The Powell Memo: A Call-to-Arms for Corporations

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When he penned his influential memo, Lewis Powell was chair of the Education Committee of the Chamber of Commerce. The Chamber was one of a number of business groups that responded to the emerging threat by becoming much more organized. The Chamber doubled in membership between 1974 and 1980. Its budget tripled. The National Federation of Independent Business (NFIB) doubled its membership between 1970 and 1979.[7]

Recognizing that lawmaking in Washington had become more open and dynamic, business groups remade themselves to fit the times.
The expansion of the Chamber and the NFIB signaled not only a rise in the collective capacity of business; it brought a harder-edged form of mobilization. Composed disproportionately of smaller firms, these organizations were especially livid about the rise of government regulation. Big companies had an easier time absorbing the administrative costs of complying with new rules, and more opportunities to pass the costs on to consumers. Moreover, business associations based on a multitude of small firms proved especially capable of mobilizing mass outrage, which would turn out to be a very effective political weapon.

Of course, big business fought back as well. In 1972, three business organizations merged to form the Business Roundtable, the first business association whose membership was restricted to top corporate CEOs. In part at the urging of Bryce Harlow, lobbyist for Procter & Gamble, this new organization combined two groups focused on relatively narrow business issues with an informal organization called the March Group. The March Group had grown out of a meeting with top Nixon administration officials and prominent executives and was designed to bring together many of the nation’s most powerful CEOs. Within five years the new mega-organization had enlisted 113 of the top Fortune 200 companies, accounting for nearly half of the economy.[8]

The Business Roundtable quickly developed into a formidable group, designed to mobilize high-level CEOs as a collective force to lobby for the advancement of shared interests. President Ford’s deputy treasury secretary Charls Walker, a leading corporate organizer about whom we’ll say more in a moment, later put it this way: “The Roundtable has made a lot of difference. They know how to get the CEOs into Washington and lobby; they maintain good relationships with the congressional staffs; they’ve just learned a lot about Washington they didn’t know before.”[9]

Keeping Up With the Naders

The role of the business community not only grew but expanded, shifting into new modes of organization that had previously been confined to its critics. Recognizing that lawmaking in Washington had become more open and dynamic, business groups remade themselves to fit the times. The expanding network of business groups would soon be capable of hoisting the public interest groups on their own petards. Using rapidly emerging tools of marketing and communications, they learned how to generate mass campaigns. Building networks of employees, shareholders, local companies, and firms with shared interests (for example, retailers and suppliers), they could soon flood Washington with letters and phone calls. Within a few years, these classically top-down organizations were to thrive at generating “bottom up”–style campaigns that not only matched the efforts of their rivals but surpassed them.

These emerging “outside” strategies were married to “inside” ones. Business organizations developed lists of prominent executives capable of making personal contacts with key legislative figures. In private meetings organized by the Conference Board, CEOs compared notes and discussed how to learn from and outmaneuver organized labor. In the words of one executive, “If you don’t know your senators on a first-name basis, you are not doing an adequate job for your stockholders.”[10]

Business also massively increased its political giving — at precisely the time when the cost of campaigns began to skyrocket (in part because of the ascendance of television). The insatiable need for cash gave politicians good reason to be attentive to those with deep pockets. Business had by far the deepest pockets, and was happy to make contributions to members of both parties. Clifton Garvin, chairman of both Exxon and the Business Roundtable in the early 1980s, summarized the attitude toward partisanship this way: “The Roundtable tries to work with whichever political party is in power. We may each individually have our own political alliances, but as a group the Roundtable works with every administration to the degree they let us.”[11]

The newly mobilized business groups understood that Democrats and Republicans could play distinct but complementary roles. As the party with a seemingly permanent lock on Congress, Democrats needed to be pried away from their traditional alliance with organized labor. Money was key here: From the late 1970s to the late 1980s, corporate PACs increased their expenditures in congressional races nearly fivefold. Labor PAC spending only rose about half as fast. In the early 1970s, business PACs contributed less to congressional races overall than labor PACs did. By the mid-1970s, the two were at rough parity, and by the end of the decade, business PACs were way ahead. By 1980, unions accounted for less than a quarter of all PAC contributions — down from half six years earlier. The shift was largest among Democrats, who were of course the most reliant on labor money: Nearly half of Senate incumbents’ campaign funds came from labor PACs in the mid-1970s. A decade later, the share was below one-fifth.[12]

By this time, however, business PACs were shifting away from their traditional focus on buttering up (mostly Democratic) incumbents toward a strategy that mixed donations to those in power with support for conservative political challengers. Such a pattern was evident in the critical election year of 1978. Through September of the election season, nearly half of corporate campaign contributions flowed into Democrats’ coffers. In the crucial weeks before the 1978 election, however, only 29 percent
did. By the end of the 1978 campaign, more than 60 percent of corporate contributions had gone to Republicans, both GOP challengers and Republican incumbents fighting off liberal Democrats.[13] A new era of campaign finance was born: Not only were corporate contributions growing ever bigger, Democrats had to work harder for them. More and more, to receive business largesse, they had to do more than hold power; they had to wield it in ways that business liked.

Read the Powell Memo. (Download the PDF.)

Footnotes

  • 1. National Journal, 1974, 14.
  • 2. David Vogel, Fluctuating Fortunes: The Political Power of Business in America (New York: Basic Books, 1989), 59; R. Shep Melnick, “From Tax-and-Spend to Mandate-and-Sue: Liberalism After the Great Society,” in The Great Society and the High Tide of Liberalism, Sidney Milkis and Jerome Mileur, eds. (Amherst, MA: University of Massachusetts Press, 2005).
  • 3. Lewis Powell, “Confidential Memorandum: Attack on the Free Enterprise System,” August 23, 1971, quoted in Kim Phelps-Fein, Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan (New York: Norton, 2009), 158, 160.
  • 4. Thomas Byrne Edsall, The New Politics of Inequality (New York: Norton, 1984), 114.
  • 5. Vogel, Fluctuating Fortunes, ch. 8.
  • 6. Calculated from http://www.bea.gov/national/xls/gdplev.xls.
  • 7. Ibid., 198.
  • 8. Vogel, Fluctuating Fortunes, 198; John Judis, The Paradox of American Democracy: Elites, Special Interests, and the Betrayal of Public Trust (Pantheon: New York, 2000), 121.
  • 9. Quoted in Sidney Blumenthal, The Rise of the Counter-Establishment: From Conservative Ideology to Political Power (New York: Times Books, 1986), 80.
  • 10. Quoted in Leonard Silk and David Vogel, Ethics and Profits: The Crisis of Confidence in American Business (New York: Simon & Schuster, 1976), 65.
  • 11. Blumenthal, Rise of the Counter-Establishment, 78.
  • 12. Taylor E. Dark, The Unions and the Democrats: An Enduring Alliance (Ithaca, NY: Cornell University Press, 1999), 149.
  • 13. Vogel, Fluctuating Fortunes, ch. 8

Excerpt from Winner -Take-All Politics by Jacob S. Hacker and Paul Pierson
Copyright © 2010 by Jacob S. Hacker and Paul Pierson. Reprinted by permission of Simon & Schuster, Inc, NY. For more information please visit www.SimonandSchuster.com.

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