5 Forces, Politics, and Porter: ‘Why Competition in the Politics Industry Is Failing America’ – Part 1
Today’s article was submitted by Greg Loving, Contributor.
If our political system were an industry—the Political Industrial Complex—it would be valued at more than $16 billon. Furthermore, if you include the $3.6 trillion budget allocated by this apparatus at the federal and state level, it’s the biggest industry out there. But we don’t think about it as an industry, nor have we employed the tools of business analysis to understand why it functions the way it does. Professor Michael Porter and Katherine Gehl seek to change that paradigm in their recently released report “Why Competition in the Politics Industry is Failing America.” Using the five forces model for industry analysis, they uncover a system effectively serving special interests but not the interests of the American people.
It’s easy to cite recent examples of dysfunction in our political system: massive disapproval of the current administration (approval ratings of 37% domestically and 22% internationally), approval of Congress at a historically low 13%, an unprecedented downgrade of US sovereign debt driven by a lack of confidence in the underlying political processes. The list goes on. But to think of this as a recent phenomenon would be ignoring the long-term trends warning of a deteriorating political system for decades. Trust in the Federal government has steadily declined from 73% in 1958 to 20% today. Congressional deadlock on salient issues has progressively increased from around 26% to 74% of the time over the last 33 congresses. And despite an increasingly independent and diverse electorate, the percentage of moderates has declined from around 50% from each party in 1951 to 11% for Democrats and 1% for Republicans today. During this same timeframe, American competitiveness in the world has declined in ways that would require another article to enumerate. In business, a management team would be held accountable for this type of poor performance. But in the last Congressional cycle, the reelection rate was 90%. How can we expect our system to improve without an accountability feedback loop?
At the heart of Porter and Gehl’s research is the five forces model, applied to the Political Industrial Complex. The industry rivalry is characterized as a classic duopoly, with the Democrats and Republicans choosing not to compete head-to-head for the average voter but rather for reliable partisans at each extreme. However, unlike other duopolies—Coke/Pepsi, Boeing/Airbus—this is the only industry that sets its own rules and is not subject to anti-trust regulation. Huge barriers to entry have prevented new entrants, with no new major parties since the Republicans in 1854. Substitutes such as candidates running as independents face massive disadvantages without access to party voter data, campaign infrastructure, and non-partisan political talent. Michael Bloomberg’s decision to forgo a 2016 Presidential run after a feasibility study illustrates how even those with formidable resources and weak competitors face long odds against the duopoly. Suppliers to this industry include politicians, think tanks, and lobbying groups, all of which have aligned themselves with either Republicans, Democrats, or both, preventing fresh ideas or new blood from entering the system. Finally, this system is well-designed to serve its customers, but those customers probably aren’t you. The duopoly reaches out to partisans who will deliver them victories in primaries and support special interests that generate significant funding for the parties such as guns, immigration, or reproductive rights. The twisted output is a system that is not incentivized to solve any of these issues, lest the funding dries up.
Why It Matters
I’m a generally apolitical engineer who has historically found politics to be a sideshow to the market forces that really drive human progress. But my mindset has shifted as we enter the 21st century facing massive, exponential challenges that will require public-private partnerships to be solved. The data on US social performance in the 35-member OECD are stark: 33rd in secondary school enrollment, 30th in child mortality, 32nd in homicide rate, 26th in political rights … and we only rank in the top half in 1 of the 23 categories measured. I personally care about issues like the Future of Work and manufacturing competitiveness—but after a Five Whys exercise to get to the root of these problems, I’ve concluded that effective government is a prerequisite to solving each of them. Likewise, whatever issue you hold dear—taxes, immigration, education, etc.—will also require effective governance to find a solution. Therefore, I argue that there should be no more pressing issue to American citizens today than reforming our political system, because all other issues rely upon its effectiveness.
How We Fix It
First, read Professor Porter and Katherine Gehl’s report. Second, share these concepts and ideas with friends, family, and anyone else who will listen. Based on polling, a growing percentage (39%) of the electorate identifies as independent and will be sympathetic to this cause. The established parties will have no choice but to pay attention to that block as it grows, but we need a well-articulated diagnosis of the problem before pushing a reform agenda. Finally, we should focus our efforts—through political philanthropy, volunteering, or evangelism—on reforms at the intersection of powerful and achievable. Solutions to the problems the report identifies like gerrymandering, ranked choice voting, and open primaries are all steps in the right direction that already have momentum and will make a difference. We should not deceive ourselves, these reforms will take a long time—decades perhaps—but they are of the utmost importance. As the shareholder versus stakeholder model of capitalism debate intensifies, it is critically important for MBAs to consider how or if business plays a role in solving this problem. But more importantly, as individuals and future leaders, it is up to us and our generation to fix broken competition in the politics industry.
Greg Loving (HBS ’18) hails from the great state of Kansas and went to KU. Prior to HBS, Greg was an engineer in the energy industry. He enjoys reading, foreign affairs, and case exhibits.
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