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This Much Is Clear
Yale experts chart the future Yale experts chart the future of U.S. business in wake of
most inconclusive Presidential election ever
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Business New Haven
11/27/2000
By: BNH
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A few months ago, Yale University planned a faculty-led discussion on what the Presidential election results would mean for the business world. Yale scheduled the event for November 14, one week following Election Day.
Geesh.
In truth the event, which took place at 55 Hillhouse Avenue (Horchow Hall), was originally scheduled for the day after the election. But as panel moderator/participant and Yale political science Paul Bracken explained, the organizers “thought they would let things settle down a little.”
Obviously, by November 14, nothing had settled down one iota. Still, Yale profs Bracken, health-care/Social Security expert Theodore R. Marmor (political science, public policy and management) and first-year assistant prof Jonathan Koppell (political science) sat down to take a stab at what the future might hold over the next four years.
This transcription of the discussion was edited before the outcome of the Florida recounts - and thus the identity of the next President - was known by BNH.
Bracken: What interests me is the way the relationship between business and government goes through cycles in the U.S. During certain periods of U.S. history, business-government relations are very good; at other times there's a great deal of friction and contention - in the 1930s during the New Deal, also during the 1970s, especially the Carter administration. Looking at this from a historical perspective, one can't help but notice that we've been in this tremendous economic boom [in which] business has been extraordinarily successful, and wealth of the country has risen enormously.
Corporate power in the United States and in Washington is at an all-time high. Corporations probably have more influence in Washington relative to the influence they had during other periods of the 20th-century.
I see good reasons to believe there's going to be a backlash against this corporate power. There will be a reaction to excessive corporate power in Washington. When I look around I see a host of disparate 'micro-issues.' These include:
I see a pattern leading to much greater scrutiny of corporate actions over the next four years than, say, over the previous ten or 15 years;
The whole debate over 'Frankenfoods' - genetically modified foods;
The public's upset with the increasing price of gasoline;
The precedent of the enormous tobacco settlement - $50 billion or $60 billion - which really serves as a precedent for other [industry] sectors;
The proliferation of class-action lawsuits;
The very great unhappiness with HMOs, and the perception that they are achieving their [financial] goals by withholding health care;
And also little things: the fact that the Presidential debates were sponsored by corporations. One of the most striking things I've heard from many quarters was [reaction to] the Budweiser sign in the back of the debate [hall]; this really made it look as though corporate power had gone too far.
I could go on and on with specifics, but I want to make a different point: Collectively, along with this sense in the United States that Washington politics has become a sort of Persian bazaar in which those who contribute the most money get the most regulatory relief, is having important impacts on public opinion.
Now, I'm not here to say that this is actually happening; I'm talking about perceptions which are going to be very powerful regardless of which candidate.
Now, I don't see a counter-Reformation, anti-business attitude developing in the next four years, probably not as severe as it was in the 1970s, let alone the 1930s. This political environment will probably induce Congress to pass new regulations in selected areas - perhaps health care, [as in] a patients' bill of rights. That will have enormous negative impact on the corporate operating statements of companies in that sector.
Under a Microscope
Bracken: I also see the rise of what was a very hot subject in the 1970s but, outside of certain narrow audiences we haven't heard much about in the last ten years, and that's corporate social responsibility, which I think is going to come back in a really big way. A company that has a brand-name product like Nike or Starbucks can't afford to be perceived as being socially irresponsible, because it destroys their brand value.
The final thing that's unique to the United States is that, unlike in western Europe or Japan - where government engineers the business sector to product what the government and presumably the people think are socially responsible outcomes - you have this kind of hands-off, arm's-length relationship between business and government which often leads to fractious, arbitrary and fragmented intervention by the government. The result is we have a lot of friction in the government toward business. In western Europe you have a very different tradition where, since the government is responsible for business and engineers jobs policy and income policy much more than in the U.S., you see the fractiousness in the political markets.
Here in the U.S. the new trend is to carry these disputes between business and government into the courts. So I see major increases in corporate litigation and class-action lawsuits for their legal payoff value and their strategic value to threaten to damage the brand names of corporations.
Let me turn to my colleague, Jonathan Koppell.
'Significant' Differences
Koppell: I really think that no matter what happens in Florida, the real victor [November 7] was the status quo, mostly because both houses of Congress are so closely divided now that putting together a majority to do anything dramatically different will be extremely difficult, in my estimation. And whoever is President is going to have a serious problem in rousing moral authority for his positions. So I don't the President will be able to steamroll much of anything through Congress. So I don't expect any legislation that dramatically departs from whatever the situation is now, in most instances. There may be some areas where there's a need for action where there hadn't been any before; and there may be some areas where a consensus can be reached - [e.g.,] a health-care bill of rights that doesn't offend any interests too severely. But I don't it's going to change the balance very dramatically between patients and health-care companies and drug companies, because I don't think either party will be able to muster the votes. And I don't think whoever is President is going to be able to push too hard, either.
The one area where I think there could be a significant difference depending on who becomes President relates to Paul was touching on in the area of regulation. I think - despite [Green Party candidate Ralph] Nader's claim that the two candidates are basically the same - there will be clear differences between the two candidates.
The most obvious [example] that's in the news right now: OSHA [the U.S. Occupational Safety & Health Administration has just introduced rules about how you regulate ergonomics - whether people who have carpal-tunnel syndrome because of their work arrangements, where they're going to be grouped under [existing] OSHA regulations. A Gore administration would clearly be supportive of that; a Bush administration - it seems from their comments, although they haven't been as definitive as one might have hoped - would do what they could to water down those regulations, and certainly wouldn't be as zealous as defending them in litigation suits.
Similarly, environmental regulation would be radically different in a Gore administration [vs. a] Bush administration. For one thing, you won't be hearing anything more about the President declaring [new] national monuments as a means of environmental protection if George Bush becomes President; I think it's not off the table if Al Gore becomes President.
I think a Bush administration would be dramatically less aggressive in pursuing environmental policies that are not business-friendly. For example, the idea of the EPA [U.S. Department of Environmental Protection] increasing the fuel-efficiency requirements on vehicles would be very different under the two administrations. The possibilities - albeit remote - even under a Gore administration of trying to lump sport-utility vehicles in with cars [thus holding them to much stricter fuel-economy standards] becomes dramatically improbable under a Bush administration.
All these seemingly 'micro'-policies in the aggregate, when you add them together I think you have a very different complexion of the federal government.
Cyber Crucible
Koppell: One of the things I write about a lot are Internet businesses, and one of the biggest stories there this year is anti-trust regulation against Microsoft. A Gore administration, I think, is more likely to pick up where Clinton left off - that is, taking a fairly aggressive anti-trust position, being skeptical of deals that are proposed that would concentrate power and looking at new ways in which market power can hurt consumers.
There are a host of issues relating to the Internet that are going to get dealt with in the next few years. Some of these issues are so pregnant that something must happen - for example, how privacy is regulated on the Internet, how intellectual property laws are applied to Internet businesses, how taxation is revised if, in fact, consumer spending does go up dramatically on the Internet, how the government will protect the information infrastructure from possible terrorism and other types of criminal activity.
Again, one might expect a Gore administration to be more favorably inclined toward governmental solutions, whereas a Bush administration might be more inclined in favor of market-based solutions.
Finally, another area of regulation that is quite alive right now is communications regulation; this relates to the Internet as well: how access will be treated in the coming years; who has the rights to the last mile, as it were, and how that market will be determined.
Informal Coalition
Marmor: This election did decide something: that there was going to be no dramatic shift of power in America. The very tightness of the election in the House and in the Senate really has produced the conditions of informal-coalition politics. The only thing we don't have is a coalition in the executive [branch]. So my proposal would be that the two parties get together and divide up the cabinet and reduce the cost that losing party will bear.
Let me say a word or two about Medicare and Social Security: I do not think that there's no difference between Bush and Gore; but I don't think it's so obvious. The balance between the Republican Congress and the Presidency has really been achieved in part by Bill Clinton's use of [Presidential] veto power.
I agree with both my colleagues that a cataclysmic shift a la 1964 or 1932 is simply not going to happen. We're going to have some form of stalemate politics.
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