Investment theory of party competition
The Investment theory of party competition (sometimes called the Investment theory of politics) is a political theory developed by University of Massachusetts Boston professor Thomas Ferguson. The theory focuses on how business elites, not voters, play the leading part in political systems.:206 The theory offers an alternative to the conventional, voter-focused, political alignment theory and Median voter theorem, which has been criticized by Ferguson and others.:20–38
Definitions for this theory:
|“||The real market for political parties is defined by major investors, who generally have good and clear reason for investing to control the state....Blocs of major investors define the core of political parties and are responsible for most of the signals the party sends to the electorate.||”|
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 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.
Labor-intensive investors made up much of the early political systems in the 18th and 19th centuries. Industries such as textiles, rubber, 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. Among other things this led to policies such as the Smoot-Hawley Tariff.:145
These industries are also heavily against labor unions, since unionization increases labor costs. 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.
Due to industrialization and new markets in the 20th century, capital-intensive investors became the new economic order after the realignment of the Great Depression. Industries such as oil, banks, tobacco, (and companies like 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 favored international competition and reduced tariffs that led to reciprocal trade agreements under the Second New Deal.:151–152
Comparison to other election theories
- An Economic Interpretation of the Constitution of the United States
- Campaign finance
- Cash for access
- Money loop
- Propaganda model - a similar theory, but concerning the media industry and public opinion.
- Ferguson, Thomas (1983). "Party Realignment and American Industrial Structure: The Investment Theory of Political Parties in Historical Perspective". Research in Political Economy.
- Ferguson, Thomas (1995). Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems. University of Chicago Press.
- Popkin, S.; Gorman, J.; Phillips, C.; Smith, J. (1976). "What have you done for me lately? Towards an Investment Theory of Voting". American Political Science Review 68 (Sept).
- Based on Larry Bartels's study Economic Inequality and Political Representation, Table 1: Differential Responsiveness of Senators to Constituency Opinion.
- "Golden Rule: The Investment Theory of Politics". Documentary by Jonathan Shockley featuring Thomas Ferguson, Noam Chomsky and other thinkers.