The Business of Politics

Political competitionOne of life’s great ironies in the Western world is the number of people who fervently declare the great success and capability of capitalist enterprise, and then turn around to lament the gross inefficiencies of government. The staunchly conservative among us love to trumpet this apparent contrast. Then again, the liberals among us have their similar contrast, decrying the ruthlessness and greed of business, and pointing to the sober diligence of government regulatory agencies. Both sides love to contrast the business world with the government system, for each their own purposes.

In fact, the irony of this is that these two systems are two sides of the same coin. Governments are plagued by inefficiency precisely because they are run in ways that resemble capitalist enterprise. Sure, in government the currency is different—politicians earn seats in government, and they sell influence—but they run as a business all the same. Let me paint the picture in more vivid colour.

A Tale of Two Systems

Reagan adPoliticians are products. They are branded by a particular party (complete with their logos and slogans), and they have a limited time to be bought or sold on the open marketplace, during election season. The parties themselves have teams of marketing experts who work to develop a product line that is specifically designed to highlight the features that make them unique from the competition (regardless of how dissimilar they really are). Parties buy ad space, have PR teams, and issue press releases, just like any good corporation does. They compete with each other to establish market share in the form of seats, and to do this they need revenue from their suppliers, the donors. Each time the market opens, the competition begins anew.

But the important thing to notice about these political systems (in North America especially) are that they function largely as an oligopoly. There are a limited number of large businesses that have most of the market share, and they are well-established and entrenched such that the barriers to entry for other businesses is high. One could liken it to the the market for operating systems. This market is dominated by two companies: Microsoft and Apple. The two of them battle for market share, but largely they only need to design their products and ads in ways that distinguish them from one single competitor, without worrying much about the role of other companies. Microsoft and Apple would be your Republicans and Democrats in the US, or your Conservatives and Liberals in Canada. Sure, there are some people who run Linux, but those would be your Libertarians or your Greens or your Independents. They have their small niche market, but they barely register on the radar of the dominant players in the market.

Think about this for a second: The Green Party of Canada, though it has grown enormously in recent years, was founded in 1983. That’s over 30 years, and the best they have ever done is capture 6.8% of the popular vote (and 1 seat in the House of Commons). The first time they even broke 1% was 20 years after their founding. And this is one of the quite successful alternate parties in Canada, with a dozen others in any given election. The US system fares no better. Despite having five major political parties and around 30 other minor parties, US politics has been dominated by two parties since at least the 1870s. The oligopoly structure of the political system creates incredibly high barriers to entry—and given that the people in charge of the rules for that system are members of the major parties, there is no incentive for them to lower those barriers.

A Seller’s Market

Types of market structuresWhy is the fact that politics is an oligopoly important? Precisely because monopolies and oligopolies are two systems that greatly diminish buyer power. When a monopoly exists, it has large discretionary power to set the price point wherever it wants (especially if the good it is selling is essential). An oligopoly, though not quite as solid as a monopoly, still has very low buyer power compared to a perfectly competitive market. Consider the situation as it exists with Canadian telecom companies. The market is dominated by three firms: Rogers, Bell, and Telus. If I want to purchase Internet service, I have essentially three businesses to choose from, all of whom offer almost identical packages. If forgoing Internet is not an option for me, then my buying power is essentially restricted to a coin flip. There is no incentive for these companies to compete on pricing strategies, so they work in other ways (offering bundled services, trying to establish brand loyalty, etc.). My ability to influence the market is extremely limited—even organizing a large-scale boycott would at best knock one of the companies on its heels, leaving the other two to absorb the market share up for grabs.

If you want to understand why government is slow, inefficient, and obstructionist, you need look no further than the same capitalist competitive principles that govern other markets. Our government system works as an oligopoly, where more is to be gained by putting out “attack ads” against another candidate than actually innovating new solutions or making a meaningful difference. Setbacks to a political party are temporary; with little risk of permanently losing market share to new competitors, they simply spend more money in advertising next election cycle, and wait for the other major player(s) to make a mistake. Competition for seats through any means necessary is more important than producing a product worth voting for.

Perhaps that is why voter turnout in Canada is at 60% and dropping. Turnout in the US has similarly been hovering between 55% and 65% since the 1910s. In the recent Ontario election, news organizations waxed positively about an estimated rise in turnout to 52%. I hardly think barely motivating half of voters to even show up to the polls warrants celebration. But when buying power is low, and the products are mediocre at best, why buy at all?

In Conclusion

When comparing politics to the competitive capitalist system, I don’t mean to say that all competition is bad, or that all politicians are corrupted by money (like I said, power and influence are the currencies of politics anyway). But it is important to recognize that, like it or not, politics has become an industry that operates on the same capitalist principles that govern our business industries. The only issue is that with businesses, we have government to help regulate and check the excesses of business (to whatever extent such regulation actually improves matters). With government, who acts as the regulator? The voters, as buyers, have little control. So who does control government? As best as I can see it, rich and influential people do. To be honest, I don’t see this necessarily as a result of conscious scheming on the part of the rich. Rather, it’s a kinship between the two systems that unites business and government. With little real pressure from buyers, and little danger from new competitors, business leaders provide the raw materials (cash) needed to produce the advertising, branding, etc. for each political party, and in return, the parties provide them with favourable policies and influence. Keeping suppliers happy is an important business practice. It’s a symbiotic relationship based on mutual interdependence: you have what I need, I have what you need. It’s a transaction just like every other market transaction that occurs in a capitalist system. The only difference is that we like to pretend our business and politics are separate.

Response to protest: Maybe we should promise them fresh elections...So what is the resolution to government oligopoly? Well, some folks have proposed replacing the first-past-the-post (winner-take-all) system with a proportional representation system of some kind. That would break down some of the high barriers to entry for other parties; the idea is certainly feasible, and has been implemented in some countries. But it wouldn’t be a complete solution. There are other issues related to voting for a “representative” who is tied to a party doctrine and has multiple competing interests. There are still issues with parties focusing more on who is the most “electable” candidate (which often favours white men) rather than who is the best representative for a region. These things still encourage politics to be run like a business, and still keep voter power low.

The most complete solution, though one that will require the most work, would be to replace the system entirely. There are other ways of doing democracy. There are other ways of running politics. There are other ways of running business markets, for that matter. Maybe we all need to do some deep introspection about whether we actually support a system where representatives are elected for years at a time and have strong incentives to “tow the party line” rather than represent their constituents. Perhaps the best solution might instead be a community-based system where the people themselves join together to resolve their problems—where power stays in the hands of the people rather than being given over to others. There is no perfect system. But a political system functioning as a capitalist oligopoly is certainly very far away from that ideal.

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