In fact, about one-quarter of the 113th Congress came right from business into political office, and many leaders tout their business records as credible political experience, such as Mitt Romney and Michael Bloomberg. And the United States is not unique. Around the world, 20 percent of national lawmakers come from the private sector into elected office.
So why would a business leader give up a successful career to take on the demands and media scrutiny that come with a political campaign? It’s not just about personal ambition. Here’s the underlying strategy.
Business leaders run when politicians have lost voters’ confidence
I’ve studied 40,000 candidates in a setting distinct from the United States — regional parliamentary elections in post-Soviet Russia, the analogue to U.S. state legislatures. But these elections offer important lessons.
My research demonstrates that business leaders are more likely to run for and win office when voters no longer trust professional politicians. These politicians, be they lawyers or government careerists, may have neglected constituents or other supporters, such as donors. Business leaders see this happening and then promise to use their management experience and “outsider” status to fix government.
One facilitating factor is the weakness of political parties. Strong political parties maintain discipline and develop long-term reputations with voters. But weak parties condone officials who defy powerful interest groups and create openings for outsiders to circumvent the system. Weak parties also can’t rely on financial support from their members. Instead, they have to court wealthy individuals, and so plum spots on party lists and in safe districts go to the highest bidder. This makes it easier for outsiders to rail against ineffective or corrupt elites.
A second factor is changes in the market. As industries become more concentrated in a few large players, conventional ways of influencing officials, such as campaign contributions and lobbying, become less effective at achieving policy goals. Instead, companies may simply send one of their leaders into higher office, which offers the best perch for making policy that increases corporate profits.
Business leaders run to make their companies money (and it works)
Are business leaders able to increase their corporations’ profits once they are in office? I compare businesspeople who barely won office to Russian parliaments to those who barely lost — what is known as a regression discontinuity design. The business leaders who barely win are not different from those who barely lose, except that they got into office. So this mimics an actual experiment and allows me to identify how much putting a chief executive in parliament might help a company.
I find that corporations whose leaders get elected will see their revenue increase by about 60 percent over the term in office (five years or so). Profitability improves by 11 percent. The source of this revenue? Government contracts and beneficial regulations.
What about the United States?
Could American companies benefit from having their executives in political office? Members of Congress do push for their own private interests while in office, even though they’re not great at picking stocks. However, there is no precedent of a businessperson controlling more than 500 companies occupying our nation’s highest office.
In a political campaign in which much is made about the role of special interests, Trump’s potential business interests in running for office have been far less scrutinized. He has no legal obligation to put his businesses into a blind trust, and he has given no indication that he would change anything besides putting his children in charge. Preliminary evidence from Foursquare indicates that Trump’s presidential run may in fact be hurting his business fortunes. Trump claims otherwise.
David Szakonyi is an assistant professor of political science at George Washington University. Follow him on Twitter @dszakonyi.