President George Washington in his farewell address in 1796 talked about the dangers of partisanship and the formation of strong parties.
John Adams, concerned with the Constitution’s limitations, said, “There is nothing which I dread so much as a division of the Republic into two great parties, each arranged under its leader and concerting measures in opposition to each other.”
So, the sounds you might hear in Mt. Vernon and Quincy are Washington and Adams flipping in their graves because their biggest fears have come true. The system they helped design has morphed over time, especially in the last 40 years, into a system that does not benefit citizens, only the political stakeholders within the two-party system.
(This is my 250th article and took several weeks for me to process and write so I hope what I learned might help you think differently about our government.)
Why Competition in the Politics Industry is Failing America. For about 15 years I taught strategic planning and during every course my students would read about and use Michael Porter’s Five Forces Framework to analyze the competitiveness of different industries. Porter is one of the world’s most astute experts on the structure of industries and how these structures impact competitiveness and serve customer needs.
About a month ago I listened to a podcast that stopped me in my tracks. It was a Freakonomics podcast called America’s Hidden Duopoly and it included Michael Porter and Katherine Gehl talking about their study of our Country’s two-party political system, which they concluded is a type of industrial monopoly they call an “uncontrolled duopoly”.
Then I read their 50+ page article called Why Competition in the Politics Industry Is Failing America. If you don’t have much time, at least read the eight (8) page Executive Summary and the Appendices, which are very compelling.
Porter and Gehl used Porter’s Five-Forces Model to evaluate the “Politics Industry,” which they say is now a “private industry.” The evidence they used to conclude our two-party political industry is indeed an uncontrolled monopoly or “duopoly” is very compelling. Their report finishes with suggestions for how we citizens can begin to change this monopolistic system.
Here are the key points I found most interesting. (In full-disclosure, because I do not want to misrepresent their great work, I often copy their words exactly as I try to give readers a shortened snapshot.)
- The political system or industry isn’t broken. Our two-party “politics industry” that we have today is financially very healthy and is even growing. It is healthy because the competition between the two parties for their own interests is quite robust. Over the last 40 years, especially, the politics industry has morphed and been re-designed to grow itself. In most industries, this is a good thing. However, the problem now is this particular industry only serves itself and not the public it was originally designed to serve.
- Citizens should expect four outcomes from a healthy political system and currently the two-party system delivers none – zero. The four outcomes are:
- Practical and effective solutions to solve our nation’s important problems while expanding citizen opportunities. Historically our government has done this, but the researchers found no examples over the past 20 or more years.
- Action. By action the authors mean legislation that actually matters and gets enacted.
- Reasonable broad-based buy-in by the citizenry over time. Good solutions should be able to gain support across a wide-range of citizens with varied beliefs. This requires leadership that is ahead of popular opinion and can inspire citizens, not divide them. Today’s structure gets its strength by dividing.
- Respect the constitution and the rights of all citizens. Good solutions reflect the rights of all citizens, not just special interests or simple majorities.
- The current political system is now a private industry that sets its own rules. It has become a type of monopoly called a duopoly. A duopoly is an industry controlled by two entities – two entities that make all the rules. These rules are mostly customized to benefit just the powerful stakeholders / customers within the industry at the expense of the less powerful. In a conventional duopolistic industry, like the soft drink industry with Coke and Pepsi, there are several external forces including Antitrust laws that impact the rule-making. There are no such external forces that impact rule-making in the politics industry.
There are five customer groups in this industry. The two parties prioritize service to these customers based on “the two currencies of politics – votes, money, or both.” Here are the customers from most powerful to least powerful:
- Partisan primary voters
- Special interest groups
- Average voters
One piece of research Porter and Gehl referred to regarding customer power was when researchers studied 1,779 policy issues handled by Congress, they found that average voters and non-voters had a statistically “near-zero” impact on those actions. They also found that politicians from both parties talked a great deal about these groups and the issues they faced and did virtually nothing for them.
- The structure of the politics industry has created unhealthy competition that fails to advance the public interest. When the writers get into the structural problems of the political industry and the competition between the two players, you can really appreciate their expertise. Porter’s strengths are in his assessment of competition and how it shapes industries. Here are seven key points about competition in the politics industry and why it can be viewed as a type of monopolistic structure.
- The two parties control all five key “inputs” into the industry – candidates, campaign talent, voter data, idea suppliers, and lobbyists. As a result, new political parties cannot gain access to these inputs. If “new entrants” can’t access the most important inputs, you have a monopoly. (SAW Note- The first major case and example was the Standard Oil Company owned by John D. Rockefeller, which controlled all the oil inputs. Standard Oil was broken apart in 1911 after the Supreme Court ruled they were violation of the Sherman Antitrust law.)
- The two parties’ control “media channels” for reaching voters. Because of partisan and special interest messaging, each party has coopted significant social and broadcast media outlets, which reinforces partisan competition and limits third party access.
- The two parties have erected nearly impossible “barriers to entry.” There have been no major parties created since the Republican Party in 1860.
- The “rivalry” between two competitors in a duopoly is constrained to avoid mutual destruction. Both parties know they each benefit when they reinforce their differentiation and separation from each other. They really compete by dividing up their customers into two ideological bases and reducing or eliminating any overlaps.
- Competing on division reduces accountability to a broad range of voters. Division allows each party to offer voters poor choices between either/or solutions. Examples are big government vs. small government, free trade versus protectionism, and regulation versus deregulation.
- Competing on division avoids compromise and reduce