Tag Archives: institutional norms

Will Trade Associations Exacerbate Growing Economic Inequality in the United States?

An essay prepared for a special section of the Journal of Management Inquiry gave me an opportunity to reflect on potential social changes in the US resulting from major political changes over the past three decades.   I believe a long-term decline in class consensus within the American business elite (Mizruchi, 2013) has raised the relative power of trade associations, compared to the powerful peak business associations of a bygone era, paving the way for more narrow self-interested actions and diminishing the influence of other kinds of interest associations. The worldview of the incoming president and his cabinet officials will facilitate this development, I believe.

Escher "Drawing Hands"

M.C. Escher “Drawing Hands”

Historically, business managers and owners could attempt to exert influence at four different levels in the system. First, they could get involved as individual executives, contributing money, lobbying officials and agencies, and so forth. Second, representatives of their organizations could do the same, especially through board interlocks with other firms in different industries, through which could diffuse general business practices as well as practices aimed at producing public goods  (Davis & Greve, 1997; Galaskiewicz, 1985). Third, firms could participate in specific industries’ trade associations that favored policies and practices they favored (Ozer & Lee, 2009). Fourth, and perhaps most important, a handful of peak associations sat above the previous three levels, cutting across firms and industries, and claiming to speak for the business community as a whole. For example, the now-defunct CED (Committee for Economic Development) advertised itself as offering “reasoned solutions from business in the nation’s interests.”

Mark Mizruchi argued that after World War II, American business leaders, working individually and through peak associations, were voices of moderation and pragmatism as the American economy expanded and the US became a global power. Foregoing narrow self-interest, business leaders accepted the legitimacy of organized labor and some federal oversight of the economy. By pursuing a policy of what the CED referred to as “enlightened self-interest,” they made it possible for the federal government to pass significant legislation that took account of national collective interests, such as the construction of the interstate highway system and improvements in the Social Security system, as well as the expansion of Medicaid. However, all this changed in the 1970s, as businesses were buffeted by global competition, rising inflation, and strong public pressure to do something about the environment, public health, working conditions, and so forth. That pressure led to the creation of many new federal agencies in the 1970s, such as the Environmental Protection Agency. What Mizruchi characterizes as a relatively harmonious working environment prior to the 1970s — involving government, business, and labor — changed into a much more confrontational system. The financialization of American corporations in the 1980s intensified pressures on executives and diminished their enthusiasm for pursuing collective solutions (Davis, 2009; Mizruchi, 2013). The corporate scandals of the early 2000s and the Sarbanes-Oxley Act of 2002 further disrupted the formerly cozy relationships between members of the corporate elite (Chu and Davis, 2016).

Changes in patterns of mergers and acquisitions, initial public offerings, and the growing importance of private equity firms have led to the slow disappearance of corporations from the American economy over the past two decades (Davis, 2016). Previously, publicly held corporations might have felt some obligation to temper their self-serving actions with more public-regarding actions, to the extent that shareholders and activists could hold them accountable (King). However, privately held corporations have no such watchdogs and thus can act with much more autonomy and disregard for collective and societal interests.

Because of these changes, the business elite has fragmented over the past three decades and lost its ability to act cohesively (Walker & Rea, 2014). Unlike in earlier eras, when presidents and political leaders could call upon business leaders in peak associations to help them push for policies that might involve some sacrifices on their part, elites pulled back into policies reflecting more narrow self-interest. Mizruchi argues that many of the problems plaguing US politics – – extreme partisan polarization and inability to enact needed legislation, such as improvements in national highway infrastructure – – stem from the damages done to social and political consensus by developments since the 1970s. Consequences can even be seen at the state level, where efforts by public interest associations to expand Medicaid, under the Affordable Care Act, ran into strong opposition by conservative nonprofit advocacy organizations that mobilized public opinion against expansion (Hertel-Fernandez, Skocpol, & Lynch, 2016). Traditional general business interest associations like the Chamber of Commerce, as well as associations of hospitals and doctors, were unable to overcome special interest lobbying against expansion.

Today, with the loss of elite cohesion resulting in fewer class-wide constraints on businesses pursuing narrow self-interest and lobbying against policies purported to be in the public interest, strong trade associations are much better positioned to pursue their own interests. In the past, they might have been constrained by networks of ties between firms and their membership in strong peak associations. However, in the changed political and economic environment of narrow partisan self-interest, they now have much more room to fight for industry-level benefits against more comprehensive cross-industry solutions, as in issues such as environmental protection. Moreover, in this new environment, big firms are not as constrained by class-wide norms as in the past, and they can use their dominance within trade associations to push for their own interests (Barnett, 2009). Whereas in the past special interest associations — such as the American Legislative Exchange Council or Americans For Prosperity — might have been restrained by needing to justify their actions to more moderate peak associations, that is no longer the case (Jackman, 2013).

The United States is entering uncertain political times, with political parties polarized, and collective action in the public interest extremely difficult to achieve. To the extent that the decline of elite class cohesion and moderate business peak associations weakens the forces of conciliation and compromise, strong trade associations may actually step into the void and make matters worse by pursuing policies favoring their own industries. Of course, as Walker and Rea (2014) remind us, we should not conflate business unity with business power, and each case must be assessed on its own merit. Nonetheless, the possibility worries me – a lot.

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The Impossible Necessity of History

Some book titles are so compelling that you’d feel guilty if you didn’t at least pick the book up and skim it. Such is the case with Ged Martin’s book, Past Futures: the Impossible Necessity of History (University of Toronto Press, 2004), based on the 1996 Joanne Goodman lectures at the University of Western Ontario. Despite his thoroughly convincing arguments that historical explanation, as we know it, is methodologically and analytically impossible, he managed to convince me that it is nonetheless worth doing. This is the kind of book that people used to describe as a tour de force. What’s Martin’s argument?

A small town that time has (almost) forgotten.

A small town that time has (almost) forgotten.

He asserts that the data available to historians are hopelessly incomplete, the models they build are fraught with selection bias, and our view of the past is unjustifiably judgmental. He advocates giving up traditional historical scholarship in favor of locating events in time, identifying their relationship to each other, and connecting them to the provisional present.

In terms of data, three problems confront anyone turning to the historical record for evidence about what “happened in the past.” First, throughout most of human history, very little that happened was permanently documented. Hugely significant events went unrecorded or noted with incomplete details using fragile techniques and materials, which disintegrated, burned, and were lost forever. Second, only a minuscule fraction of the population has ever been in a position to actually have their actions recorded. Much of what we do know about the past concerns that vanishingly small segment of the population some have recently labeled the 1%: elites who had the luxury of employing others to document what they did or the resources to create semi-permanent records using materials such as stone or parchment. The vast majority of the population engaged in activities that are now essentially invisible to us, although forensic anthropology and archaeology are pretty good at working with the few artifacts we can find. Third, more problematic is the tendency of those people who did leave records behind to engage in hyperbole, self-aggrandizement, and untrustworthy accounts of the role they actually played in historical events. Although the rise of modern digital technology would seem to have improved matters greatly, Martin argues that the problem still exists, but now on a grander scale. It is simply impossible to know everything that happened in the past.

In terms of model building, contemporary historians are in the unfortunate position of knowing exactly how things turned out. First, scholars are tempted to build their explanations backwards, starting from outcomes and then searching for plausible prior events, continuing back through history until reaching a “satisfactory” explanation. But, they will be working with historical materials left behind from each era by people who had their own theories of why things had happened and structured their documentation accordingly. Second, almost all events have multiple causes.  Prioritizing them and determining how much leverage each exerted on an outcome of interest is nearly impossible, given the data problems mentioned above. Martin compares this task unfavorably to the situation that laboratory scientists work with, which allows them to run multiple experiments, under conditions where they can control many possible causes, and isolate the influence of specific factors. By that test, of course, almost all social science explanations will also fail. Third, and perhaps more important, uncertainty permeates every aspect of human activity, with people facing multiple options at every turn. Even focusing on “decision-making,” as Martin advocates, doesn’t remove the problem of people having only the faintest of ideas concerning what’s going to happen next, given the action they take. Moreover, because we have no way of getting inside the heads of the people who made those important decisions, we can only speculate as to what they were thinking at the time they acted.

The “past futures” of the title refers to the fact that from the perspective of the present, everything in the past could be viewed as the realized futures of people who had little clue as to what was coming next. Today, we are their future, but it is highly unlikely that one any of them foresaw it. In writing history by looking backwards, from the present, it is tempting to make our “known past” part of our explanation by treating it as the intended future of humans who were making decisions about what options to pursue. But of course, lacking clairvoyance, they had no ability to imagine all the possible futures that would unfold. Nonetheless, the temptation to write linear, coherent narratives about why things had to happen the way they did overwhelms most scholars.

But wait, there’s more! Martin also takes historians to task for imposing normative judgments on the actions of historical figures, using contemporary values. The severity of the normative judgment increases, the further back in time the historian travels. He uses the example of people involved in the slave trade in the 17th and 18th centuries, as well as more contemporary examples. Martin’s point is that such normative judgments cloud the construction of analytic arguments, biasing the selection of cases and causal principles.

Despite the incredibly bleak picture Martin draws of the impossibility of historical analysis, he nonetheless concludes his book with the argument that contemporary social scientists “need” historical analysis. Giving up their quest for comprehensive explanations of historical events, historians can instead simply locate events in time and identify their relationships to one another. They can tentatively indicate which events were more significant than others by making comparisons to possible alternatives, now known because we have the luxury of looking backwards. Abandoning the conceit of the superior present, they can remind us that “each succeeding present is merely provisional, nothing more than a moving line between past and future.”

Discerning readers of my blog post will now recognize why I like this book so much: this is a very evolutionary argument, cognizant of the need for humility in building tentative explanations of social phenomenon. “Past futures” are always explicable, if one is willing to commit the kinds of methodological and analytic fallacies that Martin points out. Don’t go there. He argues that contemporary historiography has plenty to do, without falling into the trap of building “neat and tidy” explanations. Instead, historians can make us aware of our own ethical standpoints and caution us against ransacking the past for justifications of currently favored policies. The future awaits us, but it is probably not the one that we envisioned, nor could we.