One recurrent issue is whether a career politician is a better choice to ensure a prosperous national economic environment or is a candidate with extensive business experience? Who more likely to create the conditions for political and commercial satisfaction and growth? This issue received recent currency with media attention on self-made billionaire Oprah Winfrey after her talk at the 2018 Golden Globes Award. The issue also calls into question the relationship between government and the private sector and what each contributes to economic activity in a democratic environment.

Historically, presidents from the business sphere have performed below average when it comes to U.S. economic activity, although the sample is statistically small. Jimmy Carter turned around his father’s farm but struggled during the stagflation of the 1970s. George H. Bush was a successful oilman but had difficulties managing the economy after taking over from Ronald Reagan. His son, George W. and the first president with an MBA, made a fortune with the Texas Rangers baseball team but left the country with the “Great Recession” of 2008 and massive debts due to war in the Middle East. Herbert Hoover, who was elected 1928, was engineer and silver mining magnate but failed to ward off the Great Depression. More successful was Warren Harding, a newspaper publisher, who presided over “the roaring twenties” and Harry Truman, who, although a failed businessman, saw the country through the end of World War II and the post-war economic boom.

Trump inherited a fortune from his real estate father and developed an international brand of luxury condos and homes targeted at global elites. Although a media celebrity throughout his career, he never held a government position nor ran for office. His first year as US president saw the extension of the seven-year economic recovery from the Great Recession, primarily due to advances in asset prices due to low interest rates and tax cuts.

But rather than address the capabilities of Trump directly, I will examine some of the structural characteristics that make the success of the economy, a priority for political leadership in democratic political economies. DPEs are republics that have politicians represent the populace in managing governments and their public administrations. This blog post expands on the notion that a division of labor has emerged in DPEs and examines the structural pressures which drive both the public and private sectors towards a common objective – success at the macroeconomic level – despite differing approaches and competences.[1]

Companies drive economic activity by investing in potential profit-making activities. Failure to attract investment within a national boundary can raise significant difficulties for a government and its internal populace. The globalization of commerce and finance since the 1970s has created new forms of competition for capital by national and even regional governments. This trend has challenged the tax base of these governments as they compete to offer better tax deals to multinational capital. The competition for jobs has also reduced wage rates, further eroding tax revenues.

While capitalists are often quite capable of success at the microeconomic level, they are not in a position to manage the economy as a whole. Towards procuring that success, corporations lobby governments and conduct other activities to influence government actions that will help their companies and industry.

Entrepreneurs and other people in business and professional services tend to be highly focused on their own profitability while spending only limited resources on community and civic affairs. Private activities are insufficient to maintain parks, libraries, roads and other public goods that enhance the quality of life. As a result, democratic political economies tend to divide the responsibilities for modern economic life. Corporations focus on commercial and fiduciary success. Governments provide, among other things, a judicial system to protect contracts, a monetary system for transactions and price stability, educational support to train workers, and administrative support to protect the populace from pollution and other dangers. Each shares an interest in robust commercial activities, albeit for differing reasons.

When it comes to ensuring a successful and prosperous political economy, democratic societies have certain structural conditions which guide the emergence of their particular form of capitalism. Neither the public nor private sector in modern democratic societies have sufficient managerial or policy competences to ensure a successful economy. Both rely on a vigorous economy for their success. Each needs economic success to satisfy their respective electoral and fiduciary constituencies. Despite the division and differing reasons, the goal is the same, a vibrant economy that will ensure both profits and political success. The political and commercial spheres both have an interest in macroeconomic success.

Governments look to the fruits of a growing economy to pay for debt interest, defense, and other services, including welfare. Their goal is to maintain a happy populace that will keep them in office. They want a prosperous economy to keep people employed, keep share prices high, and investment flowing into productive activities that will not only keep people feeling economically secure, but provide tax revenues.

The private sector, in general, is unable to ensure overall capitalistic growth on its own. It lacks sufficient organizational and policy consciousness to ensure success at the macroeconomic level. While corporations are often quite capable of success at the microeconomic level, they are not in a position to manage the economy as a whole.

The private sector wants growth and profits as well. Corporations strive to fulfill their fiduciary responsibilities – maintaining high profits for owners and shareholders. Towards procuring that success, they lobby governments and conduct other activities to influence government actions that will help their companies and industry. However, while these attempts may help individual companies or industries, they are insufficient to ensure the success of capitalism as a whole.

An interesting situation emerged with President Obama’s “You didn’t build that” statement during the 2012 presidential election campaign.

“If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.”

The statement quickly received criticism by Governor Romney, a successful businessman, and others as an example of government encroachment in the private sector. The criticism echoed a similar critique against Vice-President Al Gore’s “I took the initiative to create the Internet.” Certainly, the Internet has progressed to be a major medium of global commerce due to entrepreneurial initiatives and accomplishments. However, much of the initial research and development, as well as the policy framework, was created by a wide range of government actions that transformed what was essentially military technology into commercial products and services.

The Republic’s Interest in the Economy

In the first of the major structural mechanisms that Fred Block proposed to explain why government officials pursue policies that are in the general interest of capitalism, he draws on the work of Claus Offe (1976). The officials of the government, according to this view, are to some extent dependent on the level of economic activity that: 1) allows the state to finance itself through taxation or borrowing; and 2) maintains popular support among the voting citizenry. Significant business investment, high levels of employment and minimal amount of government competition for surplus capital make up the most common strategies for ensuring high levels of tax receipts while keeping the voting public relatively content.

Governments require a tax base to help fund their activities, whether meeting the bureaucracy’s payroll, building infrastructure or funding defense. According to Modern Monetary Theory (MMT) governments provide a monetary system to standardize the currency used in the collection of taxes.

Taxes are policy decisions that affect different people, advantage different groups, make possible certain governmental directions. They tax a combination of capital gains, income, sales of goods and services, etc. Inheritance taxes for example, are meant to not only collect revenues, but impose a cost on the transfer of wealth and limit familial privilege and class divisions.

Administrations also produce debt instruments that help finance government activities. In the global digital financial economy, debt produced through government securities increasingly fund a significant amount of education, healthcare, military, research and other expenditures.

These instruments also provide an important hedge for the financial sectors. The global trading environment requires constant trading in a large variety of financial instruments. Government debt allows traders to increase trading activities by allowing them to hold government securities in their portfolios and trade them constantly.

Common economic doctrine argues that governments compete with the private sector for capital but in reality, the increase in government spending increases the financial sphere by expanding the trading environment, facilitating transactions, and providing instruments for risk reduction. This is a dangerous trend for governments, but financial institutions apply pressure to increase the amount of debt in circulation.

Elected officials also need to keep the voting populace materially happy to stay in office. Economic indicators play a vital role in the public’s perception of the economy. These indexes provide numerical representations of various states of the economy, from consumer confidence, to price levels and the latest unemployment rates. In an age when pensions and retirement accounts are invested in the financial markets, the public also follows such indicators as the Dow-Jones Industrial Average (DJIA) and NASDAQ to gauge their personal wealth. Policies that increase corporate wealth, such as tax cuts, are seen by many voters as more valuable than government expenditures on food stamps or other forms of personal welfare as they increase stock prices.

Significant structural relationships make the business of the economy, the business of government. For one, modern democratic governments have significant fiscal determinants that compel them to establish a major stake in the economy. Relying on taxation and borrowing to propel their activities and programs, they need to ensure a robust commercial sphere in order to obtain the needed financing to run the government, provide for the national defense, monitor the economy, and conduct special programs.

The business class is acutely aware of the influence government has on their interests and work towards shaping that influence, whether it be depressing the minimum wage, alleviating environmental restrictions, or shaping tax policy. Many critics of democratic political economies argue that influence gives capital concerns sufficient control over the state. For Block however, it is the first of several reasons, the “icing on the cake.” Other structural factors are at work and need to be considered.

Influence Channels and Cultural Constraints

Two “subsidiary structural mechanisms” are also important when it comes to shaping the actions of public administrators towards economic growth. These are influence channels and cultural hegemony.

The first of the subsidiary structural mechanisms are the influence channels. The private sector can exert significant pressure on the state through its ability influence politicians, especially in a media age requiring significant expenditures on TV and other mediums for advertising. The aims of this influence have generally been oriented towards the procurement of government contracts, favorable legislation, tax cuts, regulatory relief, labor control, and specific spending in certain areas. They are most often lobbying activities, campaign contributions, and other favors. The high costs of elections, particularly media buys for procuring elections, have tied government officials to the influence of economic concerns.

Undoubtedly, issues related to bribery, coercion, and the revolving door into higher paying jobs may be factors that influence policy actions, however, this does not discount larger structural factors at work.

Cultural hegemony was cited as a second subsidiary structural mechanism. Unwritten rules infiltrate democratic political economies, which tend to indicate what is and what is not acceptable state activity. “While these rules change over time, a government that violates the unwritten rules of a particular period would stand to lose a great deal of its popular support. This acts as a powerful constraint in discouraging certain types of state action that might conflict with the interests of capital.”[2]

A contemporary example is the cultural divide over the idea of “liberalism.” This term was recoded during the 1970s and 1980s as an attack on conservative culture, specifically religion and the belief in work and entrepreneurial activity. This attack was also located in the work of the US government. President Ronald Reagan was a strong voice in the articulation and critique of “liberalism” and promised to “get government off our backs.” This divide has been a dominant cultural characteristic of the modern US political debate.

More recently, President Trump withdrew the US from the Paris Climate Accords. While not as popular as Reagan, Trump appealed to a growing backlash against the calls for government action to address the consequences of climate pollution influencing weather effects around the world. Many were convinced that such actions would too expensive and hurt economic progress. Others refused to believe the scientific discourse on the topic. But mostly, strong interests in petrochemical-related industries drive the discussion on climate change through media technologies such as astroturfing to avoid a major “carbon bubble” collapse. For the most part, liberal progressive movements have embraced sustainable technologies and renewable energies such as hybrid cars, solar panels, and vegetarianism.

Summary

Government and corporations, while sharing broad common objectives for a robust political economy, have differing motivations and strategies for reaching these aims. Despite the division and differing reasons, the goal is the same, a robust economy that will ensure both profits and political success. Neither can, by themselves, ensure successful economic growth, but by recognizing this division of labor, and the structural properties that guide each sector, democratic political economies can guide government and corporations towards mutually reinforcing successes.

Notes

[1] Claus Offe and Fred Block have been particularly influential in examining these relationships. When I was in grad school one of my minors was public administration. One the authors that interested me was the sociologist Fred Block. He delineated a set of structural mechanisms that determine the relationship between governments and the private sector in modern economies.
[2] I originally wrote a version of this essay in graduate school. I was reading a lot of public administration as well as neo-Marxist state theory. Fred Block’s work was particularly useful and much of the ideas of a structural division of labor is based on his work, including this quote on p. 14.

Citation APA (7th Edition)

Pennings, A.J. (2018, Jan 11). Ensuring Successful Democratic Political Economies. apennings.com https://apennings.com/democratic-political-economies/ensuring-successful-democratic-political-economies/

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Anthony J. Pennings, PhD is Professor and Associate Chair of the Department of Technology and Society, State University of New York, Korea. Before joining SUNY, he was on the faculty of New York University teaching comparattive political economy, macroeconomics, and digital economics. Previously, he taught at St. Edwards University in Austin, Texas, Marist College in New York, and Victoria University in New Zealand. He has also spent time as a Fellow at the East-West Center in Honolulu, Hawaii.

Category: democratic political economies
Tags: democratic political economies (DPE) > Jimmy Carter > Warren Harding

Times Square’s Luminescent News Tickers and Public Spaces

Posted on | January 1, 2018 | No Comments

Times Square has a storied history as one of the planet’s more recognizable public spaces. Its “zipper” is an electronic news display that has reported and reflected our collective response to news events. It helped establish Times Square as the place to be when major events happen, as we are reminded every New Years Eve.

Each December 31, crowds gather to celebrate the dawning of a new year (Except for pandemic-ridden 2020). Thousands line up, often in freezing cold weather, to see the famous crystal time ball drop. The ball was created by Walter F. Palmer as a way to celebrate the arrival of 1908 and was inspired by the Western Union Telegraph building’s downtown clock tower that dropped an iron ball each day at noon. Now millions participate with the Times Square crowd as television audiences from around the world tune into the final countdown.

Times Square is now flooded with variously evolved reader boards (Reuters, ABC, Morgan Stanley, etc.), all based on the original 1928 Times Tower electric ticker.

Evan Rudowski argues he was sending tweets long before Twitter emerged in 2007. In 1986, Rudowski got a job scanning the newswires like AP and UPI and entering short 80-character news briefs into what has been called the “Zipper”, a five feet high and 880 feet long electric display providing breaking news and stock prices to the passing crowds. He typed in the messages on an IBM PC and transmitted them from an office in Long Island to the famous ticker display at One Times Square in New York City.

In 1928 the New York Times encircled its signature building with an outdoor incandescent message display. In its November 1928 print edition, it headlined “HUGE TIMES SIGN WILL FLASH NEWS.” It explained, “Letters will move around Times Building telling of events in all parts of the world.”

The zipper’s first message announced the results of the 1928 Herbert Hoover – Al Smith presidential election. The crowd reaction was probably mixed as the loser Al Smith was from New York. On the other hand, he didn’t even carry the state in the electoral college.

Nevertheless, the zipper would reach out to the nation through major announcements such as the bombing of Pearl Harbor, the end of World War II on V-J Day, the assassination of President John F. Kennedy, and the release of 52 hostages that were held in Iran for 444 days.

The surrender by the Japanese drew one of the biggest crowds. On Aug. 14, 1945, the “zipper” flashed: “***OFFICIAL***TRUMAN ANNOUNCES JAPANESE SURRENDER” just after 7 pm that evening and the Times Square crowd exploded in celebration. A picture of a sailor kissing a young nurse he didn’t know by Photojournalist Alfred Eisenstaedt memorialized the event as it symbolized the relief of a dramatic war coming to its end.

The foot traffic in Times Square is extraordinary, with the daily number of pedestrians exceeding 700,000. It’s a mesmerizing and sometimes dizzying experience as you cross 42nd street on your way up Broadway. Hundreds of different displays provide a kaleidoscope of vivid imagery.

For a history of the stock ticker, see my post on Thomas Edison.

Notes

© ALL RIGHTS RESERVED

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Anthony J. Pennings, PhD is Professor and Associate Chair of the Department of Technology and Society, State University of New York, Korea. Before joining SUNY, he taught at Hannam University in South Korea and from 2002-2012 was on the faculty of New York University. Previously, he taught at St. Edwards University in Austin, Texas, Marist College in New York, and Victoria University in New Zealand. He has also spent time as a Fellow at the East-West Center in Honolulu, Hawaii.

Category: creative cities, financial news, telegraphic political economy
Tags: stock ticker > ticker tape > Times Square > Times Square zipper > V-J Day

Auctioning Radio Spectrum for Mobile Services and Public Safety

Posted on | December 17, 2017 | No Comments

The breakup of AT&T in the 1980s created new opportunities for new companies to emerge and offer new services, including wireless or mobile telecommunications. Wireless systems lacked the spectrum or infrastructure for broadband and telcos were restricted by their “common carrier” status from carrying content at the time. Government policy needed to address the issue of supplying the public’s radio spectrum to private carriers to enhance the nation’s telecommunications abilities, its e-commerce or “m-commerce” opportunities as well as the ability to protect the public safety and respond to disasters.

Since the 1970s, the Federal Communications Commission (FCC) had segmented the spectrum to provide two analog cellular licenses in about 500 geographically separated areas. One was traditionally given to the Bell system (later to each of the Baby Bells) and another was awarded in each area by lottery. The second license was often subject to various speculation schemes, creating thousands of “cellionaires” and driving up the costs of mobile telephony. Additional costs were added by the high prices the Bell companies charged for interconnecting the wireless portion to the larger public-switched network.

In 1991, President Clinton signed the Emerging Telecommunications Technology Act to release radio spectrum to the private sector. Previously, cellular offered its services with only 50 MHz of spectrum. The Act allocated 200 MHz to be released over a 10-year period for a variety of wireless offerings such as PCS (Personal Communications Services). PCS emerged in recognition of the necessity to expand mobile services beyond car phones on roads and highways to a wider array of antennas that would serve more sophisticated services and extended mobility. A plan in Washington D.C. emerged to privatize parts of electromagnetic spectrum.[1]

The Omnibus Budget Reconciliation Act of 1993 had a rider that allowed the FCC to auction off the public’s radio spectrum. Exercising his privilege as Vice-President, Gore broke the Senate tie and sent it on to the President to be signed. The legislation, which was the first bill to balance the budget in 30 years, gave the FCC the authority to privatize the wireless spectrum. On July 25, 1994, the Federal Communications Commission commenced Auction No. 1,
netting some $617 million in winning bides by selling ten Narrowband Personal Communications Services (N-PCS) licenses used for paging services. The subsequent auction in March 1995 raised $7.7 billion for the US Treasury as companies like Air Touch and AT&T procured valuable licenses to provide wireless services. Consequently, wireless communications prices went down and services expanded.

Technological advances led to a new generation of (2G) digital wireless in 1990. But it was still offered over circuit-switched networks meaning that each conversation still needed its own channel and was slow to connect. TDMA (Time Division Multiple Access) was becoming the standard in the US while GSM (Global System for Mobile Communications) was used in Europe and PDC (Personal Digital Communications) was dominant in Japan and used packet-switching technologies.

Soon, 2.5G standards provided faster data speeds with the use of data packets, known as General Packet Radio Service (GPRS). The new standards provided 56-171 Kbps of service and allowed Short Message Service (SMS) and MMS (Multimedia Messaging Service) services as well as WAP (Wireless Application Protocol) for Internet access. An advanced form of GPRS called EDGE (Enhanced Data Rates for Global Evolution) was used for the first Apple mobile phone and considered the first version using 3G technology. For a history see my previous post on wireless generations.[3]

In 2008, the FCC auctioned licenses to use portions of the 700 MHz Band for commercial purposes. Mobile wireless service providers have since begun using this spectrum to offer mobile broadband services for smartphones, tablets, laptop computers, and other mobile devices. The electromagnetic characteristics of the 700 MHz Band gives it excellent propagation to penetrate buildings and obstructions easily and to cover larger geographic areas with less infrastructure (relative to frequencies in higher bands).

By July 1, 2009, the U.S. Government raised $52.6 billion in revenues by licensing electromagnetic spectrum.

More recently public auctions of spectrum have been used to support the development of First Net, a nation-wide network for public safety and disaster risk reduction. The FCC raised $7 billion in spectrum auction to fund the network at the 700 MHz. Concluded in January 2015, the spectrum auction raised nearly $45 billion.

Notes

[1] From “Administration NII Accomplishments,” http://www.ibiblio.org/nii/NII-Accomplishments.html. October 25, 2000.
[2] Hundt, R. (2000) You Say You Want a Revolution? A Story of Information Age Politics. New Haven: Yale University Press.
[3] Pennings, A. (2015, April 17). Diffusion and the Five Characteristics of Innovation Adoption. Retrieved from https://apennings.com/characteristics-of-digital-media/diffusion-and-the-five-characteristics-of-innovation-adoption/

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Anthony J. Pennings, PhD is Professor and Associate Chair of the Department of Technology and Society, State University of New York, Korea. Before joining SUNY, he taught at Hannam University in South Korea and from 2002-2012 was on the faculty of New York University. Previously, he taught at St. Edwards University in Austin, Texas, Marist College in New York, and Victoria University in New Zealand. He has also spent time as a Fellow at the East-West Center in Honolulu, Hawaii.

Category: mobile technologies, telecom policy and net neutrality

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