Australia is about to walk the plank and sign up to the Trans-Pacific Partnership even though much of the contents will not be publicly disclosed. Last week, the US President unsuccessfully tried to get US Senate approval to fast track the authority to commit America to the TPP. His failure in that regard will not stop the process. It appears that if the TPP is introduced corporate control of government discretionary policy through the so-called “investor-to-state dispute settlement” clauses will be much enhanced. This is not an arrangement to make trade fairer and to enhance the well-being of poorer nations or to expand the choice of richer nations. The TPP builds on the punitive measures in various World Trade Organisation agreements, which give multinational corporations substantial legal bite to resist regulatory environments set up by democratically elected governments and to punish nations that resist the dictates of international finance capital. No government in its right mind would sign up to these agreements on behalf of their nations. I will have more to say about the TPP when we know more. But all of this bears on the question of who influences public policy and if we don’t like it what can we do about it. That is the topic of this blog.
There was an interesting paper published in the journal Perspectives on Politics last year (September 2014) – Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens – by Martin Gilens and Benjamin Page (two US academics).
The paper explored the following questions:
Who governs? Who really rules? To what extent is the broad body of U.S. citizens sovereign, semi-sovereign, or largely powerless?
Which seem at the heart of the matter.
Modern Monetary Theory (MMT) provides a consistent and coherent framework for evaluating the consequences of macroeconomic policy choices taken by government.
In that sense, policy justifications become more transparent. It is clear that austerity will damage growth and cause unemployment to increase. If the principles of MMT are widely understood, then, in that case, politicians who want to impose austerity cannot hide behind spurious claims that it enhances private confidence because future tax rates will be lower.
Rather, the austerity proponent is clearly demonstrating a preference for higher unemployment and that opens the public debate to a series of different questions, which conjecture would suggest would also lead to different policy outcomes (for example, a rejection of austerity).
But we assume that government is elected by the people and becomes an effective agent for the people to accomplish outcomes that individual libertarian action is incapable of achieving.
I often write that sovereignty means that the nation issues its own currency, sets its own interest rates, floats its currency, and desists from issuing foreign-currency denominated debts.
That is my emphasis as an economist. But it also requires that governments are not captured by corporations and/or trapped by multilateral arrangements which compromise their discretion to act in the best interests of their own population.
The last concern is what this paper is about. How much influence does the public have on policy? The answer according to the research in this paper is very little if any. Which is an extremely disturbing research finding but not unsurprising.
It also motivates different thought processes about how the population might seek to defend their rights and ensure that policy is advancing general well-being rather than being ‘pro-business’ (which is code for pro profits).
I will return to that later.
The innovation in the paper cited is that it uses a “unique data set” to test:
… the differing predictions of these theories against each other within a single statistical model that permits one to analyze the independent effects of each set of actors upon policy outcomes.
The theories in question are the standard approaches to answer the questions posed at the outset:
1. Majoritarian electoral Democracy – “attribute U.S. government policies chiefly to the collective will of average citizens, who are seen as empowered by democratic elections”.
This theory is still maintained by “a good many scholars – probably more economists than political scientists”. Economists like to talk about “rational choice theories of electoral democracy” because it suits their claims that we act rationally at all times in our best interests and if left to do that the collective outcome will be the best that can be attained given the resource constraints – that is, the free market solution to allocations.
The extant literature is problematic because the main studies avoid analysing the “the impact of such variables as the preferences of wealthy individuals, or the preferences and actions of organized interest groups, which may independently influence public policy while perhaps being positively associated with public opinion”.
As a result, it is likely that the studies find links between opinion and policy that are “spurious”
2. Economic-Elite Domination – “policy making is dominated by individuals who have substantial economic resources, i.e., high levels of income or wealth—including, but not limited to, ownership of business firms.”
Elite influence could also be defined in terms of social status.
The 2013 book by William Domhoff – Who Rules America: The Triumph of the Corporate Rich (McGraw-Hill) is a famous work in this tradition and recommended (now in 7th edition).
He traces the influence of wealth and status on policy via the creation of “foundations, think-tanks, and an ‘opinion- shaping apparatus,’ as well as through the lobbyists and politicians they finance”.
3. Majoritarian Pluralism – “in which the interests of all citizens are more or less equally represented” through the diversity of “factions” and “interest groups, business firms, and industrial sectors”.
The criticism of this approach centres on the problem of organising and maintaining collective action given the so-called “free rider” problem. What motivation is there for an individual to join a collective action if they will benefit from the outcome without expending the effort?
Governments, which understand this problem, “may feel free to ignore much of the population and act against the interests of the average citizen.”
4. Biased Pluralism – “in which corporations, business associations, and professional groups predominate” and lead to “public policies that … tilt toward the wishes” of these groups.
This is particularly the case when policy “visibility is low”, and is a motivating factor in governments maintaining the shroud of secrecy over the TPP deliberations.
There is a large literature on this theory of public policy. The idea of the “capture of regulators by the regulated”, the influence of those who fund the political parties, and the power of the financial sector to divert funds to lobbying efforts etc.
The aim of the paper then is to test the veracity of these different approaches according to their predictive power. Table 1 (reproduced here) provides a summary of the different theoretical predictions of the four approaches.
From “a large, diverse set of policy cases: 1,779 instances between 1981 and 2002 in which a national survey of the general public asked a favor/ oppose question about a proposed policy change” were isolated which form the data set.
Specifically, the data set covered unambiguous policy outcomes which could be matched against “incomes of the respondents”.
I won’t go into the specific methodologies used. You can read about them if you are technically minded. They are standard and robust techniques.
Essentially, they created proxies for the “average citizen”, the “affluent” citizen, interest group influence and measures of interest group power among other ‘explanatory variables’. These variables were designed to represent the ‘sets of actors’ in Table 1 above.
The sought to explain the influence these ‘explanatory variables’ had on the dependent variable:
… a measure of whether or not the policy change proposed in each survey question was actually adopted within four years after the question was asked.
They also controlled for the problem that the different sets of actors might be correlated. For example, they found that “the preferences of average citizens are positively and fairly highly correlated, across issues, with the preferences of economic elites”.
This is not unsurprising given the influence of the economic elites on the media and the influence of that on opinion formation of the average citizen.
The idea that we are all independent, rational decision-makers belies the existence of advertising, for example. Free market economists like to think of advertising as providing informational content only. Psychologists tell us otherwise.
The authors also noted that they could find not statistically significant “association between the preferences of economic elites and the alignments of either mass-based or business-oriented groups”.
While surprising, they suggested that the economic elites were more interested in making profits while the other organised groups (think tanks etc) were more likely to reflect the “broader ideological views among elite individuals”.
These individuals and the organisations they fund and work through were not purists (wanting free markets etc) but rather would “frequently lobby for spending in areas from which they stand to gain” whether it satisfied the mainstream economic theory favoured by the dominant paradigm or not.
Whatever advanced their narrow interests would be supported.
There were very few complaints from Wall Street etc when the US government handed out billions to stave off financial collapse in the early days of the GFC. Once the executive wealth was secured, then we started to hear all the deficit terrorist scaremongering.
The research study came to the following conclusions:
1. “One is the nearly total failure of “median voter” and other Majoritarian Electoral Democracy theories. When the preferences of economic elites and the stands of organized interest groups are controlled for, the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.”
2. “Interest groups do have substantial independent impacts on policy”.
3. In a few cases “particularly labor unions” these groups “represent average citizens’ views reasonably well. But the interest-group system as a whole does not.”
4. “The net alignments of the most influential, business-oriented groups are negatively related to the average citizen’s wishes.”
5. “the preferences of economic elites (as measured by our proxy, the preferences of “affluent” citizens) have far more independent impact upon policy change than the preferences of average citizens do.”
In terms of what the results mean for “American democracy” the authors make the following conclusions:
1. “In the United States, our findings indicate, the majority does not rule — at least not in the causal sense of actually determining policy outcomes.”
2. “When a majority of citizens disagrees with economic elites or with organized interests, they generally lose.”
3. “policymaking is dominated by powerful business organizations and a small number of affluent Americans, then America’s claims to being a democratic society are seriously threatened.”
So that is a pretty sobering set of results for those who like to think casting a vote at the ballot box actually matters.
It means that in addition to working to change economic awareness so that the public can comprehend the principles of Modern Monetary Theory (MMT), progressives should also be working on strategies that undermine the influence of these elite groups on public policy outcomes.
The researchers argue that even if the public was well-informed etc, the elites would still win.
So what is to be done?
There was a good article in the Jacobin Magazine yesterday (May 18, 2015) – A Winning Strategy for the Left – that shed light on that question.
The strategy was simple – ignore the political process and instead focus collective action on “targetting corporations and oppressive institutions” – direct action where it will hurt the most.
The article concludes that rather than “pressure politicians or elect different ones”:
Inflicting pain on corporations through disruptive mass activism has historically been the best way to reduce corporate opposition to progressive changes, and in turn, the resistance of the politicians who represent them.
They lost a number of examples where such direct action has been successful – “through boycotts, protests, labor strikes, or supply chain interruptions”.
They argue that “workplace actions and protests targeting low-wage employers could be the best strategy” to raising the minimum wage, rather than rely on politicians.
Individuals often adopt particular protests to assuage their own moral sentiments. There are a number of shops I won’t enter irrespective of the attractiveness of their wares because they have been convicted of abuse of their workers.
But that might make me feel good but is not what is being suggested in this article.
This approach is not focused on individual consumption practices and does not appeal to an imaginary corporate conscience, as some mainstream environmental groups seek to do. Rather, it aims to impose costs on capitalists through organized mass action, thereby influencing the calculus of both capitalists and state officials.
I suggest you read the article in full if you are interested in learning more.
Clearly, progressives have to become more strategic in the face of almost insurmountable odds to get the message out and enacted.
The question is whether the TPP and other arrangements will also leave citizen groups and individuals open to damaging prosecutions if such activity is successful.
That is enough for today!
(c) Copyright 2015 William Mitchell. All Rights Reserved.