffic—can be a felt injury to millions of people. But it is a tactic that can only now and then be mobilized. Instead, the penalty of unemployment is visited on us by business disincentives in any situation in which business people see themselves adversely affected, because business people are major organizers and coordinators.

Business people do not have to debate whether or not to impose the penalty. They need do no more—as I said before—than tend to their own businesses, which means that, without thought of effecting a punishment on us, they restrict investment and jobs simply in the course of being prudent managers of their enterprises.

Do I need to point out how broadly business disincentives injure a population? The unemployed suffer—that is obvious. So also do young prospective entrants into the labor force, who find that they cannot obtain jobs when business is slack. So also do businessmen themselves, large and small, as production is reduced. So also do stockholders, whose earnings decline. So also do farmers—businessmen themselves—who find markets for their outputs depressed.

What about government officials? It is critical to the efficacy of automatic punishment that it be visited on them. For it is they who immediately or proximately decide to persist in policy changes or to withdraw from such initiatives. The penalty visited on them by business disincentives caused by proposed policies is that declining business activity is a threat to the party and the officials in power. When a decline in prosperity and employment is brought about by decisions of corporate and other business executives, it is not they but government officials who consequently are retired from their offices.

That result, then, is why the market might be characterized as a prison. For a broad category of political/economic affairs, it imprisons policy making, and imprisons our attempts to improve our institutions. It greatly cripples our attempts to improve the social world because it afflicts us with sluggish economic performance and unemployment simply because we begin to debate or undertake reform.

In his Great Transformation, Karl Polanyi makes the point that early English experience with policy designed to soften the harshness of the market system in 18^th century England demonstrated how easily regulation of the market could derange the economy. But he did not go so far as to argue that market systems imprison or cripple the policy-making process and indeed thought that more intelligent policy making could succeed where earlier attempts failed. I am arguing that the crippling of policy making in a market society may be more serious than he thought.

You may be tempted to believe that the real obstacle to social change is—as we often carelessly assert—a kind of social inertia or a tendency of societies to remain as they are. But it is not at all clear that inertia of that kind exists in the social world. Many people constantly try to change the social world. An explanation of their failure more plausible than that of inertia is to be found in the great number of other people who are vigorously trying to frustrate social change. My analysis points to a social mechanism that frustrates it. It is a highly selective mechanism, you should note, that permits change of some kinds and imposes powerful obstacles to other kinds.

Clearly, if we look at different areas of social life, ease of change varies greatly from area to area. In recent years we have seen large changes in sexual mores, for example, as well, of course, as multiple changes pressed on us by technological development. In political/economic life, society all over the world has gone through or is now going through one of the world’s greatest social revolutions—the organization of almost every form of social cooperation through formal organization, especially bureaucratic organization. The bureaucratic revolution is enough to testify to the capacity of society for political and economic change. It is all the more impres...