Can a businessman help the economy? For presidents, the answer has been no.
By Robert S. McElvaine,
Mitt Romney likes to argue that his business experience has prepared him for the challenges of the presidency, particularly in stoking economic recovery. In his speech accepting the Republican presidential nomination, Romney declared that President Obama “took office without the basic qualification that most Americans have and one that was essential to his task. He had almost no experience working in a business.”
But historically, has the economy been healthier in times when the president has had a business background?
As any good executive would, let’s look at the numbers.
Since Herbert Hoover’s 1928 election, the American people have voted out of office after a single term only three elected presidents: Hoover, Jimmy Carter and George H.W. Bush — all of whom were successful businessmen before they were president. And the only successful business-trained president who was reelected, George W. Bush, oversaw an economic collapse at the end of his second term.
As measured in constant 2005 dollars starting on Jan. 1 of the year after they took office — the economy’s performance in the first year of a presidency is better assigned to the preceding administration — the four presidents with successful business careers had the four worst records in terms of gross domestic product performance.
The only president since Hoover with business experience under whom the economy did well was the one who was unsuccessful in business: Harry Truman, whose haberdashery shop went bankrupt after two years.
The startling bottom line is that the nation’s GDP has grown more than 45 times faster under presidents with little or no business experience than it has under presidents with successful business careers. And on average, when there has been a successful businessman in the Oval Office (so, Truman is excluded), GDP growth has been negligible.
On average, under presidents with successful business experience, GDP has increased 0.12 percent. And under presidents with little or no business experience, GDP has grown 5.46 percent.
The story is much the same when we look at share prices in this time frame.
None of the five presidents under whom the stock market has had its best performances — Bill Clinton, Barack Obama, Ronald Reagan, Franklin D. Roosevelt and Dwight Eisenhower — had significant business experience. Topping the list are the two most recent career-politician presidents, Clinton and Obama, both of whom pursued economic policies that Romney and his running mate, Paul Ryan, insist are anti-business and economically disastrous.
Three of the four presidents under whom the stock market has had its worst showings — Hoover, Carter and George W. Bush — had successful business experience. Carter, the only Democratic president in this period who prospered in business, had run a very profitable peanut enterprise. But his economic record as president was so bad that Reagan defeated him in 1980 in large part by pointing to the very high “misery index” created by high unemployment and inflation under Carter.
Stock values have averaged a robust 14.2 percent annual gain under presidents without business experience, and they have fallen by an average of 3 percent annually under those with that “essential” qualification.
The most startling figures emerge when we combine party and business experience. Historically, a Democrat without business experience has been extraordinarily better for the economy and the stock market than a Republican who had a career in business. In the past 84 years, GDP has grown 7 percent per year under Democrats without business experience (FDR, JFK, LBJ, Clinton and Obama) and fallen by 0.2 percent per year under Republicans with business experience (Hoover and the two Bushes). The Dow has risen an average of 16.8 percent per year under Democrats without business experience and has fallen by 3.7 percent per year under Republicans with business experience.
It is often said that a president has little control over the economy, but that is only partially true. A president and governmental policies act with the economy as farmers do with crops. Crops and economies grow on their own, but how well they grow is greatly affected by the actions of those providing water, fertilizer, weed removal and so forth.
There is a saying: “If you want to live like a Republican, vote Democratic.” Perhaps it should be amended to: “If you want to live like a successful Republican businessperson, vote for a Democrat without business experience.”
Romney might need to find a better way to sell his experience.
Robert S. McElvaine, the author of “The Great Depression: America 1929-1941,” is a history professor at Millsaps College in Jackson, Miss.