The New Relationship of Commerce to Politics:

Reexamining Political Action Committees

The history of American antagonism toward commercial engagement in politics is long and deep. Half a century before cartoonists and editorialists railed against robber barons and the Standard Oil trust, Americans were fighting over the corruption of a national bank and the political bribery generated by canal companies.

This long history of antagonism is beginning to change. Today, commerce interacts with politics through political action committees, or PAC's.

Most Americans believe that they understand PAC's and their role in our political life. Public opinion falls into two general categories: One-third strongly believe that PAC's represent undesirable domination of our political life by elite and powerful commercial groups; the remaining two-thirds hold a weak opinion that PAC's are acceptable, merely providing a voice for special interests.

A third group, numbering less than 100,000 people, is actively involved in the operation of PAC's. These people have more complex views about the role of PAC's and seldom discuss their views in public.

Because PAC's represent a new mode of commercial interaction with politics, and because public opinion may be diverging from historic norms, this is a historic issue.

PAC's Have Historic Significance

The historic significance of PAC's has been overlooked because their entry into the political domain was surreptitious. There was never a single vote or a single decision that created them. The functioning of PAC's has moved political donations out from under a veil of secrecy into the light of published accounting and public scrutiny. Furthermore, political contributions now support campaigns rather than serving as personal bonuses for elective officials. These changes signify shifts in power.

PAC History

The PAC in its present form was not invented intentionally. Rather, it grew out of collective political wisdom (or ignorance, as taste may dictate). In 1936, the Congress of Industrial Organizations, a coalition of unions, was the first incarnation of and the earliest model for PAC's. The CIO had a political arm and was vigorous in educating its members on the issues of elective politics, but it didn't have the funds to support candidates. Unlike corporations, which could hit up their senior employees with impunity, unions could not quietly solicit donations from their members to turn over to political candidates. In order to legitimize solicitation for this purpose as an openly administered process, unions sought and won authorization to form PAC's.

The first official PAC, the CIO&endash;PAC, was founded in 1943; in 1944, it raised $1.2 million. Slowly, other organizations recognized the value of turning to their own members for funds to support political action and formed PAC's of their own. In 1964, there were 11 business PAC's and hundreds of union PAC's. By 1974, there were 608 registered PAC's: 201 were unions, 89 were corporations, and the rest were trade associations. PAC contributions in 1974 totaled $19.1 million&emdash;and nearly half of that amount was from labor.

The PAC became the contemporary vehicle with which we are familiar as a result of three events that occurred in the 1970s, the first two of which were supported by unions:

1. The Federal Elections Campaign Act (FECA), enacted in 1971, significantly tightened disclosure laws for federal candidates.

2. Post&endash;Watergate political reform amendments were added to FECA in 1974, permitting PAC's to contribute generously to campaigns and setting an upper limit on individual donations of $1,000 per candidate per election.

3. Corporate solicitation of PAC funds from employees and the public was allowed pursuant to a third FECA amendment and Federal Elections Commission decision (SUN&endash;PAC).

With these step by step changes, the modern PAC was born.

By 1983, there were 3,525 PAC's; 1,658, or nearly half, were corporate. Their total expenditures were $220 million. Today, the number is many times larger.

Commerce, Large Institutions, and Political Representation

When the U.S. Constitution was drafted and debated by the Federalists and anti&endash;Federalists, there were only a few institutions more important than the family. These included state governments, monarchies, a small selection of political entities, churches, guilds, and associations such as the Freemasons (a combination of church and guild). In the United States in 1800, there were only 40 corporations and an estimated 3,500 partnerships. Nonagricultural income accounted for less than 25 percent of total GNP. By the 1990s, agricultural income had declined to 4 percent of total GNP.

The Constitution has been changed on seven occasions so far, but one change that constitutional amendment has not yet accommodated is the growth of commercial, nonagricultural institutions to their current magnitude.

In today's world, when we think of commerce, we think of large corporations. Other large institutions, such as universities and membership associations, also have commercial and political interests. For example, the University of California has more than 120,000 employees and no vote. Neither does the Red Cross have a vote, nor the U.S. Navy. Their employees and members do not vote as a block and cannot be counted on to vote primarily in their institutions' self-interest. Undeniably, however, these nonvoting entities do have strong political and policy interests.


Could any government survive long if commercial interests had little or no significant influence on that government? The answer has to be no. In the past decade, we have seen business as a revolutionary actor in causing the reform of governments that threatened economic interests. Two examples of domestic businesses taking control of a national government that had ignored their interests are Chile in the 1970s and Colombia in the late 1980s. Similarly, American business used American power to overthrow, or "reorient," the governments of Grenada and Nicaragua in the 1980s, and Japanese business used the government of Japan to redirect the governance in Thailand in 1993.

The way the political process was designed in the U.S. Constitution, power was given only to voters, and that power was further weighted in favor of landowners. In the founding period, voting and the control of capital were viewed as congruent. After two centuries, the power of voting has not retained equal influence with the power associated with control of capital. A few million Americans, each with one vote, control 90 percent of the commercial power in America, while the remaining 95 million voters control only 10 percent of the commercial power. The discrepancy in our Constitution, in other words, is that it assigns a minor direct voting role to the small percentage of people who today yield great commercial power, leaving the commercially weak super majority with the potential for unrestrained control of the society.

The Significance of PAC's

The modern PAC has become a socially acceptable equalizer. It enables commerce to exercise power in the political realm, in order to compete with the political power of citizen voters. Before the modern PAC, commercial power exerted its influence on the political realm surreptitiously and largely through institutions such as Tammany Hall.

What is interesting is that this phenomenon has gone from covert to overt in only two decades, gaining the acquiescence of a stunning two&endash;thirds of the voting public. It would be naive to think that previously covert activity is now 100 percent overt, but a rough personal guess would put it at more than 75 percent overt, representing a radical reversal since the first half of this century.

To recapitulate: PAC's annually spend hundreds of millions to billions of dollars to influence legislation and government policy. They do this openly, with nearly every dollar publicly accounted for. They are blatant in their behavior, giving inordinate sums to longtime incumbent Congressional committee chairmen and trivial amounts to flyweight newcomers from nowhere.

Accepted but Unappreciated

Public acceptance of the modern PAC has come about for two interacting reasons. First, Americans have a history of acknowledging and, uncomfortably, tolerating corruption. It is part of our tradition. Periodically, there have been organized bursts of voter outrage on a national scale. The two largest occurred in periods from 1890 to1915 and from1964 to 1980. Outside these two periods, public intolerance of corruption seethed but had little impact. Resignation to political corruption has been an American norm.

Second, Americans define corruption as payment to officials for political behavior that is contrary to the public interest or in violation of the officials' legal responsibilities, in deference to individual or special interests. The operative phrase in this definition is payment to officials &emdash;in a word, bribery.

Since 1975, the reliance on PAC's has all but erradicated the large-scale bribery of elected officials, at least as a standard operating procedure. This should have prompted great huzzahs and a sense that our country had turned toward a righteous path. That didn't happen, because petty bribery continues to crop up in the news (for example, Abscam), fueling Americans' lack of confidence in the political process. In addition, the one&endash;third among us who still consider PAC's corrupting &emdash;the Ralph Naders and Alexander Cockburns&emdash;are outspoken and adamant.

The modern PAC is a significant development in American political life. It is an open mechanism for allowing commerce and important institutions to engage overtly in politics, and it is vitally important that we attempt to understand these issues.

Michael Phillips, 1994 (revised 2000)

1. Americans Talk Issues Foundation (Summer 1993), Survey for Congress, Washington, D.C.

2. Larry J. Sabato, PAC Power: Inside the World of Political Action Committees ( W.W. Norton & Co., 1984).

3 .Dan Clawson et al., Money Talks: Corporate PAC's and Political Influence (Basic Books 1992).


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