Satyajit Das: The Business of Politics

By Satyajit Das, a former banker. His latest book is ‘A Banquet of Consequences‘ (published in North America as The Age of Stagnation to avoid confusion as a cookbook). He is also the author of Extreme Money and Traders, Guns & Money

Electorates believe that business leaders are qualified for and likely to be effective in politics. Yet, with some notable exceptions, business people have rarely had successful political careers.

The assumption is that corporate vision, leadership skills, administrative skills and a proven record of wealth creation will translate into political success. It presupposes personal qualities such drive, ambition and ruthlessness. The allure is also grounded in the romantic belief that outsiders can fix all that is wrong with the political process. The faith is misplaced.

First, the required skills are different.

Successful business leaders generally serve a technical apprenticeship in the business, industry or a related profession giving them familiarity with the firm’s activities. Political success requires party fealty, calculating partisanship, managing coalitions and networking. It requires a capacity to engage in the retail electoral process, such as inspirational public speaking and an easy familiarity with voters in a wide variety of settings. It requires formidable powers of fund raising to finance campaigns. Where individuals shift from business to politics in mid or later life, he or she is at a significant disadvantage to career political operatives who have had years to build the necessary relationships and organisation to support political aspirations.

Second, the scope of the task is different. A nation is typically larger than a business. The range of issues is broader, encompassing economics, finance, welfare, health, social policy as well as defence and international relations. Few chief executives will, during a single day, have to consider budgetary or economic issues, health policy, gender matters, privacy concerns, manage involvement in a foreign conflict in between meeting and greeting a range of visitors varying from schoolchildren to foreign dignitaries as well as attending to party political matters.

Political leaders must also manage for the entire population rather than the narrow interest of investors. They must take into account the effect of decisions on a wide range of constituencies including many implacably opposed to their positions.

Third, business objectives, such as profit maximisation, are narrow, well defined and constant. Political objectives are amorphous and ideological. The emphasis is on living standards, security and social justice. Priorities between conflicting objectives shift constantly. The benefits of decisions by governments in infrastructure, education and welfare are frequently difficult to measure and frequently will not emerge for a long time.

Business decisions rarely focus on the societal impact. Firms can reduce workforce, shift production overseas, seek subsidies or legally minimise taxes. Politicians must deal with the side effects of individual profit maximisation decisions such as closed factories, reduced employment, welfare and retraining costs, security implications as well as social breakdown and inequality or exclusion.

Fourth, the operating environment is different. Businesses usually operate within relatively defined product-market structures. In contrast, governments operate in a complex environment shaped by domestic and foreign factors, many of which they do not control or influence. Government actions require co-operation across different layers of government or countries. Businesses can withdraw from certain activities, while government do not have the same option.

Fifth, within boundaries set by laws and regulations, business leaders enjoy great freedom and power to implement their policies. Boards of directors and shareholders exercise limited control, usually setting broad financial parameters. They do not intervene in individual decisions. Most important government actions require legislative or parliamentary support. Unlike commercial operations, government face restrictions, such as separation of powers, restraints on executive or governmental action and international obligations.

Business leaders have unrivalled authority over their organisation based on threats (termination) or rewards (remuneration or promotion). Political leaders cannot fire legislators. They face significant barriers in rewarding or replacing public servants. Policy implementation requires negotiations and consensus. It requires overcoming opposition from opposing politicians, factions within one’s own party, supporters, funders and the bureaucracy. It requires overcoming passively resistance from legislators and public servants who can simply outlast the current incumbent, whose tenure is likely to be shorter than their own.

The lack of clear goals, unrivalled authority and multiple and shifting power centres means that political power is more limited than assumed Many Presidents of the United States, regarded as the most powerful position on earth, have found that they had little ability to implement their agendas.

Sixth, unless they choose to be, business leaders are rarely public figures outside business circles. Politicians cannot avoid constant public attention. Modern political debate and discourse has become increasingly tabloid in tone, with unprecedented levels of invective and ridicule. There is no separation of the public and the personal. Business leaders frequently find the focus on personal matters as well as the tone of criticism discomforting.

There are commonalities. Both fields attract a particular type of individual. In addition, paraphrasing John Ruskin, successful political and business leaders not only know what must be done but actually do what must be done and do it when it must be done. A further commonality is the ultimate fate of leaders generally. Enoch Powell, himself a long-serving Member of the British Parliament, once remarked that all political lives end in failure. It is also true of most business leaders.

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  1. PlutoniumKun

    I think the key difference between successful politicians and business people is patience. When you look at the careers of successful politicians, you can often see many years of pure relentless grind going into a few years of glory in a senior position. Endless committee meetings, rubber chicken dinners, being nice to people you loath, the inevitable humiliation of losing elections. Most business leaders simply lose patience after a few years after they go into politics. Much the same seems to apply to military leaders, although off the top of my head I can think of more successful examples of the latter than of business people (Eisenhower and De Gaulle come to mind). Berlusconi comes to mind as a ‘successful’ politician and businessman, but then Italy does seem to be an outlier in some respects.

    One key difference I think between ‘good’ politicians and ‘good’ businesspeople is in making decisions. Good businesspeople are decisive. Good politicians never make a decision until they absolutely have to.

  2. PhilU

    This is clearly a consequence of ‘The government is like a household’ misinformation campaign, which I think is really conceptualized as ‘government is like a small business.’ So why not get a businessman to run the thing?

    1. Yves Smith Post author

      Interesting point. It also comes out of 30+ years of demonization of government as being less well run than business, when IMHO the problems of government are 1. the result of scale (think of how well run GM and Citigroup were in the mid 200s…and both are better now that they have downsized and shaped up) and 2. inevitable given that you do not want government employees making stuff as they go, i.e., overruling the legislature and courts. The latter point is that some rigidity is part of how government works, and it’s necessary to protect citizens.

      1. PhilU

        And look at that Mr. Businessman creating all those jobs. If we could just elect someone who would create jobs…. but none of those government bureaucrat jobs that I have to pay for!!!! They are all lazy freeloaders!

      2. human

        GM is a finance company with an auto manufacturer attached and Citi should have become nationalized from its corporate welfare support! It still sickens me, when I drive by Citi Stadium, to know that the $400M endorsement was made possible by taxpayers.

        “Protect citizens,” my ass. Where are the felony indictments for GM managements’ culpability in the wrongful deaths caused by their faulty ignition switches? Obama included for approving The Plan Forward ™.

        The “Goverment like a household” meme is pure mis-direction which has never served the populace. The US economy was in the doldrums heading into W’s administration … and then 9/11 happened and all sorts of corporate welfare and backdoor dealing suddenly became available as 100’s of billion$ were laundered to TPTB. ~ By Pam Martens and Russ Martens: September 11, 2016

      3. The Infamous Oregon Lawhobbit

        @Yves: Of course, let any libertarian suggest an obvious solution – scaling back the size and scope of government – and we’re looked at like we have lobsters crawling out of our ears. We’re repeatedly assured that we need Big Government, with Big Projects, spending Big Bucks – all being run by those politicians who’ve ground their way through the system establishing crony links … excuse me, I meant “connections with the system” … in the best interests of We The People.

        It’s amusing and amazing how the Big State people complain about the Frankenstein’s Monster they advocate for. They wanted it, they got it. I’ll just continue with my Willy Wonka sotto voce, “Wait. Stop. Don’t.”

        1. Left in Wisconsin

          You make a good point but posit an overly simplistic, unworkable solution.

          The “Big State people” are two distinct groups that for the most part have opposing ends. In one camp are the international corporations and their allies in government (including MIC) who want to keep our military spending larger than the rest of the world put together and want to extend American “influence” everywhere for all time. Some misinformationists in this camp like to tout a preference for small government – some of them even describe themselves as libertarians – but that is a lie. Spend time in the Capitol or any state house and you will see that virtually all of the work of government is done on behalf of, not in opposition to, big business.

          The second group, and I would posit the focus of your scorn (but maybe I’m wrong), are those of us that see government as the only bulwark against total international corporate domination (see above), and thus support activist government to 1) regulate the worst features of big business and 2) provide some base level of citizenship for all regardless of their personal economic “success.”

          OK, there is a third group, which is politicians who aim to please their voting constituents and political donors. For the most part I think they serve group 1, but they also like to be seen as “having a heart” (i.e. do the minimal for group 2) and they also tend to see voters through a middle-class prism, and so like to do things that are perceived as “helping the middle class.”

          My main point is that Big Government is essential to counteract the power of Big Business but that Big Government is in no way guaranteed to counteract Big Business and is always susceptible to 1) purchase by Big Business, 2) petty corruption and 3) incompetence, both inadvertent and intentional. The solution to the problem is good government, which is a real thing that has occurred in various places at various points in time (but is always contingent and threatened), not small government.

      4. ChrisPacific

        Which is what most bureaucracy is all about, even in healthy societies (I’m excluding malignant bureaucracy of the type found in the US).

        One of the political columnists I read is good at making this point. When people start railing against bureaucracy and government complexity, she responds by asking a lot of hypothetical questions (What if X happens? What if Y happens? What if Z happens? What if they all happen at once? What’s the fair outcome?) Then she points out that what we call bureaucracy is actually the sum total of our attempts to achieve a fair outcome in all those hypothetical situations. Yes it’s complex, cumbersome, frustrating, and slow-moving to the point of paralysis at times, but it’s the price we pay for a fair society.

  3. Sound of the Suburbs

    Adam Smith on the businessmen you shouldn’t trust:

    “The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”

    What they knew in the 18th century, we have forgotten today, but nothing has changed.

    He wouldn’t like today’s lobbyists.

    1. Sound of the Suburbs

      Neoclassical economics hid the work of the Classical Economists and the difference between “earned” and “unearned” income.

      Once you hide this it is easy to make it look as though the interests of business and the wealthy are the same.

      We lowered taxes on the wealthy to remove free and subsidised services for those at the bottom.

      These costs now have to be covered by business through wages.

      All known and thoroughly studied in the 18th and 19th Centuries, they even came up with solutions.

      There should not really be any tax on “earned” income, all tax should fall on “unearned” income to subside the productive side of the economy with low cost housing and services.

      This allows lower wages and an internationally competitive economy.

      Adam Smith:

      “The Labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every savage has the full fruits of his own labours; there are no landlords, no usurers and no tax gatherers.”

      Adam Smith saw landlords, usurers (bankers) and Government taxes as equally parasitic, all raising the cost of doing business.

      He sees the lazy people at the top living off “unearned” income from their land and capital.

      He sees the trickle up of Capitalism:
      1) Those with excess capital collect rent and interest.
      2) Those with insufficient capital pay rent and interest.

      He differentiates between “earned” and “unearned” income.

      The UK dream is to emulate the idle, rich rentier with a BTL portfolio, living off “unearned” income extracted from the “earned” income of generation rent, whilst doing as little as possible and enjoying a life of luxury and leisure.

    2. KYrocky

      “…who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”

      Adam Smith just described the modern Republican Party and movement Conservatives.

  4. Sound of the Suburbs

    We have seen left wing revolutions before; we are now dealing with a right wing revolution.

    Left wing revolutions usually involve much violence and eventually lead to tyranny, as any means are deemed acceptable to implement the one true solution and the new ideology. Pol Pot was the most extreme example where he decided to return to year zero by wiping out the bourgeoisie in Cambodia. When the dust has settled the revolution just leads to a new elite who maintain their ideology with force and brutality.

    When Francis Fukuyama talked of the end of history, a new year zero was envisaged, this one based on a right wing ideology. A right wing revolution that could take place globally and was not confined to individual nations like left wing revolutions.

    Its theories had already been tested in South America and Indonesia where extreme brutality was employed to implement their one true solution and the new ideology. The children of the US elite were the storm troopers of this ideology and they headed out from their elite US universities to bring this new ideology to developing nations. “The Chicago Boys” headed out from the University of Chicago to bring the new way to South American nations and “The Berkley Mafia” headed out from the University of Berkeley, California to bring the new way to Indonesia.

    Any means were deemed acceptable to implement the one true solution and the new ideology, e.g. torture, terror, death squads, snatching people off the streets and making them disappear permanently. Any left wing resistance had to be quashed by whatever means necessary.

    Their revolutions always massively increased inequality, a few at the top became fabulously wealthy and extreme and widespread poverty became prevalent at the bottom. Mixing with the people at the top, the elite US storm troopers deemed their revolutions a huge success. This ideology was ready to roll out across the world.

    Under this new ideology, the UK dream is to emulate the idle, rich rentier with a BTL portfolio, living off “unearned” income extracted from the “earned” income of generation rent, whilst doing as little as possible and enjoying a life of luxury and leisure.

  5. Norb

    Obfuscating the relationship between free markets and the role of government is coming to an end. So much failure and misdirection cannot hide forever. The cognitive dissonance set up in society is unsustainable- people don’t like to feel or experience crazy.

    Markets are stronger and healthier when backed by functioning government. Defining what good government is and demanding it is required today. That is the revolutionary force, finally turning back the negative campaign against government and demanding good government- fighting for it.

    Fighting fraud and corruption follows these same lines. Reading about the various forms of fraud and corruption here at NC daily provides the framework to address the problem. The real work begins convincing fellow citizens to not accept the criminality- the new normal. It is sometimes distressing seeing the reaction of fellow citizens to these crimes not as outrage, but more along the lines of begrudging admiration for the criminals. The subtile conditioning of the population to accept criminality needs a countervailing force.

    Modern mass media projects a false picture of the world. The meme they push is that violence and corruption are so pervasive in the world, vast resources must be expended addressing the problem, and when these efforts fail, settle for apathy and avoidance. The creation of the Businessman/Politician is the perfect vehicle to move this agenda forward.

    Politics controlling and driving business decisions must be reestablished, not the other way around- business driving politics and society. That truly is the distinction between authoritarianism and democracy. Small authoritarians are tolerable in society- large ones not so much.

  6. KPL

    Bang on. Especially being a political leader in a democracy is too tough and I am surprised that people want the job given the landmine they have to navigate and the compromises you have to make on a daily basis. Similarity is closest when you compare a benevolent dictator and a successful businessman, something like how Lee Kuan Yew ran Singapore.

      1. Robert Hahl

        It’s not immediately apparent that site policies are under the menu tab, upper left, which tab I never even noticed before.

  7. Robert Hahl

    “Enoch Powell…once remarked that all political lives end in failure. It is also true of most business leaders.” But that is also what they say about love. No good end can come of it.

  8. fenne

    Succesful businessmen project this false image of being fit for the job, being able to manage it all. They believe it themselves too, seeing the amount of dollars as proof of their being right. I know one personally that’s made quite a bit of money and hence thinks he knows it all and everybody else is such an idiot (especially progressives of course). But it seems to me he knows squat of the real world. As the article says, running a business is not the same as being a politician, or better said, a democratic leader. You need to know society, history, culture/tradition, the ideologies,.. Look at Trump, hasn’t read a book in his life, what does he know.

    It’s therefore peculiar and quite ironic how many see succesful businessmen and technocrats as solutions to incompetent politicians. Perhaps a big reason why politicians are loathed nowadays is actually because they’ve become more like businessmen, no longer being the great statesmen of old, no longer really having values besides the homo economicus ones. Because they engage in so much PR, treat citizens as customers (children, really) and try to sell them the product they want.

  9. RobC

    There is a mistaken assumption here that business people are responsible for their own or their organization’s success. Or even that they’re qualified as business people. The higher up the business ladder you go, the more it is other people making the important decisions, even deciding what you think, do and say.

    In this way it’s similar to politics. It’s likely that neither the successful business person nor the politician is qualified for their roles, that nobody can be. Also their roles are essentially to be authorities, and likewise nobody is truly qualified nor has the justification or legitimacy for authority.

  10. shinola

    This bit of convenient fiction caught my eye:

    “Political leaders must also manage for the entire population rather than the narrow interest of investors.”

    Perhaps political leaders should do this but, as has been recently shown, there is no basis in reality that this is any kind of requirement (as in “must”).

    1. Robert Coutinho

      Perhaps his use of “must” in this case is talking about the intrinsic requirement. In other words, even if they are managing negatively for some and positively for others, they are managing for all.

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