[Excerpt] The wild enthusiasm business gave Nixon\u27s new economic policy stems not only from a longstanding business preference for Republicans but a short-run expectation of profit windfalls. In a moment of economic crisis the President turned to business to clear up America\u27s problems. In fact, if the record of the last quarter-century is to be believed, not only will the nation\u27s trouble remain unsolved but business will not get the anticipated bonanza either. The politics of business is clearly Republican, but it is not so clear that the Republican Party is good for business

Corwin, R.D.

Gray, Lois Spier

English

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11-1-1971 
Of Republicans and Recessions: Why Does Big Business Vote for 
Them? 
R.D. Corwin 
New York University 
Lois Spier Gray 
Cornell University, lsg7@cornell.edu 
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Of Republicans and Recessions: Why Does Big Business Vote for Them? 
Abstract 
[Excerpt] The wild enthusiasm business gave Nixon's new economic policy stems not only from a 
longstanding business preference for Republicans but a short-run expectation of profit windfalls. In a 
moment of economic crisis the President turned to business to clear up America's problems. In fact, if the 
record of the last quarter-century is to be believed, not only will the nation's trouble remain unsolved but 
business will not get the anticipated bonanza either. The politics of business is clearly Republican, but it is 
not so clear that the Republican Party is good for business. 
Keywords 
Nixon, republican, president, business, economic, crisis, voting 
Disciplines 
Economics | Labor Relations | United States History 
Comments 
Suggested Citation 
Corwin, R. D., & Gray, L. (1971). Of Republicans and recessions: Why does big business vote for them? 
[Electronic version]. Social Policy, 2(4), 41-43. 
Required Publisher Statement 
Copyright by Social Policy. Published version posted with special permission of the copyright holder. 
This article is available at DigitalCommons@ILR: https://digitalcommons.ilr.cornell.edu/articles/110 
The profit motive does not explain business support of the Republican Party. 
The fact is that business suffers when Republicans are in ofice. 
OF REPUBLICANS AND RECESSIONS: 
con- 
ling, 
dou- 
Why Does Big Business 
Vote for Them? 
t 
The wild enthusiasm business gave Nixon's new eco- 
nomic policy stems not only from a longstanding busi- 
I ness preference for Republicans but a short-run ex- 
pectation of profit windfalls. In a moment of economic 
crisis the President turned to business to clear up 
America's problems. In fact, if the record of the last 
quarter-century is to be believed, not only will the 
nation's trouble remain unsolved but business will not 
get the anticipated bonanza either. The politics of 
business is clearly Republican, but it is not so clear 
that the Republican Party is good for business. 
According to a Fortune magazine survey two years 
ago, almost three-quarters of the chief business exec- 
utives interviewed considered themselves Republi- 
cans, fewer than 10 percent said they were Demo- 
crats. Even when, almost two years later, the 
percentage calling themselves Republicans had fallen 
to 58, most of the dropouts considered themselves in- 
dependents, not Democrats. 
And, as Herbert E. Alexander demonstrates in his 
book Financing the 1968 Election, businessmen put 
their money where their mouths are. In 1968, officers 
and directors of General Motors gave $114,675 to Re- 
R. D. CORWIN is an assistant professor of  sociology at 
New York University. LOIS GRAY is the Metropolitan 
Director at the New York State School of Industrial and 
Labor Relations, Cornell University. 
publicans and $1,000 to Democrats; Litton Industries 
executives donated a total of $151,000 to Republican 
candidates and gave nothing to Democrats. In their 
campaign donations, members of thirteen major trade 
associations favored the Republicans eight to one. 
These contributions during the 1968 election reflected 
trends that have been relatively consistent in Ameri- 
can politics. 
It  is difficult to know for certain why businessmen 
support the Republicans so overwhelmingly. An ob- 
vious explanation is that it pays. But the obvious is 
deceptive, for the facts show the contrary. 
THE ECONOMIC RECORD 
It  is worth remembering that in the last quarter-cen- 
tury four of the five postwar recessions have occurred 
under Republicans and that the real rate of economic 
growth, the best index of economic performance, has 
increased more under Democratic than Republican 
Presidents. * 
For business these general trends show up in hard 
cash. According to the survey of corporate profits pub- 
lished by the First National City Bank, since World 
War I1 American business has had its best years under 
Truman, next best under Kennedy-Johnson, and worst 
while Eisenhower was President. Even big business, 
the Fortune 500, did better under Kennedy-Johnson 
"This point was developed by the authors in "Books and 
Ideas," Fortune, July 1971. 
41 
the ring of "sound dollars and ialanced budgets," ap: I 
peals to the ears. These are the phrases to which busi- 1 nessmen have been conditioned to respond. When , 
they hear Republican sounds, they are eager with 
. 
anticipation even though, in the end, they may not get 
the reward. Eventually, with Pavlovian logic, the bell 
becomes the reward. 
Another value for businessmen related to Republi- ; 
can ascendancy pertains to recognition and prestige-. I psychological benefits. When Republicans are in the 
White House, businessmen are treated with deference, 
even exalted. To a large extent the Democrats offer 
the same recognition, but in the latter case the spot- 
light has to be shared with other interest groups- 
labor leaders, minority spokesmen, and garden-variety 
outsiders. 
Even more important than prestige is a sense of I freedom from restraint, investigation, and harassment. 
Since many regulatory agencies were established dur- 
ing Democratic administrations, businessmen have the 
impression that Democrats are more vigorous in their 
regulatory activity. Freedom from restraint is impor- 
tant to the self-image of businessmen. I These, then, are values associated with Republicans , 
that transcend economics yet are attractive, even corn- 1 
pelling, to businessmen. Perhaps they form an ideologi- 
cal net that draws business to support the Republican 
Party. 
, 
than under Eisenhower. (No Fortune data were col. 
lected prior to 1954.) During the Nixon Presiderkcy / 
profit rates have turned down again. The difference 
in profit seems small when it is recorded as a per- 
centage (the rate of return was 12.7 percent under 
Eisenhower), but actually amounts to billions of dol- 
lars. tratio 
It  is curious that businessmen continue to invest in j other 
the Republican Party. Of course, it should be pointed dat:~ 
out that a preference for Republicans is not a life-and- again 
death choice for businessmen. Both major parties are 
committed to business values. In fact, many businec,s- 
men contribute to both Democrats and Republicans 
and make money no matter who is in the Whlte House. '; tribut 
Social scientists, even economists, have long recog- I able 
nized that people are willing to pay a price for no=- Alexa 
SOME GAIN-OTHERS LOSE 1 
economic preferences. Perhaps a GOP victory is just 
such a preference. Reassuring Republican rhetoric 
Businessmen may indeed be moved by these non- 
, 
economic factors, but a closer look at profit data sug- 
1 
gests that some businesses have it both ways. Whereas 1 
most industries do not benefit financially from ~ e p u b -  
lican administrations, some do. The Fortune data on 
banks have had a much better period under Eisen- 
the fifty largest commercial banks reveal that since I, 
1956, the first year Fortune published these data, big I 
hower than under succeeding Democratic adminis- 
is cot 
vide 
Richa 
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tors c 
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SHOR 
An 
Port 111 
based 
tions, ; 
and m 
!he ent 
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absol,,i 
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NOVEM 
". . . what many businessmen seem to want is reaffirmation of 
I 
cO1- i ency f 
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their ideology. . . . the ideology of the free enterprise system 
has become the businessman's opiate." 
trations. They have prospered, in fact, at a time when 
other businesses were being badly hit. Preliminary 
data for the Nixon Administration show that once 
again banks are prospering while other businesses are 
hurting. I t  appears that big banks, then, have an eco- 
nomic stake in Republican victory. 
Bankers, it turns out, make substantial political con- 
tributions. They are heavily represented on innumer- 
able corporate boards of directors; and, as Herbert 
Alexander and Harold B. Meyers have pointed out, it 
is corporation directors rather than officers who pro- 
vide most large political gifts. For example, in 1968 
Richard King Mellon, a financier and ex-General Mo- 
tors Board member, donated $65,000 to the Republi- 
cans,more than all the rest of CM's officers and direc- 
tors combined. In other words, what appears as a do- 
nation from an industrial representative may, in fact, 
be a banker's contribution in disguise. 
Heavy representation on corporate boards has fur- 
ther implications. By virtue of their strategic location, 
financiers occupy a position of influence in the key 
corporate centers of American industrial power. This 
influence was examined in detail by the Subcommit- 
tee on Domestic Finance of the House Committee on 
Banking and Currency. Richard Barber, in his book 
The American Corporation, draws on these hearings 
to argue that ". . . forty-nine banks have representatives 
on the boards of directors of 300 of the nation's 500 
largest companies." This creates power; for these 
forty-nine banks, Barber contends, hold more than 
half of the nation's bank trust assets, and have, as 
primary lenders of capital, "acquired trustee owner- 
ship of enough common stock in the judgment of most 
realistic observers of the corporate scene to provide 
effective control of almost 150 of the 500 largest U.S. 
industrial corporations." It is possible, then, that finan- 
ciers, who as a group profit from a GOP victory, not 
only contribute heavily to the Republican coffers 
themselves but are in a position to influence others to 
do so. 
SHORT-TERM PROFITS VERSUS GROWTH 
An alternative explanation of the prodigious sup- 
port business gives Republicans hinges on distinctions 
based on the size of companies. For large corpora- 
tions, growth or asset accumulation is a crucial goal, 
and may supersede profits as a test of success. Since 
the end of World War I1 the largest corporations have 
increased their share of the total corporate assets from 
48 to 60 percent and have registered remarkable 
absolute growth rates as well. It is possible that the 
economic lags associated with Republican ascendancy 
provide long-run opportunity for large companies to 
expand their share of the market. 
Indeed, recessions actually improve the growth 
prospects of some large corporations. Earlier it was 
noted that recessioi~s have tended to occur under Re- 
publicans. At the same time, business failures also in- 
crease. During Eisenhower's Presidency the average 
annual rate of business failure was twice what it was 
under Truman. Even more revealing, however, is the 
year-to-year trend, which shows that from 1953 to the 
present, the probability of business survival has 
tended to grow worse with each year of a Republican 
administration and better with each vear under the 
Democrats. In bad times, while smaller busiilesses are 
collapsing, industrial giants do not go out of business 
-they simply lose money for a while. When the next 
boom arrives. those firms that are still in the field are 
in a better competitive position. 
Bv the same token. recessions mav increase the vul- 
nerability of smaller'fims to be taken over by larger 
ones. Problen~s of raising capital, lowered cash flow, 
and inadequate reserves plague even the largest enter- 
prises; but for a smaller business, these issues may 
make the lure of "rescue" by a larger firm all but ir- 
resistible. In short, although a recession reduces prof- 
its. the Darwinian survival test it ~rovides mav actu- 
L 
ally contribute to the long-run profit picture of large 
firms by increasing their prospects for growth. 
Furthermore, opportunities for growth are provided 
not only by the business cycle but also by specific 
government actions-subsidies, tax write-offs, and for- 
eign investment guarantees. In 1970, for example, the 
oil industry had its poorest profit year since 1962. But 
reports in the national news media indicate that the 
Nixon Administration has given oil "a bonanza" bv 
" 
permitting a five-year program of extensive and accel- 
erated off-shore drilling. In 1968, American Petroleum 
Institute executives gave the Republicans over 
$429,000 and the Democrats less than $30,000. Having 
friends in Washington can h e l ~ .  
" 
When a Republican wins the Presidency, some busi- 
nessmen prosper, but most do not. Nevertheless, the 
overwhelming majority provides Republicans with 
money, the key measure of value. Although justifica- 
tion for these political contributions is presented in 
"hardheaded" business terms-balanced budgets, 
sound dollars, fiscal responsibility-what many busi- 
nessmen seem to want is reaffirmation of their ideol- 
ogy. If so, it appeers that few corporate leaders are 
able to capitalize on this conventional wisdom. In 
effect, the ideology of the free enterprise system has 
become the businessman's opiate. 


Of Republicans and Recessions: Why Does Big Business Vote for Them?

[Excerpt] The wild enthusiasm business gave Nixon's new economic policy stems not only from a longstanding business preference for Republicans but a short-run expectation of profit windfalls. In a moment of economic crisis the President turned to business to clear up America's problems. In fact, if the record of the last quarter-century is to be believed, not only will the nation's trouble remain unsolved but business will not get the anticipated bonanza either. The politics of business is clearly Republican, but it is not so clear that the Republican Party is good for business.Gray39_Of_Republicans_and_Recessions.pdf: 629 downloads, before Oct. 1, 2020

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