Investment theory of party competition
Encyclopedia
The Investment theory of party competition (sometimes called the Investment theory of politics) is a political theory developed by University of Massachusetts
professor Thomas Ferguson
. The theory focuses on how business elites, not voters, play the leading part in political systems. The theory offers an alternative to the conventional, voter-focused, political alignment theory, which has been criticized by Ferguson, et al.
The theory states that, since money driven political systems are expensive and burdensome to ordinary voters, policy is created by competing coalitions of investors, not voters. According to the theory, political parties (and the issues they campaign on) are created entirely for business interests, separated by the interests of numerous factors such as labor-intensive and capital-intensive, and free market
and protectionist businesses. In rare cases, labor unions sometimes act as major investors such as with the creation of the Labour Party
in Britain, but are generally overshadowed by corporations.
However, this is different from a corporatist system in which elite interests come together and bargain to create policy. In the investment theory, political parties act as the political arms of these business groups and therefore don't typically try to reconcile for policy.
Within this framework, the Democratic Party
is generally said to favor internationalist capital-intensive businesses (along with labor unions) while the Republican Party
favors nationalist, anti-union, labor-intensive businesses.
and steel
favor economic protectionism with high tariffs and subsidies. Since these businesses are mainly responsible for their domestic market, they are opposed to a Laissez-faire
economy open to foreign competition.
These industries are also heavily against labor unions since unionization increases the price of their goods. This is said to be responsible for the anti-union policies
throughout much of the 18th and 19th centuries when these businesses controlled much of the economy.
. Industries such as oil
, bank
s, tobacco
(and General Electric
) along with labor formed the New Deal Coalition
.
Capital-intensive industries have almost no percent of their value added based on labor and are therefore open to unionization, which, Ferguson states, is why pro-labor policies such as the Wagner Act were passed under the New Deal. These investors also favor international competition and reduced tariffs which is said to have led to the Reciprocal Tariff Act
(in response to the Smoot-Hawley Act).
University of Massachusetts
This article relates to the statewide university system. For the flagship campus often referred to as "UMass", see University of Massachusetts Amherst...
professor Thomas Ferguson
Thomas Ferguson (academic)
Thomas Ferguson is an American political scientist and author who studies and writes on politics and economics, often within a historical perspective. He is a political science professor at the University of Massachusetts Boston and a member of the advisory board for George Soros' Institute for...
. The theory focuses on how business elites, not voters, play the leading part in political systems. The theory offers an alternative to the conventional, voter-focused, political alignment theory, which has been criticized by Ferguson, et al.
Overview
Definitions for this theory:
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The theory states that, since money driven political systems are expensive and burdensome to ordinary voters, policy is created by competing coalitions of investors, not voters. According to the theory, political parties (and the issues they campaign on) are created entirely for business interests, separated by the interests of numerous factors such as labor-intensive and capital-intensive, and free market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...
and protectionist businesses. In rare cases, labor unions sometimes act as major investors such as with the creation of the Labour Party
Labour Party (UK)
The Labour Party is a centre-left democratic socialist party in the United Kingdom. It surpassed the Liberal Party in general elections during the early 1920s, forming minority governments under Ramsay MacDonald in 1924 and 1929-1931. The party was in a wartime coalition from 1940 to 1945, after...
in Britain, but are generally overshadowed by corporations.
However, this is different from a corporatist system in which elite interests come together and bargain to create policy. In the investment theory, political parties act as the political arms of these business groups and therefore don't typically try to reconcile for policy.
Within this framework, the Democratic Party
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
is generally said to favor internationalist capital-intensive businesses (along with labor unions) while the Republican Party
Republican Party (United States)
The Republican Party is one of the two major contemporary political parties in the United States, along with the Democratic Party. Founded by anti-slavery expansion activists in 1854, it is often called the GOP . The party's platform generally reflects American conservatism in the U.S...
favors nationalist, anti-union, labor-intensive businesses.
Labor-intensive investors
Labor-intensive investors made up much of the early political systems in the 18th and 19th centuries. Industries such as textiles, rubberRubber
Natural rubber, also called India rubber or caoutchouc, is an elastomer that was originally derived from latex, a milky colloid produced by some plants. The plants would be ‘tapped’, that is, an incision made into the bark of the tree and the sticky, milk colored latex sap collected and refined...
and steel
Steel
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...
favor economic protectionism with high tariffs and subsidies. Since these businesses are mainly responsible for their domestic market, they are opposed to a Laissez-faire
Laissez-faire
In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....
economy open to foreign competition.
These industries are also heavily against labor unions since unionization increases the price of their goods. This is said to be responsible for the anti-union policies
History of union busting in the United States
The history of union busting in the United States dates back to the Industrial Revolution in the 19th century which produced a rapid expansion in factories and manufacturing capabilities. As workers moved away from farm work to factories, mines and other hard labor, they faced harsh working...
throughout much of the 18th and 19th centuries when these businesses controlled much of the economy.
Capital-intensive investors
Due to industrialization and new markets in the 20th century, capital-intensive investors became the new economic order after the realignment of the Great DepressionGreat Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
. Industries such as oil
Oil
An oil is any substance that is liquid at ambient temperatures and does not mix with water but may mix with other oils and organic solvents. This general definition includes vegetable oils, volatile essential oils, petrochemical oils, and synthetic oils....
, bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s, tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...
(and General Electric
General Electric
General Electric Company , or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States...
) along with labor formed the New Deal Coalition
New Deal coalition
The New Deal Coalition was the alignment of interest groups and voting blocs that supported the New Deal and voted for Democratic presidential candidates from 1932 until the late 1960s. It made the Democratic Party the majority party during that period, losing only to Dwight D. Eisenhower in 1952...
.
Capital-intensive industries have almost no percent of their value added based on labor and are therefore open to unionization, which, Ferguson states, is why pro-labor policies such as the Wagner Act were passed under the New Deal. These investors also favor international competition and reduced tariffs which is said to have led to the Reciprocal Tariff Act
Reciprocal Tariff Act
- Reciprocal Trade Agreements Act of 1934 :President Franklin Delano Roosevelt signed the Reciprocal Trade Agreements Act into law in 1934. RTAA gave the president power to negotiate bilateral, reciprocal trade agreements with other countries. This law enabled Roosevelt to liberalize American...
(in response to the Smoot-Hawley Act).
Applications
- Health care reform (2010), The final health care reform bill was not single-payer, and did not have a public health insurance optionPublic health insurance optionThe public health insurance option is a proposed government-run health insurance agency which competes with other health insurance companies. It is not the same as Publicly-funded health care. Called the public insurance option or public option, for short, it was a proposed health insurance plan...
because business interests were against it, despite overwhelming public opinion for both those programs.
Comparison to other election theories
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External links
- "Golden Rule: The Investment Theory of Politics". Documentary by Jonathan Shockley featuring Thomas Ferguson, Noam Chomsky and other thinkers.