Lobbying America by Waterhouse Benjamin C

Author:Waterhouse, Benjamin C.
Language: eng
Format: epub
Publisher: Princeton University Press
Published: 2013-08-25T04:00:00+00:00

THE POLITICS OF REGULATION IN THE AGE OF LIMITS

One of the great ironies of industrial leaders’ steadfast devotion to reforming the regulatory state was that the campaign distracted their attention from the larger structural factors that were fundamentally reshaping American business, and indeed global capitalism. If Americans in the 1970s needed further convincing that the fount of prosperity they had enjoyed since the 1940s had come to a halt, Jimmy Carter drove the point home in his inaugural address, telling his fellow citizens that “even our great Nation has its recognized limits.”17 Although the American economy still loomed three times larger than its nearest competitor, Japan, the nation’s unquestioned international dominance over industries like steel, oil, agriculture, and even automobiles had become a thing of the past. The rapid rise of German and Japanese manufacturers in the late 1960s flooded the global market, leading the United States to run nearly constant balance of trade deficits after 1971—only in 1973 and 1975 did Americans export more manufactured goods than they imported.18 In response, the profitability of American industrial firms fell 40 percent between 1965 and 1973. The OPEC embargo of 1973–74 spawned the worst recession since the 1930s, pushing U.S. profitability down another 25 percent. Even after an anemic recovery during the Ford administration, profits in manufacturing remained significantly below their pre-recession levels. Unemployment hit nearly 9 percent during the 1975 recession and remained above 7.5 percent during the 1976 campaign, even as inflation hovered around 5 percent.19

As economic historians like Robert Brenner have argued, the crisis of profitability in American manufacturing resulted from overproduction by low-profit firms. Policymakers inadvertently abetted this process by stimulating aggregate demand, allowing low-margin manufacturers to remain in business by selling at high volume, as well as through financial deregulation that loosened restrictions on capital flows. Credit-market deregulation, as sociologist Greta Krippner has recently shown, encouraged corporations to borrow more and devote greater resources to investments and speculation in the financial markets at the expense of production.20 Yet while industrial executives certainly understood these shifts in the international patterns of production and investment, they frequently overlooked their broader implications and maintained a narrow focus on domestic issues, especially regulatory policy. As the fierce debates surrounding the Chrysler bailout in 1979 demonstrated, executives and their conservative political allies strongly believed that their profitability crisis emerged directly from the spate of regulatory requirements that firms had to comply with, not from growing global imbalances. In their minds, the “malaise” of the 1970s vindicated their long-held arguments against government regulation and provided a perfect opportunity to refocus the national debate on its burdens.

Although business-minded conservatives had complained about regulatory excesses for generations, their campaign for comprehensive reform received a major boost amid the inflation crisis during the presidency of Gerald Ford, whose policy preferences aligned more closely with those of top business leaders than had those of his predecessor. As one participant in a White House business-government relations meeting gushed to presidential assistant Bill Baroody Jr.: “[F]or the first

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