Spring Semester:Supply-Side University Economics Lesson #4
Memo To: Students of Supply-Side University
From: Jude Wanniski
Re: Choosing political leaders
In our lesson last week, we discussed the democratic process at the simplest level, with the electorate having to vote yes or no on a single issue. We found that on such matters as a bond issue to finance a flood-control project, or a statewide proposition to limit taxes, or state referenda on environmental or gun-control propositions, the voters may at times 1) reject the advice of their political leaders and opinion leaders on which way to vote and 2) tell public opinion pollsters one thing and vote the opposite. In Massachusetts in 1976, we recounted a statewide vote that chose Jimmy Carter for President over Jerry Ford. On the same ballot, there were a dozen single-issue initiatives, each of which was placed on the ballot by a liberal interest on the basis of polls showing clear support for the proposal. In each case, the voters came to the opposite conclusion after serious discussion of its pros and cons. I suggested the image of the electorate as a mainframe computer, which processes all the information AVAILABLE to it in making such calculations in the political marketplace.
This week, we will take the electorate to a higher level of complexity as we consider the means by which it chooses political leaders or representatives — leaders and representatives being quite different political actors. But first we should bridge the discussion with some comments on the possibility of running an entire political system with national balloting of this kind? Do we really need presidents and prime ministers and senators and parliaments? The short answer is yes, we do need them, if only because modern society can afford the luxury of giving a small number of its members the job of doing the day-to-day work of lawmaking and rulemaking. Just as we no longer spend part of our week helping our neighbors build a new barn, or build our own homes, we can now buy the services of carpenters and contractors and financiers who specialize in doing those things. We elect those who have a comparative advantage, with the tools and skills, to do the political work of the nation. In doing so we economize on our time, which is the most precious, non-renewable resource we possess. Economics is fundamentally about economizing on our time. The political work force is an extremely important segment of the general work force, because it can expand the free time we have when it does a good job of lawmaking and rulemaking. When it does a bad job of it, though, our free-time contracts as we have to deal with recession, depression or war.
The single most important job in the nation is that of the top leader — president, prime minister, king or dictator. The leader uses his skills best when he correctly divines what the electorate would do if it took time out of enjoying life to do the calculations that guide the course of the nation state. If the electorate really would like to move west on the political compass, and the leader makes the mistake of thinking it wants to move east, the electorate will be forced to rouse itself in some fashion to let its displeasure be shown. A computer, though, will not compute unless it is presented with a problem. We cannot imagine a computer being programmed by a computer, ad infinitum, just as we cannot imagine the universe without a Creator. The electorate does not know if it wants or does not want a flood-control channel, or a reduction or increase in tax rates, until individual members of society who work in these areas ask for a computation by the electorate. In the economic marketplace, American consumers did not know if they wanted a hula hoop until someone thought up the idea of a ring of plastic that you could wiggle on your hips, and persuaded others to finance the idea. If you were to ask them in a public opinion poll or marketing survey if they would pay $5 for a plastic hoop to wiggle on their hips, they would almost certainly answer in the negative. When the entrepreneur — the leader — takes the risks of trying it in the broad marketplace, a small number of consumers discover it is fun, and persuade others that it is worth $5. My friend Reuven Brenner of McGill University in Montreal, who I consider the finest business economist in the world, observes the general futility and negative returns of market surveys, when employed by giant corporations wanting to bring new products to the market. The experience of candidates for president using "focus groups" to find out what the political consumers want and then campaigning on those promises is the exact parallel. Every election season candidates spend tens of millions of dollars on focus groups and useless public-opinion polls. They do not understand the process by which the market has a conversation with itself in sorting out what it wants and what it doesn't.
It does not help if you get standing ovations at one speech after another, appealing to what you believe to be the tastes of your audience. In his quest for the 1980 GOP presidential nomination, former Texas Gov. John Connally brought the house down everywhere he went with a promise to shut off Japanese imports. I tried to persuade him that he was appealing to the dark side of his audiences and that they would on reflection turn against him. The several million dollars he spent produced only one delegate. In his 1988 race for the GOP nomination, Jack Kemp's biggest applause line was that he would refuse to negotiate with the Soviet Union unless Moscow first lived up to its past promises. On reflection, voters decided that they wanted their President to negotiate with Moscow no matter what, as the alternative was nuclear confrontation. Of the several contenders, George Bush was the only one who supported Ronald Reagan's negotiations with Mikhail Gorbachev. After his losing campaign, Kemp told his closest backers that the line was his biggest mistake of the campaign. It could be a hard line the voters would accept in a candidate for the Senate or House. But that is because the national electorate attempts to elect to these "committees" a mixture of force and diplomacy, hawk and dove, pessimist and optimist. In the one national leader, the President, the electorate requires a balance, an equilibrium, the harmony of yin and yang.
The greatest assistance the leader has in anticipating the desires of the electorate comes from the electorate's representatives. The congress or the assembly or the parliament is composed of men and women who reflect varied parochial interests which must be taken into consideration and somehow composed by the nation's leader. It is useful to think of the U.S. Congress as a committee of the whole people, supported out of the private earnings of the population, which we term the public expense. The committee is a mass of contradictions, especially in a nation as varied as the United States, and the mechanisms designed to compose those differences are unique in the world. If the President is a great leader, one who knows what the electorate wants before it even thinks it needs it — like a hula hoop or a tax cut — the electorate will even give him the number of Senators and Congressmen he needs to get his program passed. The phenomenon came to be called the President's coattails.
Switzerland is the one state that successfully operates with a mechanism that relies on the general electorate to make its own calculations on all serious matters, delegating only housekeeping details to the political work force. There is a head of state in Switzerland and a national legislature, but all matters that involve redesign of the governments tax and spending powers are sent to the voters for ratification. In my entire life in political journalism or political economy, I've never known the name of the Swiss president or head of state. Among his many talents, McGill's Reuven Brenner is an expert on the Swiss political system. He especially appreciates how it can function at such high levels of efficiency with such low levels of domestic conflict when it is comprised of three essentially different ethnic regions — one German, one French, and one Italian. With a little more buttering up, I might persuade Professor Brenner to give us an entire lesson on the Swiss mechanisms, but suffice it to say that it has found a way to reduce the slippage between the political desires of the electorate and the resolution of those desires. As in Massachusetts, almost every year there are referenda on the Swiss ballot that have been promoted as political fads, after polls show they are clearly popular when the people hear them described by the pollster. The voters then go to work and shred the ideas, looking for nuggets that might be useful someday, but otherwise voting them down.
Switzerland can do without a clear leader because the Swiss choose to be neutral in global affairs while the United States cannot. A nation-state composed of distinct populations of Germans, French and Italians could not be anything other than neutral in a century of war among these ethnic groups. Switzerland is an example of a computer that is programmed by a computer which is programmed by programmers. A nation has to have a primary leader when it cannot be neutral, when it has to choose sides among competing commercial nations or warring nations. If Switzerland were alone in the world, it would have to have a leader, because it could not program itself. As it is, it is constantly assessing where it is in the world relative to what the rest of the world is doing, on taxation, on monetary policy, and on foreign policy.
Because the United States was formed as a state, not a nation — albeit a state which brought forth a new nation — the mechanism our forefathers had to devise in the Constitution was different than all other mechanisms, and really only appropriate to the United States. The careful mixing of democratic and republican forms, the checks and balances of the three branches, and the powers granted to the individual states that comprised the union, had to have a precise kind of architecture. It had to be one that would enable the different ethnic and religious groups that came from other nations to live together in peace and harmony. This not only meant a more democratic architecture than existed in the Old World, but also mechanisms that militated toward the golden mean of moderation and tolerance. If you want to design a tool enabling you to easily pour liquid into a bottle, without having it splash about, the tool will have to look like a funnel. That kind of thinking went into the design of our mechanism. The best source is The Federalist, which is a compendium of op-ed pieces written for the New York newspapers, arguing the merits of the Constitution. Right up front, in the first of the Federalist papers, Alexander Hamilton describes the concept of the funnel in different words: "Were there not even inducements to moderation, nothing could be more ill-judged than that intolerant spirit which has, at all times, characterized political parties. For in politics, as in religion, it is equally absurd to aim at making proselytes by fire and sword. Heresies in either can rarely be cured by persecution [p.3]"
The key words are inducements to moderation. The structure of government, with the federal umbrella to state, county and local jurisdictions, is an inexorable inducement to moderation. In a homogenous nation state, parliamentary mechanisms produce simple coalitions of interests. In our federal system, there is the no real glue holding the political parties together. This results in a kaleidoscopic shifting of coalitions from one day to the next, one issue to the next. Because each member of Congress has to rely on pulling all kinds of strange allies into his coalition, when he wants something that benefits only his constituents, he cannot afford to make many personal enemies. In the Senate, it is rare to find men and women who remain personally hostile toward each other for a long period of time because the mechanisms punish the extremes of passion. Politics makes for strange bedfellows. The fellow on the other side of the aisle whom you would secretly like to strangle today, next week is in your political embrace, as the world has turned and the issues have shifted.
The voters of each political subdivision not only want their representatives to generally represent their interests, but they want men and women who seem to have the political skills necessary to get along with the representatives of the other jurisdictions. During the past century, as a rule Democrats have had more such skills than Republicans, primarily because they come out of heterogenous subdivisions. They have to be able to speak a little Italian, a little Yiddish, a little Spanish, a little Polish, or they will not be able to represent these combinations in a way that will enable them to defeat the Republican candidate, who need only knit together the Episcopalians, the Methodists, the Presbyterians, the Baptists, and the small business class that speaks the language of money.
It does not mean you cannot be aggressive. Because Texas is so big, yet has only two Senators to fight for its piece of the resource pie against the likes of Rhode Island, Vermont, New Hampshire, etc., it tends to send hard-nosed scrappers to Congress. There is no Senator who plays hard ball more than Phil Gramm of Texas, and he has no trouble getting re-elected as a result. The same is true of New York's Alphonse D'Amato, "Senator Pothole," because he delivers the federal goods to state and local government when the pie is being sliced. But D'Amato would never think of running for President, knowing he might spend a fortune and not get one delegate. Which is what happened to Senator Gramm in 1996, when he raised a fortune from a business class that did not understand that when people vote for President, they are not looking for a pit bull. We can say without fear of contradiction that Gramm is in the Daddy Wing of the Daddy Party, far from the center of the Daddy-Mommy spectrum which is where American presidents are found. Jack Kemp is clearly in the Mommy Wing of the Daddy Party, so much so that political pros say he would have a much easier time winning a general election than he would the GOP nomination.
They are wrong, though, because when Republicans vote for their presidential candidate, they assess the likelihood that he will be able to win the general election. Because we only have one leader at the head of the national family, he or she will more often than not come from the Daddy Party, as long as the party nominee is at least close to the Mommy wing. John F. Kennedy was in the Daddy wing of the Mommy party, as is Bill Clinton and as was Jimmy Carter. Bob Dole could shout "Liberal, liberal, liberal" at Clinton in the 1996 campaign, but the electorate knew better. The voters of Massachusetts continue to send Teddy Kennedy to the Senate, and he is among the leaders of the Mommy wing of the national party. Even if he were not burdened with Chappaquidick, he never had a chance of winning the White House. Similarly, Vice President Al Gore provided the balance on the Clinton tickets of 1992 and 1996, because he is a traditional Mommy, averse to risk-taking and "risky schemes," and devoted to the idea of perpetual security. It is hard for me to imagine him winning the White House in 2000, unless the voters are so unhappy with the GOP choice that they again decide on divided government, to balance a tough Newt Gingrich Republican Congress.
In The Way the World Works, I suggested what I came to call the "chicken-duck-parrot" model as the simplest form of my general political model.
As an example of this political model in its simplest terms, consider the following caricature. Assume that the purest expression of the electorate's self-interest is a chicken. It attempts to communicate this desire to the politicians through a multitude of voices in a great variety of ways. Only a very few of the individual voices will come close to expressing this desire precisely, most of the voices expressing negative tastes for everything that is not a chicken. If there are two keen politicians contesting, on election day one might have refined his platform to express a duck. The other thinks the voters want a parrot. And because a duck is more like a chicken, the electorate will choose the candidate who expresses duck. Personality is as important as substance, however. If the duck candidate has shown sufficient signs of being untrustworthy, so weak and vacillating that in post-election he might easily become a hawk, the electorate would choose the more trustworthy parrot.
If the two contesting candidates were not keen, but insensitive to the expressions of the multitudes, on election day one might express a vulture, the other a worm. The vulture might win if in addition he showed signs during the campaign of moving in the direction of a more peaceful bird, and perhaps thereby being educable in office. Otherwise, the voters would likely choose the less threatening worm and wait for the next election, hoping for the best. The fact that the vulture candidate had at least expressed a bird might not be sufficient to persuade the voters that their interests were being given first consideration; the vulture candidate might have confronted the electorate as being an obstacle to be surmounted, his expression of bird of prey being a purely personal taste rather than a reflection of the electorate's tastes. In any case, with such a poor showing by the political alternatives, voters would be inclined not even to make a trip to the polls.
The only difference in reality from this simple chicken-duck-parrot model is in the number of variables that compose the consensus of the electorate's desires. The electorate may desire in addition to a domestic policy of chicken a foreign policy of eagle, and the task of the contending politicians becomes geometrically more difficult. A candidate may be near perfect in discerning the domestic desires of the electorate, but if he is widely off the mark on foreign policy he could easily lose to an opponent who is less correct on domestic policy, but less incorrect on foreign policy. No single candidate could possibly satisfy all the electors, however. In the modern nation state, individual electors have self-interests that are diametrically opposed to the interests of other electors. There are individuals whose well-being is served by economic growth and there are those who benefit by economic contraction or stagnation. So too, there are individuals whose welfare requires peace and those who benefit from tension. Each such interest is, in its own way, a legitimate one that the politician must in some sense take into account, for as long as peace and prosperity are not always society's condition, it has need of those who can deal with the alternatives. Pediatricians benefit directly from life; undertakers from death.
When former Georgia Gov. Jimmy Carter ran for the Democratic nomination in 1976, he faced several nationally known Democratic contenders, including Morris Udall, Fred Harris, Birch Bayh, and Hubert Humphrey. Each of these four had read the public opinion polls and decided that the American people were mad at the big oil companies and the big auto companies, so they campaigned on various promises to punish big oil and big auto. Udall of Arizona was the favorite among the liberals to win, and on January 23, 1976, I wrote about the race in the lead editorial of The Wall Street Journal, entitled "The Politics of Despair."
On "Meet the Press" last month, he capsulated his campaign, declaring that the days of "cheap land, cheap timber, cheap resources, cheap everything" are over, and "the story of our lives is going to be how we are going to adapt to the end of that era." He proposes to "move us to an era in which our lives are different, but our lives are going to be better. We are going to recycle, we are going to be thrifty, we are going to conserve energy, and we are going to bring the people down below the poverty line up, and we are going to have a just society where everyone pays fair taxes and we have national health insurance and a lot of other things.
The politics of despair appeals to the liberal Democrats because, as Mr. Udall's rhetoric makes so clear, once you have written off growth you have to concentrate on the issue of wholesale income redistribution. This is a program to transfer power from the conservative wealthy elite to the liberal intellectual elite, which is to say, to the left wing of the Democratic Party. So our guess is that the liberals will recognize Mr. Udall as their man, since he is the only Democratic contender to explicitly embrace a Club-of-Rome, doomsday, no-growth philosophy.
Now we do not believe the American people are yet quite ready to throw in the towel and abandon the American dream, and it will be a very tough job marketing political despair to the electorate at large. So even though the liberal wing will exert considerable clout at the national convention, the party will reach out for alternatives. [To] the true liberals... Mr. Carter is unacceptable because he is soft on private enterprise and does not want to break up the oil companies."
I remember Bob Bartley, editor of the WSJ editpage and my boss back then, asking me why I thought Jimmy Carter was winning the primaries when he did not seem to stand for anything, with his competitors complaining that he fuzzed and fudged all the issues being debated. I recall telling Bartley that if one candidate says, "Elect me and I will kill every fifth American," and another says, "I will kill every tenth American," and another says "every 15th," and another "every 20th," and then Jimmy Carter steps forward and says "I haven't made up my mind. Maybe I won't kill any Americans." The voters will of course pick Carter, as they did, going on to beat President Ford in the general election.
Why was he, Carter, successful against Ford and unsuccessful in winning re-election in 1980 against Reagan? The history books being written say all kinds of silly things, but at the time I was observing that Ford had an opportunity to lift Richard Nixon's price controls on the oil and gas industry. He decided not to because his political advisors worried the price of No. 2 fuel oil would rise and the voters of New Hampshire would be mad. The Texas wildcatters, furious at this betrayal, begged Ronald Reagan to run against Ford, and Reagan came within a whisker of beating him. In the general election, Jimmy Carter signed a letter to the oil state governors promising he would lift oil prices by executive order as soon as he was elected. Not quite "read my lips," but "read my letter." Once elected, the new President was persuaded to extend the controls again. When Reagan ran against him in 1980, heavily financed by the Texas wildcatters, Carter lost the oil patch and the presidency. There were many other things going on, but this could easily have been the margin. In Lesson #2, which you might re-read, we did discuss the path that led Reagan to the White House at exactly the moment the nation needed his particular experience and skills.
What we've learned in this lesson is something of how the masses go about picking a leader. We have certainly not exhausted the subject, but the concepts here are the most basic in the political model I think works best. Questions?