Three articles from the Wall Street Journal show the strange myopia of businesses and business groups when it comes to politics. One article detailed how big retailers (Home Depot, Wal-Mart, Lowe's, Target) are warning employees about the possibility that a Democratic sweep could give unions the upper hand (translation: vote Republican!). A second describes how the U.S. Chamber of Commerce is mounting a huge $35 million campaign—twice the amount it spent in 2006 Congressional races—to support "almost exclusively Republicans in contested Senate races." And Federal Express CEO Fred Smith gave an interview to the editorial page in which he endorsed Sen. John McCain: "Because I agree with him on trade, taxes, energy and health care."
Let's take each in turn. Big retailers such as Home Depot, Wal-Mart, and Target, the Journal reports, are freaked out that Obama and a Democratic Congress would pass the Employee Free Choice Act, "which would do away with secret balloting and allow unions to form if a majority of employees sign cards favoring unionization." Now, don't get me wrong. EFCA may be a disaster for retailers. But of all the woes facing companies—the credit crunch, crappy growth, a disastrous job market, a lost decade in the stock market—unions are the least of their problems. So far this year, legions of retailers have gone bankrupt—Steve & Barrys, Linens'n'Things, the Ponderosa and Bonanza restaurant chains—victims of excessively optimistic projections, poor expansion choices, mismanagement, and horrific capital structures. Unions had nothing to do with their failure.
Retailers that survive face a bigger challenge. We've just concluded an economic expansion in which median incomes failed to rise. The people who shop at Wal-Mart, Home Depot, and Target are basically making the same amount of money they were in 1999. There are a host of reasons why wages failed to rise in this expansion, among them: globalization, outsourcing, and a decline in the educational attainment of workers. But unions aren't one of them. What's more, long-term stock charts put the lie to the binary concept—Republican, anti-big-labor good, Democrat, pro-big-labor bad. Check out these charts of Home Depot (up about five fold in the Clinton years, down about 60 percent in the Bush years), or Wal-Mart (boom in the Clinton years and drift in the Bush years, or Target (ditto).
Now, with consumer confidence at a record low, credit difficult to come by, and demand shrinking, retailers are facing a bleak outlook. And they're worried about the prospect of greater unionization at some point in the future?
The U.S. Chamber of Commerce seems to be chiefly guilty of bad timing. While the Chamber technically doesnt endorse political candidates, on Oct. 23, it announced a big field operation to educate voters in battleground states. The Journal has also reported that it is pouring millions of dollars into Senate races to buck up Republicans such as Mitch McConnell, Susan Collins, John Sununu and Norm Coleman, along with token Democrat Mary Landrieu of Louisiana. More Democrats, the Chamber fears, would mean "policies favoring increased unionization, higher taxes, more restrictions on trade and more regulation on the financial-services and housing sectors." Once again, the past 16 years provide a great controlled experiment: eight years of a Democratic regime that was comparatively pro-labor, higher tax, pro-regulation and anti-free trade, followed by eight years of a Republican regime that was comparatively anti-labor, decidedly low tax and anti-regulation, and pro-free trade. Pop quiz: for the members of the Chamber of Commerce, and for corporate America at large, which eight years were better? (And as a matter of pure political strategy: Is it wise for the Chamber to spend millions against a Democratic party that is likely to control Congress and the White House?)
Federal Express CEO Fred Smith couched his binary political take more as a matter of personal preference and less as a question of what would be good for the company he runs. (He endorses McCain "Because I agree with him on trade, taxes, energy and health care," and doesn't endorse Obama because "I just disagree with him on trade and taxes and energy and health care.") Fair enough. But once again, one wonders what conclusions Smith might draw from the past 16 years of running Federal Express. From 1993 through 2000, the president was a guy he disagreed with on trade, taxes, energy and health care in office, and from 2001 through 2008 the president was a guy he agreed with on trade, taxes, energy and health care. How did that work out for a Federal Express shareholder? Check out this long-term chart of Federal Express and see for yourself.
So why do some members of the business class cling so bitterly to the notion that Democrats and unions inevitably spell doom while Republicans and the absence of unions always spell nirvana? It could be, as colleague Liza Featherstone suggests in the about-to-be-posted "Money Talks" podcast, that CEOs are really most worried about their personal income taxes, rather than the macroeconomic climate. Could be. But I suspect the real reason is theology. Just as religion frequently involves simplistic good/evil comparisons, members of the church of free enterprise frequently hew to the first (Thou shalt not unionize) and second (Thou shalt not bow down before Democrats) commandments.
In the past 16 years a bunch of really big picture economic developments have influenced the trajectory of the nation's (and the globe's) economy. These include, but are not limited, to: the Internet, free-trade agreements, the emergence of China and India, the fluctuating price of oil and commodities, and climate change. But the people we've elected to serve in Congress and in the White House haven't had much of an impact on any of those trends. In so many areas—home ownership, the stock market, investor participation rates—the past eight years have been something of a lost decade. We can't blame President Bush and former Republican Congressman Tom DeLay for all of this. But it's pretty clear that the policies promoted by a Republican President and a Republican-controlled Congress didn't do a lot to stimulate broad-based growth. At the very least, recent economic history should cause people to reexamine some of their assumptions about the relation between politics and the private sector. I'm not saying it doesn't matter who sits in the White House or who controls Congress. But it doesn't matter nearly as much as many businesspeople think it does.