Man Without Qualities

Thursday, April 25, 2002

The New American Look.

Are the worthy heirs of Albert Hadley and Sister Parish (nee, Dorothy B. Gilbert) as the creators of a new American decorative look for their time truly Russell Feingold and John McCain (nee, Republican)? Parish & Hadley is tough competition, and most interior decorators would not relish the challenge. But Messrs. Feingold and McCain have been making out as if they have what it takes. How substantial has their contribution been?

In a prior post the Man Without Qualities opined:

“[T]here is no particular reason for corporate majordomos to be gifted or not gifted in understanding major national Constitutional power shifts – it’s just not something that comes up that often or that critically in one’s growth from minordomo to majordomo. And passage of a campaign finance reform bill which effectively suppressed the ability of non-media private parties to use their accumulated wealth to lobby and influence voters would certainly constitute a major national Constitutional power shift.”

“Where would such legislation lead Big Media? It is hard to say, since prior laws supposedly passed as such “reform” have not had much of their putative intended effect. But I don’t think it would lead to the Big Media as we know it acquiring the kind of power its majordomos may hope for – and which the critics of campaign finance reform fear.”

“But it’s fairly obvious that a new Big Media would acquire exactly that kind of power, and that is something the current crop of majordomos may or may not understand. If campaign finance reform effectively suppressed the ability of non-media private parties to use their accumulated wealth to lobby and influence voters, then ownership and control of the Big Media companies would immediately become essential to every major economic interest group in the nation. For example, MicroSoft – which long disdained purchasing political influence in Washington but is now a major employer on Gucci Gulch – would really only have one option: it would HAVE TO acquire a Big Media company, or several of them. It would be completely immaterial whether such an acquisition was economically rational in the sense that the acquisition price square with the potential profits of the acquired company. MicroSoft would be protecting itself. And it would not be alone. Big Oil. The automotive industry. The Unions. All of them - by hypothesis - would suddenly have only one way to reach the voters: control of Constitutionally protected media. It would not be pretty.”

The above argument suggests that passage of a campaign finance reform bill which effectively suppressed the ability of non-media private parties to use their accumulated wealth to lobby and influence voters should make the stock of media companies much more valuable, and should make the news divisions within those companies the new jewels in the crown. The enhanced value of the media companies and their news divisions would not come from enhanced revenue – but rather from the ability of these entities to influence political developments that control the distribution of wealth throughout the economy.

Congress has recently passed – and the President has signed – the McCain-Feingold campaign finance reform bill. Is that bill a campaign finance reform bill which effectively suppressed the ability of non-media private parties to use their accumulated wealth to lobby and influence voters –and, if it does not accomplish such ends completely, does it move the system meaningfully in that direction? McCain-Feingold has some rather large holes, as ably described by several people, especially Mickey Kaus.

And there is some question about what the actual intent of that bill was, at least in the form it was enacted. As Mr. Kaus puts it:

“Do the defenders of McCain-Feingold simply want to restrict political ads financed by for profit corporations, as they tend to argue when it's time to file briefs in court. Or do they really want to limit the speech of individual citizens who may be rich, as their rhetoric about 'leveling playing fields' and 'curbing the influence of money' suggests?”

If McCain-Feingold meaningfully, if only partially, accomplished either of these alternative intents, it is reasonable to expect that a good portion of such displaced influence should be transferred to media companies and their news divisions. For example, if a non-network owning corporation with big political concerns (for example, Microsoft) had its influence reduced by McCain-Feingold, then it has a larger incentive to shore up its influence by seeking control or influence over such a network. Have Big Media companies benefited?

Big Media majordomos don't seem to think so - at least the ones at Disney/ABC, where current corporate policy towards the ABC news division seems to resemble current Chinese policies towards Tibet.

The stock market also seems to say “NO.” Comparing the S&P average with the stock prices of Viacom, Disney,GE, and News Corporation does not suggest that the market believes any of these companies has gained particular influence over the economy of the United States from passage of McCain-Feingold. Of course, these companies are conglomerates – and the contributions to the stock price from any single component (such as a network or news division) may be diluted. But even companies closer to being “pure plays” in news distribution – such as the New York Times and the Washington Post do not seem to have felt a particularly discernable bounce from McCain-Feingold. But the stock prices of those companies have to reflect entrenched family control - so the effect of any "control premium" may be muted. That is, the stock of family controlled public companies like the Times and the Post can't easily be bid up because a prospective buyer can't acquire the company in a hostile takeover. Of course, a buyer can still offer a high price in a consensual transaction, which is how the Los Angeles Times changed hands a few years back. Public shareholders might or might not share in an offer made to the family in such a consensual transaction. In sum, the evidence is not all in.

But what evidence exists seems more consistent with both Big Media itself and the market having concluded that McCain-Feingold is essentially showy window dressing. Which is bad news for Parish & Hadley.

McCain-Feingold will certainly affect what might be called the “personality” of the campaign finance system. Political operatives will have to work within or evade the structure of the act. So McCain-Feingold seems destined to be one of those federal statutes - such as the Securities Act of 1933 - that the affected people have to think about all the time, but which ultimately has little substantive effect. Sister Parish was famous for her belief that "personality mattered most when decorating home." Those who would say the same of a campaign finance system seem to have got that absolutely fabulous New American Look they’ve always wanted.

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