Politics Industry Theory

Politics Industry Theory is a nonpartisan political theory that uses the lens of industry competition to analyze the performance of the American political system. Politics Industry Theory was developed by business leader Katherine Gehl and business strategist Michael Porter. Key scholarship includes Gehl and Porter’s 2020 book, The Politics Industry: How Political Innovation can Break Partisan Gridlock and Save Our Democracy, and their 2017 report, Why Competition in the Politics Industry is Failing America: A strategy for reinvigorating our democracy.

According to Politics Industry Theory, the American political system has become a private industry dominated by a textbook duopoly- the Democrats and Republicans- and plagued and perverted by unhealthy competition between the players. It has therefore become incapable of delivering solutions to America’s key economic and social challenges. Further, there is virtually no connection between political leaders solving problems and getting reelected. The tools of business analysis - and Michael Porter's Five Forces Framework - are applied to show how the political system functions just as every other competitive industry does, and how the duopoly has led to the outcomes seen today. Politics Industry Theory puts forth a strategy comprising a clear set of choices on two key areas; how elections work and how laws are made.

Origins

Politics Industry Theory was developed by business leader Katherine M. Gehl and Harvard University business strategist Michael E. Porter. In 2013, Gehl asked Porter to consult on her company’s strategy. She was the president and CEO of Gehl Foods, a $250 million high-tech food manufacturing company in Wisconsin. While the duo were using Michael’s “Five Forces” and other tools of competitive analysis to analyze and develop a strategy for Gehl Foods, Katherine was conducting a parallel analysis of what she came to call the politics industry. Soon after Gehl sold her company in 2015, in part to dedicate more time to political innovation, she asked Porter to join her work as a coauthor. In 2017, Gehl and Porter published their ground-breaking research and analysis on- and more importantly a prescription for- our political system in the Report Why Competition in the Politics Industry Is Failing America: A strategy for reinvigorating our democracy. Gehl and Porter’s ‘Politics Industry Theory’ has been featured on Freakonomics Radio, Harvard Business Review, Fortune, Inc., CNBC, and Salon.

In 2020, Gehl and Porter published their book, The Politics Industry: How Political Innovation Can Break Partisan Gridlock and Save Our Democracy. The culmination of their work, The Politics Industry is an original and completely nonpartisan guide to the true dynamics and profound challenges of the American political system that provides real solutions for reshaping the system for the benefit of all.

Theory

Background

Many Americans are concerned about the abysmal results from Washington D.C. The federal government is increasingly characterized by dysfunction, polarization, and inaction. The political system is plagued by tribalistic parties that increasingly play the identity-politics game, painting fellow citizens on the other side as enemies. America is experiencing a quality-of-life downturn, a major slide in global economic competitiveness, historically high levels of gridlock, and historically low trust in government. Many are certain the opposing political party is the problem, or hope that refreshing candidates or policy change is the answer. Politics Industry Theory, however, proposes that the problem is systemic. The rules, structures, norms, and practices of politics, that determine everything from how candidates get on a ballot and how we vote to how a bill becomes a law, have been designed and optimized to serve our two political parties. This self-serving and self-perpetuating nature of our politics has led to a lack of competition and therefore its dismal performance.

Politics as a Private Industry

Healthy Competition Versus Unhealthy Competition

Politics Industry Theory suggests that the problem with the American political system is the nature of competition between political parties and politicians, as well as the surrounding industry actors and organizations.

The politics industry is a duopoly, an industry dominated by two entrenched players: the Democrats and Republicans. Both are gain-seeking organizations working to advance their self-interests, not necessarily the public interest. Around the two major parties has arisen a “political industrial complex,” an interconnected set of entities that support the duopoly, including special interests, “big money” donors, pollsters, partisan think tanks, the media, and lobbyists. The American political system is perfectly designed to serve the private interests of this political-industrial complex: to grow its power and revenues to protect itself from threats.

The business of politics is not a public institution, rather, a bona fide multibillion-dollar private industry within a public institution. In healthy competition, industry actors would be competing to deliver the desired outcomes for customers - fellow citizens - and be held accountable for results. Political rivals who fail to serve the public interest would be replaced by new competitors who do. Instead, today’s political competition is unhealthy competition in which rivals are entrenched, insulated from the pressures to serve customers better, and protected from new competition.

Unhealthy Competition: Applying the Five Forces Framework

Porter’s Five Forces framework was originally developed to look holistically at the forces that shape the nature of competition in for-profit industries by examining: (1) the nature of rivalry; (2) the power of buyers (channels and customers); (3) the power of suppliers; (4) the threat of substitutes; and (5) the threat of new entrants.

Applying the Five Forces Framework

Rivals: Duopoly Control

As politics is currently structured, the same two rivals (the Democrats and Republicans) are virtually guaranteed to remain in power no matter how poorly they serve the public interests. In this duopoly, the rivals engage in anti-competitive behavior by mutually taking steps to enhance the attractiveness of the industry and avoid undermining it. Conveniently, there is no independent regulator to hold the rivals accountable, nor antitrust regulations that apply.

Customers: Power Skewed

A political system is supposed to serve the public interest, so all its citizens should be customers. But, the industry does not serve all customers equally. Just as savvy businesses prioritize their most profitable customers, the duopoly prioritizes the customers who most effectively advance its interests: party-primary voters, special interests, and donors, who all deliver the two most valuable currencies, votes and money.

Channels: Compromised

Channels exist between the rivals and the end customers. In politics, the duopoly reaches us with information and persuasion through key channels, such as direct voter contact (the “ground game”), paid advertising, traditional independent media, and a panoply of new media channels that have remade the communications marketplace over the last few decades. Whereas these channels once mediated politics with unbiased perspectives and analyses, and balanced and moderate deliberation, they have now been co-opted by the political-industrial complex and are characterized by partisan rhetoric.

Suppliers: Captured

Suppliers provide valuable inputs that allow rivals to produce their products and services. In the politics industry, partisan competition is reinforced and amplified by the duopoly’s infiltration and capture of the key suppliers to the industry: candidates, specialized campaign and governance talent, voter-data shops, idea suppliers such as think tanks, and academics and lobbyists who contribute to shaping legislation or regulation and its implementation.

Barriers to Entry and Substitutes: Colossal and Constrained

Barriers to entry determine how easy or hard it is for a new competitor to enter the fray. Substitutes and new entrants are different ways of competing. In the politics industry, a new entrant would be the foundation of a new party, and a substitute could be independent candidates not affiliated with a party. Barriers to new competition in the politics industry are colossal. They include economies of scale; a well-developed infrastructure; brand recognition; deep and growing expertise and relationships; privileged access to funding; election rules and practices favoring parties; and governing rules creating party control of the legislative process.

The System Sets its Own Rules

The politics industry is different from virtually all other industries in the economy because the participants themselves control the rules of competition. As our political system has evolved, the parties (and the larger political-industrial complex surrounding them) have established and optimized a set of rules and practices that enhance their power and diminish our democracy. The duopoly dictates these rules by controlling the industry’s “machinery.” This machinery can be divided into two parts- elections machinery (how elections are won) and legislative machinery (how laws are written).

Elections Machinery

Today’s election machinery ensures that moderates need not apply, those who seek compromise are punished, and that independents and third parties are locked out. Two key features of today’s elections machinery are the most important in cementing unhealthy competition: party primaries and plurality voting.

Party Primaries

Primary voters: In party primaries, a small group of more ideological voters become guardians at the gate, which makes this small band of partisans one of the most powerful customer segments in the politics industry. Party primaries can have the effect of screening out problem-solving candidates, while rewarding extreme candidates. The duopoly has learned to exploit party primaries to strengthen ideological purity and enforce party loyalty.

Sore loser laws: Candidates who run and lose in their party’s primary are not allowed to appear on the general election ballot, even as an independent.

Limited ballot access: Biased ballot access rules, such as signature requirements, make it more difficult for independent and third-party candidates to get on the ballot.

Plurality Voting

With plurality voting, the candidate with the most votes wins. Under this system, politicians can easily win elections with more than two candidates without winning a majority of votes. This system of voting incentivizes candidates not to speak to a broad cross-section of the electorate, but rather to target a just-big enough base of partisans who can push them slightly ahead of their opponents.

Plurality voting also creates “the spoiler effect,” which pressures voters to not vote for the candidate they like the most out of fear that they will inadvertently contribute to the election of the candidate they like the least. Talented, successful independents are discouraged from competing. The “spoiler effect” essentially creates the single greatest barrier to entry for new competition in politics, which is wielded to all potential competition to the duopoly.

Whenever we want to vote for someone not considered to have a strong chance of winning, we are told that we are wasting our vote. Because citizens want their votes to matter, plurality voting creates a pull that prevents new challengers from becoming viable.

Plurality voting also creates incentives for negative campaigning and dividing voters.

Legislative Machinery

A powerful set of rules and practices determine how Congress works ensures that the interests of the political-industrial complex are prioritized.

In the past 50 years, Congress has experienced a complete partisan takeover. Congress once operated on a strong committee system in which members of both parties debated, offered amendments, and decided whether bills should be sent to the floor for a vote. Today, committee leaders are beholden to party leaders, motivated to be loyal soldiers and threatened with losing their positions or being denied promotions if they stray from ideological purity. Partisan chairs of congressional committees wield substantial control over big decisions, like the committee’s schedule. If a bill makes it out of a committee, it must then make it through a small cadre of majority-party partisans on the Rules Committee. Here, the Speaker of the House acts on the Hastert Rule- a standard practice that dictates that the Speaker of The House will not allow a floor vote on a bill unless the majority of the majority- the Speaker’s party- supports the bill, even if a majority of the full House would vote to pass it. Therefore, serious legislation is often only passed under single party control under partisan lines.

Consequences

Lack of Problem Solving

Keeping a problem or divisive issue alive and festering is a way to attract and motivate partisan voters, special interests, and committed donors to each side, delivering two currencies- votes and money- in return. Even in areas where the sides agree, legislators sometimes fail to pass any legislation that would represent progress in order to deny the other side any claim of progress before the next election.

Political Disillusionment

The American public has never been more dissatisfied with the political system. Public trust in the federal government is hovering at a near sixty-year low. With no other viable option, citizen discontent has been expressed through volatile swings of sentiment between the existing parties.

Lack of Accountability

Despite making little or no progress on solving the nation’s problems and serving the American people, the duopoly is not held accountable for results. In politics, accountability would mean voting party leaders and many legislators out of office if progress is not made. However, since there are only two major parties who compete by dividing up and serving partisan voters and special interests, voting out individual legislators means replacing them with others from the same party or the other party who can get elected in the current structure.

Strategy for Political Reform: New Rules of the Game

The political system is not self-correcting. The problems are systemic and structural, involving multiple factors that are self-reinforcing. This means that the only way to reform the system is by taking a set of steps to change the industry structure and rules that underpin it- shifting the very nature of political competition. Gehl and Porter propose a series of political innovations intended to break partisan gridlock and save our democracy.

Nonpartisan Top-Five Primaries

Instead of a Democratic or Republican primary, there would be a single, open, nonpartisan primary. Every candidate from any party, as well as independent, appear on this single ballot (with a partisan affiliation next to their name if they so choose). The top five finishers, regardless of their partisan affiliation, advance to the general election. Top-five primaries would create a new way of determining who gets to compete and set up a broader competitive field of five candidates for the general election. Having five slots in the general election would make it unlikely that a single party would capture all five spots and ensure more voters have a choice they support come November. This would also prevent the instance of non-competitive congressional races, where in heavily Democratic or Republican districts, candidates who win their primary face no real challenge in the general election. Hyper partisan politicians who typically have little reason to worry about the safety of their seats would be held accountable. Further, no longer fearful of being “primaried,” legislators would not automatically lose their seat if they vote yes on a bipartisan landmark bill that violates orthodoxy.

Ranked-Choice Voting General Elections

Come Election Day, voters would receive a ballot with the names of the five nonpartisan primary winners. Each voter picks his or her favorite, as well as their second, third, fourth, and fifth choice. After the polls close, the first-place votes are counted. If one candidate receives more than 50 percent of the first-place votes, then the election is over. If no candidate gets a true majority, the candidate in last place is eliminated. But, the votes for that candidate aren’t wasted, because voters who selected him/her as their first choice have their ballots automatically transferred to their second choices. This repeats until a single candidate reaches the 50 percent threshold. Under plurality voting, candidates can win by securing the turnout of a strong base, but with RCV, candidates must win by garnering a broad and high level of popular support. Candidates must not only aim to be voters’ first choice, but also their second, third, and fourth choice. Because of this, candidates are discouraged from denigrating their opponents to prevent isolating their supporters, and must take into account these supporters’ concerns. Campaigns would become primarily issue-based.

Reengineering Legislative Machinery

Partisan control of House and Senate rules and processes would be eliminated. The rules would be rewritten from scratch using a proven management practice: zero-base budgeting. With “zero-based rule making,” the current rules and customs (both formal and informal) that have been optimized and weaponized by our two parties would be set aside and reimagined from a clear, white space. The rules would be formulated by a Legislative Machinery Innovation Commission, an independent and nonpartisan effort to design a model, modern legislature built to produce real results by adopting the best practices for state-of-the-state negotiation, negotiation, and communication. The commission would consist of a nonpartisan consortium of leading experts representing a diversity of disciplines and organizations, and eventually join with legislators to adopt and adapt a new playbook for how the institution works.

References

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