CHAPTER 6

Uncertain Victory

BIG BUSINESS AND THE POLITICS OF REGULATORY REFORM

He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people, and eat out their substance.

—Thomas Jefferson, Declaration of Independence (1776)

THE BUSINESS ROUNDTABLE HELPED DEFINE CORPORATE LOBBYING in Washington, D.C., in the 1970s, but for twenty years the group also maintained an office in New York City, where it kept its administrative and strategic planning functions geographically separate from its lobbying. From its prehistory at the Links Club on 62nd Street, the Roundtable bounced around Manhattan’s hot real estate locations, including stints on Wall Street, Broad Street, and Lexington Avenue. From 1978 until its final move south in 1993, member CEOs and professional staff members, particularly those who worked on nonlobbying issues like construction industry negotiations, occupied a posh suite in the eight-hundred-foot modernist skyscraper at 200 Park Avenue called the Pan Am Building (known since 1992 as the MetLife Building).¹ High above midtown Manhattan, the Roundtable’s leadership met frequently to establish policy positions, report on the work of a growing list of task forces and committees, and chart the group’s future.

At one such meeting, on November 13, 1979, the group’s forty-six-member Policy Committee convened to debate a particularly heated and divisive question: should the Roundtable support or oppose a bill to guarantee federal loans to the Chrysler Corporation, a venerable automaker and, until recently, a prominent Roundtable member? Since the late 1960s, stiff competition from Japanese firms led by Toyota and Datsun (later Nissan) had chipped away at the market share controlled by Ford, General Motors, and Chrysler, and by the late 1970s, a decade of economic turmoil had further undermined the U.S. automotive industry. Amid high unemployment and spiking gasoline prices, Japanese companies offered smaller, cheaper, and increasingly higher-quality alternatives to Detroit’s gas guzzlers, and their competitive advantage received an added boost from preferential financing and insurance policies from the export-oriented Japanese government.² Chrysler, the smallest and weakest of the Big Three, felt the sting worst of all, and by 1979 the company found itself hemorrhaging cash and on the brink of collapse. Its chief executive officer, John Riccardo, announced in July that the company had lost $207 million in the second quarter, held nearly $4 billion in debt, and had more than $700 million worth of unsold cars sitting on its lots. Total losses for 1979 would reach $1.2 billion (approximately $7 billion in 2013 dollars), the largest recorded annual loss in American corporate history up to that point.³

Chrysler chief John Riccardo was the son of working-class Italian immigrants in New York. Trained as an accountant, he became president of the auto giant in 1970, where he worked closely with chairman and CEO Lynn Townsend to weather their industry’s ever-growing travails. When Townsend retired in 1975, Riccardo replaced his former boss both as CEO and on the Business Roundtable’s Policy Committee. Four years later, as his company faced imminent bankruptcy and failed to qualify for private bank loans, Riccardo prevailed on sympathetic lawmakers to draw up legislation for government-backed loans to save the company. Pushed by public bloodlust to “fall on his sword,” in the words of many commentators, Riccardo stepped down as chairman in the fall of 1979, resigned his position with the Roundtable, and turned the CEO’s office over to his recently hired company president, Lee Iacocca, who did not join the Roundtable.⁴ Also the son of Italian immigrants, Iacocca had risen from the steel-working communities of western Pennsylvania to earn engineering degrees at Lehigh and Princeton before embarking on a managerial career at the Ford Motor Company, where in 1970 he became president under CEO Henry Ford II (also a member of the Roundtable’s Policy Committee). In the spring of 1978, Ford fired Iacocca and soon thereafter retired (Ford’s immediate successor, Philip Caldwell, joined the Roundtable’s Policy Committee in 1981). As both president and CEO of Chrysler, Lee Iacocca immediately became the public face of a major lobbying campaign for a government bailout. President Carter and many lawmakers from both parties announced their support for government aid, but Iacocca knew that getting a bill through Congress would require massive public outreach, not least toward the powerful and organized business interests who threatened to stand in the way.⁵

Hat in hand, Iacocca approached his fellow business leaders and asked for their political support for the bailout. Among the nation’s top chief executives, association heads, and other business-oriented policy activists, the “Chrysler situation” presented a major quandary. On one hand, many conservative-minded business leaders philosophically rejected the idea that the U.S. government should loan public money to a company that private financial markets had deemed unacceptably risky. Such government interference in the free enterprise system, many told themselves, represented exactly the threat they had spent the last ten years mobilizing against. In November, the chairman of the Roundtable’s Policy Committee, Thomas A. Murphy, urged the group to respect the ideology of free markets and lobby against the bailout. Raised in Chicago, Murphy had earned an accounting degree from the University of Illinois in 1938 and immediately launched a lifelong career at the corporation he would ultimately lead as chief executive from 1974 to 1981—the General Motors Corporation, then still the undisputed worldwide leader in automobile production. Although Murphy’s professional stake in his competitor’s troubles might suggest an ulterior motive behind his purist pro-market stance, the GM chief in fact had long established himself as one of the Roundtable’s more outspoken opponents of government involvement in the market. As Murphy put it, government meddling in free enterprise meant that “inevitably someone—maybe all of us—would lose our freedom.”⁶ But not all business leaders expressed the same zeal as Murphy to invoke moral hazard and throw Chrysler to the wolves. Indeed, some agreed with Michigan’s moderate Republican governor William Milliken, who argued for a bailout in the interest of his recession-wracked state. Between the company itself and its suppliers, Milliken worried, hundreds of thousands of Michigan workers stood to lose their jobs. Letting the company go bankrupt, he concluded, “would be many times more costly to the state and federal government than properly drawn aid programs.”⁷ Even in the heart of automobile country, therefore, opinions varied widely.

As Iacocca toured the nation drumming up support for Chrysler’s bailout, he relied on a variant of Milliken’s cost-benefit argument with the general public and many lawmakers. To arouse sympathy and support from his fellow business leaders, however, he employed a different rhetorical strategy. Although scholars have attributed the bulk of Chrysler’s disastrous record in the 1970s to bad management, Iacocca worked hard to paint his firm as an innocent victim of rampant overregulation by the federal government. Tapping into business leaders’ most visceral anxieties, he argued that the crushing spate of social regulations—from the National Traffic and Motor Vehicle Safety Act of 1966 to the Clean Air Act Amendments of 1970 to the Energy Policy Conservation Act of 1975—had ruined his company. Although emissions and safety standards applied to all car makers, foreign and domestic, Iacocca argued that the research and development costs required to comply with them inflicted a particularly high burden on smaller companies like his—smaller, at least, compared to industry leaders Ford and GM. In short, Iacocca passionately insisted that Chrysler deserved a government bailout precisely because the government had caused its problems.⁸

In the end, Iacocca’s pitch to business leaders failed. Under Thomas Murphy’s leadership, the Business Roundtable’s Policy Committee approved a position statement that “the broad social and economic interests of the nation are best served by allowing this [market] system to operate as freely and fully as possible.” The NAM, where Chrysler was also a member, objected to the government playing favorites or, in the phrase that would become increasingly popular in the 1980s and 1990s, “picking winners and losers.”⁹ Yet although Iacocca failed to shore up any appreciable business support, he ultimately sold the plan where it counted most. In January 1980, Congress passed and Jimmy Carter signed the Chrysler Corporation Guarantee Act, which offered $1.5 billion in loans to the beleaguered automaker. Chrysler was far from the first large American corporation that, having run into hard times, found itself the beneficiary of government largesse. In 1970 and 1971, the Nixon administration engineered rescue packages for the Penn Central railroad company and defense supplier Lockheed Corporation, respectively, both of which eventually rebounded. Following their example, Iacocca also parlayed the government’s loan guarantees into an effective revival and restored the company’s profitability in just one year; indeed, Chrysler paid back its loans fully in 1983, seven years ahead of schedule.¹⁰

At the time of the bailout, many political activists within the business world and the burgeoning conservative and libertarian think-tank communities immediately cried foul. Conservatives like former treasury secretary William Simon, an ardent free marketeer who founded the Council for a Competitive Economy to lobby for “free competition, not political favors,” charged Iacocca with the greatest of treasons against capitalism.¹¹ GM’s Thomas Murphy, for his part, never backed down from his blunt, not to say uncharitable, decree of “No Federal bailouts.” His vocal disgust with the plan, even after Chrysler’s turnaround, became legendary among future generations of GM management.¹²

Yet despite such noisy complaints about the bailout itself, many corporate leaders remained sympathetic to Iacocca’s arguments about the destructiveness of government regulations. In October 1979, NAM chairman John Fisher told the House Banking Committee that although his group opposed the bailout as a matter of principle, the NAM was a “friend of the Chrysler Corporation” and desperately worried about the “hundreds of businesses, many small and some large, which are in similar … circumstances.” Bad choices by management may have played a part in Chrysler’s troubles, Fisher conceded, but “the market-oriented economy has a way of disciplining such decisions.” On the other hand, he claimed, excessive regulations had the opposite effect, thwarting the omnipotent hand of free enterprise. The market, according to Fisher, was “not capable of distinguishing between voluntary management decisions which prove to be wrong and therefore uneconomic and those decisions which management is mandated to make by government and which prove to be uneconomic and wrong [italics added].” In other words, American companies could successfully manage themselves or else they would go out of business. The far greater danger came from the “host of business regulations enacted by the Congress” that constituted a “form of taxation” and “an expenditure by the company as a condition for staying in business.”¹³

A Tennessee native with a Harvard MBA, Fisher had spent his entire career at the Ball Corporation, a glass jar manufacturer founded in Muncie, Indiana, in 1880 that expanded into a major provider of aerospace goods and services in the mid-twentieth century.¹⁴ As Ball’s CEO, Fisher had witnessed firsthand the explosion of social regulations since the late 1960s, particularly environmental and workplace safety standards, and believed that the pace of such legislation was accelerating. “There have been at least 25 major pieces of regulatory legislation passed in the five years from 1974 to 1978,” Fisher told Congress. Facing stiffer competition, depressed sales, and the high costs of regulatory compliance, companies had fewer profits to reinvest in research and development. Articulating the perspectives of the NAM’s small and midsized members as well as large corporations like his own, Fisher decried the uneven effect of regulations. Even when “applied uniformly to an industry,” he argued, “they tend to alter the competitive structure of the industry because the cost of compliance falls disproportionately on the smaller firms.” Chrysler had fallen to the point where it demanded a government bailout precisely because it lacked the large budget to absorb the added cost of regulatory requirements. The vicious cycle of lower profits and higher costs engendered by social regulations, Fisher concluded, thus imperiled all of industrial manufacturing.¹⁵

The Chrysler bailout brought the business community’s deep frustrations to the fore. To be sure, Chrysler’s energetic campaign for government aid, like those of Lockheed, Penn Central, and myriad other corporations before it, clashed both ideologically and politically with the mantra of “free enterprise” around which business leaders had long mobilized. Some corporate leaders, like Thomas Murphy, took a hard-line stance (albeit a self-interested one, given his position as head of a major competitor). Others, like Fisher, opposed the bailout more reluctantly, moved as they were by deep frustration over the government policies that had brought Chrysler to the brink of ruin. In an apologetic note to Iacocca explaining why he had voted against the bailout, another NAM director hinted that perhaps the entire debacle had a silver lining.

If business leaders could show the public that government regulations had in fact caused Chrysler’s pain, they might yet achieve “the relaxation and reversal of the uneconomic, destructive and debilitating trend of overregulation which has so possessed our federal government in recent years.”¹⁶

The debate over the Chrysler bailout within the business community highlighted persistent tensions over what “free market” solutions really should look like, as well as business’s ongoing policy struggle with the liberal regulatory state. By the end of the 1970s, industrial lobbyists led by major employers’ associations had notched a number of significant political victories and established themselves as powerful players in national policymaking. As the previous two chapters demonstrated, organized business groups, allied with conservative policy institutions and politicians, had successfully redefined public debates over inflation fighting, unemployment, consumer protection, and labor law. In the process, they played key roles in stopping the forward tide of liberal reform legislation and spreading a market-oriented, antiregulatory vision throughout American political culture. For many lobbyists and executives, however, such achievements represented only a starting point toward loftier goals: the severe rollback of environmental, consumer, and workplace regulations and the comprehensive overhaul of the regulatory apparatus. In pursuit of that agenda, business lobbyists waged a wide-ranging campaign against social regulations that extended from the stagflation of the mid-1970s well into the economic recovery during the Reagan administration.

In the end, however, their efforts led to only mixed results. While business leaders and their conservative political allies successfully recast the national conversation about regulations to focus on costs as well as benefits, their ambitious goal to undo the social regulations of the 1960s and 1970s came up short. Moreover, the contradictory debates over “free markets” dramatized through the Chrysler bailout exposed the challenges that conservative business leaders faced. Although a growing number of Americans shared conservatives’ antipathy to “big government” by the end of the 1970s, most still favored bailing out Chrysler in order to save autoworkers’ jobs. That fact signaled to business leaders that their liberal political antagonists remained strong and resilient. Indeed, the public’s support for the bailout galvanized corporate leaders like John Fisher, who used Iacocca’s claim that Chrysler had been regulated into bankruptcy to renew the attack on regulatory excess. Yet despite this enthusiasm, corporate lobbyists would discover that proactively reforming the regulatory regime would prove a much harder nut to crack than thwarting liberal legislation like the Consumer Protection Agency or labor law reform. By the Reagan years, the shifting political and economic environment, as well as the complex politics of regulation, conspired to place limits on organized business.

THE POLITICS OF REGULATION IN THE AGE OF LIMITS

One of the great ironies of industrial leaders’ steadfast devotion to reforming the regulatory state was that the campaign distracted their attention from the larger structural factors that were fundamentally reshaping American business, and indeed global capitalism. If Americans in the 1970s needed further convincing that the fount of prosperity they had enjoyed since the 1940s had come to a halt, Jimmy Carter drove the point home in his inaugural address, telling his fellow citizens that “even our great Nation has its recognized limits.”¹⁷ Although the American economy still loomed three times larger than its nearest competitor, Japan, the nation’s unquestioned international dominance over industries like steel, oil, agriculture, and even automobiles had become a thing of the past. The rapid rise of German and Japanese manufacturers in the late 1960s flooded the global market, leading the United States to run nearly constant balance of trade deficits after 1971—only in 1973 and 1975 did Americans export more manufactured goods than they imported.¹⁸ In response, the profitability of American industrial firms fell 40 percent between 1965 and 1973. The OPEC embargo of 1973–74 spawned the worst recession since the 1930s, pushing U.S. profitability down another 25 percent. Even after an anemic recovery during the Ford administration, profits in manufacturing remained significantly below their pre-recession levels. Unemployment hit nearly 9 percent during the 1975 recession and remained above 7.5 percent during the 1976 campaign, even as inflation hovered around 5 percent.¹⁹

As economic historians like Robert Brenner have argued, the crisis of profitability in American manufacturing resulted from overproduction by low-profit firms. Policymakers inadvertently abetted this process by stimulating aggregate demand, allowing low-margin manufacturers to remain in business by selling at high volume, as well as through financial deregulation that loosened restrictions on capital flows. Credit-market deregulation, as sociologist Greta Krippner has recently shown, encouraged corporations to borrow more and devote greater resources to investments and speculation in the financial markets at the expense of production.²⁰ Yet while industrial executives certainly understood these shifts in the international patterns of production and investment, they frequently overlooked their broader implications and maintained a narrow focus on domestic issues, especially regulatory policy. As the fierce debates surrounding the Chrysler bailout in 1979 demonstrated, executives and their conservative political allies strongly believed that their profitability crisis emerged directly from the spate of regulatory requirements that firms had to comply with, not from growing global imbalances. In their minds, the “malaise” of the 1970s vindicated their long-held arguments against government regulation and provided a perfect opportunity to refocus the national debate on its burdens.

Although business-minded conservatives had complained about regulatory excesses for generations, their campaign for comprehensive reform received a major boost amid the inflation crisis during the presidency of Gerald Ford, whose policy preferences aligned more closely with those of top business leaders than had those of his predecessor. As one participant in a White House business-government relations meeting gushed to presidential assistant Bill Baroody Jr.: “[F]or the first time since arriving in Washington, I felt that industry has the opportunity for valid and open discussion with the Administration.”²¹ Alcoa’s John Harper and GE’s Reginald Jones, both members of the Business Roundtable’s Executive Committee, served on Ford’s Labor-Management Committee, as did several other Roundtable members, including GM CEO Richard Gerstenberg and Walter Wriston of First National City Bank, and Heath Larry of U.S. Steel, who in 1977 became one of the NAM’s most influential chairmen.²²

Declaring the persistent rise in prices his top domestic priority, Ford addressed a joint session of Congress six weeks after taking office to roll out his inflation-fighting agenda, including the much-derided “Whip Inflation Now” (WIN) slogan. In addition to targeting specific inflationary pressures in the food and energy sectors, Ford laid out a broader agenda of reform for the nation’s regulatory system. At a recent summit, the president explained, business leaders and economic experts had displayed “very broad agreement that the Federal Government imposes too many hidden and too many inflationary costs on our economy.” To check those costs, Ford called on Congress to appoint a National Commission on Regulatory Reform “to undertake a long-overdue total reexamination of the independent regulatory agencies.” When Congress showed no sign of taking up his charge, Ford proclaimed by executive order the next month that all new regulations must include an “inflation impact statement” and that the director of the Office of Management and Budget (OMB) would evaluate all such statements and determine which rules “may have a significant impact upon inflation.”²³

Ford’s Executive Order 11821 created the first mandatory system of cost-benefit analysis for regulations and, at first blush, appeared to reflect many of the aims of the Consumer Protection Agency then making its way through Congress. Like many business leaders, the president frequently invoked the image of the struggling consumer to make the case against excessive and costly regulations. “All too often,” Ford told members of the Chamber of Commerce, “the Federal Government promulgates new rules and regulations which raise costs and consumer prices at the same time, to achieve small or somewhat limited social benefits.”²⁴ But such a superficial confluence of goals belied the profound philosophical and political gulf between Ralph Nader’s and Gerald Ford’s visions of pro-consumer regulation. As the previous chapter argued, Nader believed that regulatory capture and bureaucratic inefficiencies compromised consumers’ well-being, either by driving up costs or by leading to unsafe products, but he fundamentally supported the principle of regulation in the public interest—that government policy should place public safety, worker health, and the environment ahead of private profits. Business conservatives, on the other hand, begrudgingly accepted that Americans wanted safe products and a clean environment but urged policymakers, as they had for years, to weigh those social needs clearly against the tremendous costs they entailed. Regulations, they maintained, inevitably drove up costs for producers, contributing not only to inflation but also to unemployment, pressures on profit margins, and the decline of American manufacturing competitiveness. In reality, regulations rarely operated in such a simplified manner; indeed, many of the rules issued by regulatory agencies actually improved American firms’ competitiveness by requiring their goods to conform to other countries’ regulatory requirements, or otherwise making them more efficient and marketable. Nonetheless, most business leaders viewed the issue in far more narrow terms. Enshrining their perspective into law, Gerald Ford jettisoned the public interest movement’s goal of improving regulatory effectiveness in favor of reducing the overall burden.²⁵

Business leaders greeted Ford’s policy with unmasked enthusiasm. Although the idea of a centralized review of regulations focused on cost-benefit analysis had originated with Army Corps of Engineers construction projects during the Johnson administration and expanded informally to include OMB oversight over environmental rules under Nixon, Ford’s executive order formalized the concept for the first time and fundamentally reframed policy debates over regulation.²⁶ Within weeks of the announcement, the Business Roundtable’s Policy Committee appointed DuPont CEO Irving Shapiro to chair its new task force on regulation. Shapiro, the son of Lithuanian Jewish immigrants to Minnesota and the first nonmember of the Du Pont family to lead the venerable chemical company, embraced his new role with gusto.²⁷ Lauding Ford for casting “the spotlight on the mass of government regulations that increase costs for no good reason,” Shapiro urged all Roundtable members to send him a “listing of harmful or unnecessary regulatory practices by any arm of government.” Armed with a growing list of anecdotes and cost estimates by member CEOs, Shapiro urged both the administration and business-friendly members of Congress to enact specific legislation to place further restraints on government regulators.²⁸

Figure 6.1. In 1976, the National Association of Manufacturers printed this image on the cover of its “Documentary of the Over Regulation of Business.” Typifying many business leaders’ exaggerated claims about the deleterious effects of regulation, the cartoon depicts American industry as Gulliver, tied down by myriad regulating Lilliputians—from “Labeling Lords” to “Carcinogen Kids”—as legions more flood down from Congress, itself flanked by massive government bureaucracies. Courtesy of Hagley Museum and Library.

The Business Roundtable’s enthusiasm for regulatory reform reflected its long-held animus toward social regulations, both because of compliance costs and, more personally, because such rules implied that business could not be trusted to serve the public good on its own. Liberal reformers agreed with the latter assessment. According to consumer advocate Joan Claybrook, who headed the Consumer Federation of America in the 1970s and worked on public interest legislation like the CPA, “Social regulation took decisionmaking out of the hands of corporate managers and socialized it…. Public interest groups essentially democratized the decision process and put something other than profit into the equation.” Corporate leaders like Shapiro recoiled because such regulations, by their very nature, purported to substitute government expertise for corporate autonomy.²⁹

As the Roundtable trained its sights on the costs of social regulations, a parallel yet distinct political critique developed amid the economic strife of the 1970s that, by the end of the decade, would fundamentally reconfigure several major industries. This “deregulation movement” targeted economic regulations in the transportation, telecommunications, energy, and financial services industries. The regulatory structures that governed such industries had largely developed during the Progressive and New Deal periods amid economic uncertainty, price collapses, and business failures, as well as public outcry over natural monopolies and their unchecked power to command high prices. In many cases, policymakers enacted industry-specific regulations at the behest of corporate leaders who sought protection from competition and the perils of market forces and counted on government agencies to impose order and predictability on their operations by establishing barriers to entry, fixing prices, and determining routes and zones of operation. As historians David Moss and Michael Fein have shown, public interest activists helped shape certain aspects of the Progressive Era regulatory regime, particularly regarding broadcast communication, which largely served the public good throughout most of the twentieth century. In other key industries, however, economic regulations largely favored the entrenched private interests who helped construct them. It was precisely that system of private privilege for highly regulated industries that the “deregulation movement” critiqued and sought to unmake in the 1970s.³⁰

The drive for economic deregulation came not from business lobbyists but from a political and intellectual movement that united free marketeers and liberal social reformers. The movement’s intellectual godfather, conservative University of Chicago economist George Stigler, forcefully articulated an economic theory of regulation in 1971 that upended policy debates. Rather than promote a public purpose by restraining capitalism’s disastrous patterns of creative destruction, Stigler argued, regulation served the exclusive interests of private actors by reducing competition and consumer choice, as well as by inflating unjustified profits. Antistatist conservatives picked up Stigler’s theory to inveigh against regulation’s threats to market freedom and the twisted inefficiencies of cartelization. At the same time, New Left scholars of the “corporate liberalism” school levied compatible complaints, finding that private interests systematically thwarted the public good by capturing the legislative process to their own ends. Liberals like Ralph Nader, Senator Edward Kennedy, and jurist Stephen Breyer extended this reasoning to argue that regulatory capture begat excess profits at the expense of consumers, workers, and smaller firms. Moreover, they claimed, the logic of regulation meant that capture would always result eventually, even if policymakers took special efforts to establish legal and structural barriers between regulated firms and government regulators. Uniting ideologically diverse players, the deregulation movement thus gained strength from the common belief that economic regulations privileged some companies unfairly and at great cost.³¹

During the late 1970s, this coalition engineered a remarkable wave of statutory deregulation. The Airline Deregulation Act of 1978 paved the way for the disintegration of the Civil Aeronautics Board (CAB), which had established route prices and entry barriers for commercial aviation since the 1930s. The Railroad Revitalization and Regulatory Reform Act of 1976 and the Motor Carrier Act of 1980 similarly loosened the Interstate Commerce Commission’s control over railroads and long-haul trucking, although the commission itself continued to exist until 1995. The Federal Communications Commission (FCC) likewise amended its rules to permit greater competition in the telecommunications industry, paving the way for the end of the American Telephone and Telegraph Company’s monopoly over long-distance telephone service. Finally, the Depository Institutions Deregulation and Monetary Decontrol Act of 1980 removed federal restrictions on savings account interest rates and permitted bank mergers.³²

Despite the momentous nature of this legislative juggernaut, the very economic theory that underlay the deregulatory movement also predicted—accurately—that business leaders, however committed to the principles of free enterprise, would play only a bit part in the drama. Since economic regulations privileged existing corporations by limiting competition, the fiercest resistance to deregulation often came from regulated companies like Delta and Eastern in the case of airlines and AT&T in the case of telecommunications.³³ Many of the CEOs of those corporate giants, particularly AT&T’s John deButts, played influential roles at the Business Roundtable, which not coincidentally refrained from taking a position on any deregulatory bills. Despite their traditional embrace of overt free-market ideology, the NAM and the Chamber likewise remained on the sidelines.³⁴

Business leaders’ reluctance to lend their lobbying weight to economic deregulation typified the extent to which social and economic regulations operated according to distinct political and economic logics. As political scientists and interest group theorists have long pointed out, economic regulations exposed fault lines within business, since their effects benefited one group, generally well-established firms, while disadvantaging competitors and upstarts. Social regulations, on the other hand, frequently cut across industries, affected firms of all sizes and regions, and produced few notable “winners.” Although occasionally firms that boasted technological superiority in complying with regulations—a cleaner production process, for example—could use social regulations to their competitive advantage, more often such regulations provided a clear and compelling rallying point for industrial leaders by defining a common enemy. Thus while economic regulations tended to divide the business community, social regulations provided an important solution to the collective action problems that frequently hampered efforts to organize firms and industries politically.³⁵

Although the campaigns to reform economic and social regulations constituted distinct political projects, public and scholarly debates frequently conflated them, creating a discursive complexity that worked to business groups’ advantage. Conservative and business-oriented politicians like Gerald Ford blurred the structural distinctions, lumping agencies like the EPA and the CAB together when blaming regulations for the “tremendous efficiency losses, reductions in productivity, and unnecessary costs to the economy,” as Ford told members of the Chamber of Commerce.³⁶ Liberal deregulators like Ralph Nader and Edward Kennedy, although motivated by their concern for consumers, workers, and social justice, often co-opted the rhetoric of market-oriented conservatives by bemoaning the high costs of economic regulations, essentially making business leaders’ case for them. Such framing, crafted through political expediency, created an opportunity for business activists to shift the public debate from economic to social regulations by invoking the same language of costs and inefficiencies. In the late 1970s, the campaign for comprehensive regulatory reform legislation, spearheaded by the Business Roundtable, developed from the rhetorical and political openings the deregulatory movement created.

REGULATORY REFORM

During the presidential election of 1976—the first since the oil crisis, the ensuing recession, the Watergate scandal, and the official end of the war in Vietnam—both Gerald Ford and Jimmy Carter tried to capitalize on voter cynicism by casting themselves as foes of “Big Government.”³⁷ Both charged that the federal bureaucracy had grown bloated, cumbersome, and costly, and each promised wholesale change. While their specific positions reflected their party orientations—Ford catered more explicitly to business’s argument that regulation abetted inflation while Carter stressed regulation’s pernicious effects on consumers and workers—both candidates favored sweeping reform to both economic and social regulations.

Carter, the victor that year by the fourth narrowest popular vote margin in the twentieth century, originally pinned his hopes for minimizing cumbersome bureaucracy associated with regulation on the passage of the Consumer Protection Agency. The CPA, its boosters hoped, would fundamentally restructure the operation of regulatory agencies and thus reduce regulation’s cost and complexity while preserving goals like a clean environment, safe and honest products, and fair and healthy employment practices. But the Carter administration and the public interest lobby ultimately failed to overcome business and conservative lobbyists’ claims that the CPA represented more “big government” bumbling that hurt producers—especially small businesses. With the CPA dead in the spring of 1978, Carter joined his predecessor Ford in taking unilateral executive action where the legislative process had failed. On March 23, he issued Executive Order 12044, which extended and expanded Ford’s Order 11821 by directing all executive agencies to construct “simple and clear” regulations that “did not impose unnecessary burdens on the economy, on individuals, on public or private organizations, or on State and local governments.”³⁸

Although the business community had lobbied exhaustively against the CPA, corporate leaders hailed Carter’s executive order as a positive alternative. As the self-appointed leader of the campaign for regulatory reform, the Business Roundtable took a particular interest. Frank Cary, CEO of IBM, chaired the Roundtable’s task force on regulation (having succeeded Irving Shapiro, who became the group’s chairman in 1976) and expressed his organization’s approval in a letter to Carter. The fifty-seven-year-old Californian who had earned an MBA at Stanford before joining IBM thirty years earlier praised the executive order for requiring that new regulatory analyses “include an evaluation of the potential economic impact of the alternative approaches and final regulation proposed [italics added].” Business leaders agreed, said Cary, that sensible regulatory analysis should not presume that all regulations were beneficial or cost-effective; they should start from the premise that other, cheaper paths to similar results existed. “I expect [this clause] was the subject of much criticism by other groups and individuals,” he concluded. “You obviously persevered in this case, and we applaud you for it.”³⁹

Yet Roundtable executives, while encouraged by what they called Carter’s “open, orderly, cost-conscious approach to regulation,” believed that the president’s executive order did not go far enough. First, it applied only to agencies housed within executive departments, such as OSHA, which existed under the aegis of the Department of Labor. Independent agencies, most notably the EPA, did not fall under its purview. Moreover, the order came with a sunset provision; if it were allowed to expire in June 1980, Roundtable members feared, “relatively little of lasting effect would be achieved.” To combat the groundswell of regulation—some ninety government agencies that issued, according to the White House, approximately seven thousand distinct rules each year—business leaders urged more comprehensive reform and hoped to use their newfound lobbying clout proactively.⁴⁰

Buoyed by Carter’s executive order, the Business Roundtable redoubled its public information and lobbying campaign for regulatory reform. To convince lawmakers to require economic impact statements by all regulators, Roundtable executives believed that they needed concrete, specific proof of the excessive cost of regulations. In 1978 the group Commissioned the accounting firm Arthur Andersen to conduct what Frank Cary called “an independent, objective study” that would for the first time “measure by accounting methods the direct, incremental costs of regulation with a methodology applied consistently across agency and industry lines.” In the spring of 1979, Arthur Andersen released Cost of Government Regulation, which reported that in 1977, forty-eight companies had spent $2.6 billion to comply with regulations from six departments and agencies. Although the report did not analyze all the regulations those companies faced, the cost it calculated represented more than 10 percent of their capital expenses, nearly half of their tax obligations, and 15 percent of their after-tax income. According to Cary, “Measurement of the benefits of regulation was beyond the scope of this study, as was the measurement of total regulatory costs.” Even though the study only considered “the tip of the regulatory cost iceberg,” Cary hoped that the discovery of “wasteful and non-productive” regulations would strengthen the movement for reform.⁴¹

For the Roundtable, the Arthur Andersen study presented an opportunity to do more than simply dramatize the cost of government regulations (although it certainly did that). By measuring with some degree of precision and methodological rigor the exact cost of regulation—even in a limited context—the Roundtable CEOs hoped to buttress their case for mandatory economic impact analysis. Since the group’s founding in 1972, Roundtable leaders had deliberately presented themselves as pragmatic, not ideological, defenders of business and economic growth. Rather than devolve into intemperate bromides against the injustice of social regulation, as many conservative politicians, academic economists, and policy institute analysts were prone to do, the chief executives sought to project a measured, reasoned appeal. Cost-benefit analysis, Cary told the Senate, did not represent “an indirect attack on the principle of government regulation.” Indeed, he acknowledged, “certain regulations are necessary.” Rather, the study merely demonstrated that “some new regulatory programs … developed over the past decade … have caused excessive and unintended costs.” Richard Wood, CEO of Eli Lilly pharmaceuticals, also spoke for the Roundtable and implored the House Judiciary Committee to consider the link between the cost of regulation and the sickly national economy. “Some critics,” he explained, “believe that the cost of regulation is irrelevant, but that is a difficult position to maintain publicly in a period of inflation and declining productivity.”⁴² By positioning themselves as a partner to Carter’s calls for less expensive, less wasteful regulation, Roundtable executives hoped to create a political consensus around their conviction that the current regulatory state simply cost too much.

By early 1979, the Roundtable had joined a diverse coalition of business groups, lawmakers from both parties, and public interest activists united by the Carter administration to work on a comprehensive regulatory reform bill. According to the title of an early version, the legislation aimed to “make regulations more cost-effective, to ensure periodic review of old rules, to improve regulatory planning and management, to eliminate needless legal formality and delay, [and] to enhance public participation in the regulatory process.”⁴³ The coalition, which cut across standard alliances in Congress, reflected the populist rhetoric that animated both the consumer movement and conservative groups, including—however ironically—business associations. Indeed, the spirit of the legislation echoed Nader’s dedication to Jeffersonian ideals by directly challenging the prerogatives of regulatory decision makers. Moreover, the campaign proceeded from the same beliefs that underlay Carter’s embrace of economic deregulation in the aviation, energy, transportation, and telecommunications industries: regulations—whether of markets or “externalities”—generated economic inefficiencies and higher prices. But the push for regulatory reform represented shrewd politics as well as principle, particularly for the president. Carter’s domestic policy advisor Stuart Eizenstat, for instance, argued that by taking the initiative on comprehensive reform, the president could set the terms of the debate and provide “a necessary and responsible alternative to reactionary antiregulatory bills” advocated by congressional conservatives.⁴⁴

Throughout the winter of 1979–80, Carter’s regulatory reform bill made steady legislative progress. By the spring of the election year, however, a series of political obstacles began to fracture the once-strong coalition. One important clash concerned a provision known as the Bumpers Amendment. Named after Democratic senator Dale Bumpers of Arkansas, the amendment would have removed the judicial presumption that a regulation was valid until proven otherwise. Its supporters, including the Roundtable, argued that current law inherently favored regulators over firms and sought to level the playing field. Business interests and government regulators should “stand on equal footing,” according to a Roundtable report.⁴⁵ Backed by the conservative American Bar Association, Roundtable executives lobbied the Carter administration to support the Bumpers Amendment, while labor and consumer groups bristled at the idea. Given business’s superior financial resources, liberals argued, a “level playing field” in the courts would actually put regulators—and the public interest—at a disadvantage. In the end, key members of the administration agreed and Carter came out against the amendment.⁴⁶

A second point of contention surrounded a proposal to insert a “regulatory flexibility” clause into the legislation, requiring regulatory agencies to grant smaller firms greater exemptions and leniency. Invoking the same logic he used to explain why pollution standards hit Chrysler harder than General Motors or Ford, NAM president John Fisher argued that smaller manufacturers paid a disproportionate cost to comply with regulations. “[I]t is a myth that regulations protect the ‘little guy,’ ” Fisher opined in an article. “The time and excessive cost required to meet federal regulations favor existing, established companies over new and expanding entrepreneurs.” But while the small business community clamored for the flexibility clause, and Jimmy Carter concurred, the big-business interests at the Business Roundtable rejected the claim. “[D]ifferentiated treatment of business based on size,” Eli Lilly CEO Richard Wood told the House Judiciary Committee, should not be the guiding force at regulatory agencies. To be sure, he conceded, “certain aspects of regulation … can impose disproportionate burdens on small businesses,” but the law should not compensate by creating regulations that were “unfairly discriminatory” against large firms. Just as administrative distinctions between large and small companies under the Nixon price-control regime had impeded pan-business cooperation in the early 1970s, so too did the issue of regulatory flexibility divide the movement under Carter.⁴⁷

During the summer of 1980, the Business Roundtable CEOs and their staff members worked furiously to promote their plan to comprehensively reform regulatory procedures. The entire Roundtable membership, including paid lobbyists, public information specialists, and CEOs themselves, used their personal connections with members of Congress to urge a floor vote on the existing bill, including the Bumpers Amendment. “[T]ime is short in the 1980 session,” Frank Cary wrote to the Roundtable members, “and major obstacles remain…. Two years of effort could be lost, and the opportunity might not come again.” Although he expressed confidence that the public’s antigovernment, antibureaucracy mood begat a political atmosphere that was uniquely conducive to reform, Cary warned that the present bill had to pass quickly to create a “permanent mechanism for bringing economic considerations to bear on the regulatory process and for holding regulators accountable for their actions.”⁴⁸

At the White House, however, liberal advisors grew increasingly alarmed at the business community’s lobbying offensive and concluded that the bill, in its current form, simply conceded too much to business interests. Labor unions and public interest groups agreed, insisting that the Bumpers Amendment and business’s focus on cost-benefit analysis betrayed a philosophical opposition to the very notion of regulation, not a progressive commitment to smarter, more effective regulation. As written, many liberals argued, the bill placed the burden of proof on agencies themselves to show that regulations were “cost-effective” and thus undercut the entire notion of proper social regulation. Facing such opposition from the left, as well as the travails of the reelection campaign that he would ultimately lose to Ronald Reagan in November, Jimmy Carter backed away from regulatory reform in the fall of 1980. In August, Congress passed a more narrowly focused Regulatory Flexibility Act that granted special considerations to smaller firms, despite the Roundtable’s reticence. Signing the separate law, Carter managed to simultaneously appease small business groups and provide himself political cover to walk away from the omnibus bill. Despite continued pressure from the Roundtable for comprehensive reform, Congress adjourned without moving on the measure.⁴⁹

The Business Roundtable’s leaders regretted their failure to proactively lobby for “meaningful regulatory reform legislation” that institutionalized cost-benefit analysis, but they took solace that the general trajectory of regulatory politics had moved decisively in their direction and away from the public interest vision during the Carter administration. Although liberals in the White House pushed the president back from overtly business-friendly omnibus legislation, Carter signed a second less sweeping, yet quite significant, regulatory reform measure during his lame-duck period. The Paperwork Reduction Act, passed over the objection of many career bureaucrats and regulators, streamlined information gathering, clarified reporting requirements for companies, and reduced bureaucratic bookkeeping in both the federal government and the private sector. More important, the act created the Office of Information and Regulatory Affairs (OIRA) within the OMB and charged it with reviewing proposed regulations to ensure that they corresponded with administration goals. Although little fanfare greeted OIRA upon its arrival, especially from the embittered business lobbyists at the Roundtable, the new government agency marked a clear rejection of Ralph Nader’s dream of a truly independent and apolitical arbiter of regulation. Locating the review process squarely in the OMB under the supervision of the president, OIRA provided a check against regulatory excess but one that could easily become dominated by political appointees. Under the incoming Reagan administration, that seminal, if largely overlooked, administrative change helped set the stage for the increased politicization of regulatory policy.⁵⁰

REGULATORY RELIEF

The presidency of Ronald Reagan, long the standard-bearer for archconservative critiques of New Deal policies from welfare to regulation, presented both opportunities and challenges for business’s regulatory reform campaign. During the Republican primary in 1979 and 1980, many prominent business leaders had looked askance at the former California governor, worried that his social conservatism and radical proposal for deep cuts in personal income taxes were out of step with business’s fundamental economic priorities. Indeed, many Republican executives favored Texas oil man John Connally, the Nixon administration veteran with extensive personal contacts among the nation’s business elite. When Connally’s bid flamed out in early 1980, the pro-business mantle fell to his fellow Texan George Herbert Walker Bush, the former CIA director, UN ambassador, and member of Congress who gave Reagan his most serious challenge and wound up rewarded for his perseverance with the vice presidency.⁵¹ Although the major business associations stayed above the partisan fray during the election, preferring to work with the existing Congress and incumbent Carter administration on issues like regulatory reform, many corporate leaders expressed qualified optimism after Reagan’s victory. The chairman of the Business Roundtable, Exxon CEO Clifton Garvin, pledged that the business community would “work closely and cooperatively with the new administration,” even as he urged caution among excessive optimists who hoped that “President Reagan will be able to solve the nation’s economic problems almost overnight.”⁵²

Nonetheless, the new president’s invective about the debilitating effect of government bureaucracy on private enterprise reinforced the mantra that organized business groups had chanted for years. As a matter of political philosophy, if not coherent policy, Ronald Reagan’s famous inaugural decree that “government is not the solution to our problems; government is the problem” struck a resonant chord. At the Business Roundtable, Frank Cary handed the reins of the Task Force on Government Regulation to John Opel, his successor as CEO of IBM. Noting that “1981 promises a more favorable environment” for the comprehensive regulatory reform legislation that failed in the waning months of the Carter administration, task force members worked closely with Reagan’s transition team during the interregnum and provided what Opel called “detailed recommendations for a 1981 Executive Order on Regulation and a regulatory reform legislative agenda.”⁵³

In the winter of 1981, the new administration hit the ground running with a vigorous set of policy proposals that aimed to put into practice Reagan’s longstanding admonitions about the foibles of liberal government. In addition to a major proposal to cut taxes and reduce social welfare spending, the president quickly built on his predecessor’s regulatory reform initiatives. First, he ordered a moratorium on all regulations that agencies had written but that had not yet gone into effect. Shortly thereafter, he issued the far-reaching Executive Order 12291, which mandated cost-benefit analysis for all rules whose compliance costs totaled more than $100 million per year and required agencies to choose the least expensive regulatory alternative. The order also dismantled the Council on Wage and Price Stability, created by Ford to monitor inflation, and transferred its staff to OIRA. Eliminating COWPS simultaneously ensured that his administration would never entertain a return to wage-price controls and, administratively as well as symbolically, confirmed the Republican’s belief that inflation fighting should be explicitly linked to reducing regulatory overreach.

Finally, Reagan created the Presidential Task Force on Regulatory Relief, chaired by Vice President Bush, to monitor and review regulation and make recommendations to the director of OIRA, who would oversee agencies’ compliance with the new regime.⁵⁴ The task force’s very name indicated the new view on regulation that the Reagan administration espoused: no longer was regulation something to be “reformed,” as everyone from Gerald Ford to Ralph Nader had urged; instead it was an insidious oppressor from which the free market demanded “relief.” In that spirit, Vice President Bush asked Roundtable chairman Clifton Garvin to send him a top-ten list of “specific regulations [that] could be changed in order to increase benefits or decrease costs, thereby generating greater net benefits for all.”⁵⁵ For the next two years, the regulatory relief task force operated as a clearinghouse for complaints, gathering anecdotes and personal testimony from businesspeople across the country who expressed outrage over the regulatory burden they faced. In a typical example, the Texas-based safety director of chemical and aerospace manufacturer Whittaker Corporation claimed that in the aftermath of “an explosion of one of our plants,” OSHA inspectors “descended upon us like ‘Storm Troopers.’ ” During the government’s investigation into the accident, he continued: “I was in ‘Hitler’s Germany’, ‘Stalin’s Russia’ and ‘Hirohito’s Japan’, and I didn’t like one damn thing that I saw from these people.”⁵⁶

Reagan’s executive order turned the tables on the entire regulatory regime, shining the critical spotlight not on regulated companies but on government regulators. In the same spirit, the administration also worked with Republican leadership in the Senate, as well as several interested Democrats, to revive the push for major regulatory reform legislation. The Senate Judiciary and Government Affairs Committees debated bills that would have made permanent Executive Order 12291’s requirement that all regulations, from both executive and independent agencies, provide proof that their benefits clearly and mathematically outweighed their costs. The Judiciary Committee’s bill also included the Bumpers Amendment, which would remove the judicial presumption in favor of regulators, as well as a two-house legislative veto of new rules (which White House officials opposed because they worried that it would compromise executive authority). As policy historian James Anderson has noted, “this bill would have been quite objectionable to the Carter Administration.”⁵⁷

In the fall of 1981, once the intense negotiations over Reagan’s tax cut, discretionary budget reductions, and defense appropriations had concluded, the lobbying effort to pass the regulatory reform bill kicked into high gear. Backed by environmental, consumer, and labor groups, liberal Democrats urged a more moderate bill that exempted many independent agencies from cost-benefit analysis. In a rare instance of overt partisanship, IBM’s John Opel, chairman of the Roundtable’s task force on regulation, openly chastised the Democrats on the Senate Government Affairs Committee, whom he accused of trying to weaken the bill. The Roundtable coordinated closely with George Bush’s Task Force on Regulatory Relief, the NAM, the Chamber of Commerce, and other trade associations, orchestrating an indirect lobbying campaign reminiscent of its successful campaigns against labor and public interest legislation. Chief executives and public relations specialists drafted position papers and talking points, staff members coordinated mail blitzes to local and state-level business organizations, and lobbyists located specific members of Congress whom they hoped to persuade with evidence of popular support for the bill.⁵⁸

In March 1982, the Senate voted 94 to 0 in favor of the omnibus regulatory reform package, and the lobbying turned to the House. In the lower chamber, however, a coalition of public interest and other liberal organizations and their political allies managed to keep the legislation bottled up in the Rules Committee until Congress recessed for the midterm elections.⁵⁹ In October, the Roundtable joined eleven other business associations at a rally in Washington to inaugurate a final push for the bill, combatting what the Roundtable described as “intense, well-organized opposition to the legislation by 22 anti-reform interest groups, some labor groups and several Democratic committee chairmen in the House.” These twelve groups, the Business Coalition on Regulatory Reform, implored local business leaders, CEOs, trade association lobbyists, and corporate Washington Representatives to “contact members of the Rules Committee and all Members of the House during the recess, prior to the elections” and convince them to pass the House’s version during Congress’s lame-duck session. “A small incremental investment over the next 2 months,” John Opel told Roundtable CEOs, “could push the bill through the House, to the Senate, and on to the President’s desk, and avoid the need for another 2 or 4-year effort on this legislation.”⁶⁰

However, despite earnest support from the conservative, antiregulatory occupant of the White House, the business community’s proactive lobbying campaign crashed on the rocky shores of political reality. In November 1982, a disgruntled American electorate registered its disapproval with Ronald Reagan’s first half-term in office, delivering 27 additional House seats to the Democrats, who then commanded a 50-vote majority, and emboldening continued liberal resistance to Reagan’s economic agenda. Reflecting on the election’s consequences for his party, House Speaker Tip O’Neill (D-MA) gloated: “There’s no question that we’ll have more of a voice than we’ve had in the last year and a half.” Although business lobbyists continued to press for a vote on the comprehensive regulatory reform bill, the House leadership still managed to keep it locked in the Rules Committee until Congress adjourned.⁶¹ A year later, despite a renewed push for the legislation, the Roundtable reluctantly acknowledged that it foresaw “little prospect for early action in Congress on comprehensive regulatory reform” and announced that it would redirect its primary lobbying efforts to other issues. More bluntly, leaders at the NAM chided the Reagan administration for “slowing down” on regulatory reform after going “one-third of the way down the road” by executive order.⁶²

While Reagan’s commitment to comprehensive procedural reform certainly waned, none could doubt the long-term effect his presidency had on the politics of regulation. In 1983, Vice President Bush’s Task Force on Regulatory Relief officially dissolved itself, taking credit for implementing regulatory changes that, it predicted, would save $150 billion over the next ten years. (As the earlier discussion of the Arthur Andersen study indicated, actually calculating the costs or savings of regulation is a deeply fraught task, so it is impossible to know how accurate that prediction was.) The task force left its administrative duties to the OMB, which became during the early 1980s the permanent locus of regulatory review, according to OIRA deputy administrator Jim Tozzi.⁶³ In addition to procedural changes, the president also achieved lasting results—and notoriety among his critics—through “deregulation by administrative appointment.” Over the course of his term, Reagan routinely, and quite deliberately, selected agency and department heads who shared his animus toward the regulatory project in general and thus achieved weaker enforcement, and lower compliance costs, by sheer dint of their inactivity. His selection of conservative mining advocate James Watt as secretary of the interior, anti-environmentalist Ann Gorsuch Burford as EPA administrator, and libertarian economist James Miller as chairman of the Federal Trade Commission (FTC) convinced many critics that the president preferred to “deregulate” simply by posting foxes to guard the henhouse.⁶⁴

By centralizing regulatory review within the powerful OIRA and institutionalizing antiregulatory sentiment through both the Bush task force and his administrative appointments, Ronald Reagan significantly reformed the nation’s regulatory system without the omnibus legislation that business groups so fervently lobbied for. As the conservative editorial board of the Chicago Tribune reflected, the central pillars of the new social regulation—the EPA, OSHA, the Consumer Product Safety Commission, and the FTC—remained “alive and well,” but the administration had reined in the most egregious instances of regulatory excess. (The editorial writers cited, for example, “such insanity as the requirement that two separate individuals count dump trucks at federal highway projects and the proposal that the steps of swimming pool slides be covered with diagrams showing how to climb the steps of swimming pool slides.”)⁶⁵ Business lobbyists’ inability to completely squash social regulations thus formed part of the broader failure of conservative and libertarian activists to “undo” the New Deal by eliminating government agencies. For example, although Candidate Reagan had resolutely vowed to abolish the Department of Energy and the Education Department, both created under Jimmy Carter, President Reagan expended no political capital toward such a rollback. Nevertheless, the tenor of political debate moved decisively toward the rhetoric business conservatives had long employed, even though the institutional apparatus of the new social regulations remained in place during the so-called Reagan Revolution. Taking an uncertain victory, the Business Roundtable in 1983 indefinitely postponed its quest for comprehensive regulatory reform.

REGULATORY POLITICS IN A POST-CRISIS WORLD

The recession of 1981 and 1982, which capped more than a decade of economic upheaval and left the American manufacturing community severely rattled, ultimately yielded to recovery just in time for Ronald Reagan to declare “Morning Again in America” and proceed on his way to overwhelming reelection in 1984. But the economic traumas of the 1970s had marked more than a downturn in the business cycle. As the final two chapters of this book explore, the American economy, even in the bullish 1980s, differed markedly from what had preceded it. New industries and sectors—particularly technology, finance, and retail—came to dominate the business landscape as manufacturers struggled and production moved increasingly offshore. As a political class, American consumers retained their high expectations and their powerful hold on policymakers, even as the ethos of economic conservatism and its faith in unfettered, deregulated markets grew increasingly widespread. As the political and economic terrain shifted decisively under corporate leaders’ feet, organized business groups struggled mightily to shift along with it.

In the realm of regulatory politics, the long-awaited recovery from inflation, recession, and energy crisis meant that conservative complaints about the high costs of regulations lost some punch. Perhaps nowhere was this change more evident than in the realm of environmental protection, both in the United States and around the world. From its origins in the late 1960s, the environmental movement had always been a global phenomenon, and by the 1980s “Green Party” politicians began to gain seats in municipal and national legislatures throughout the industrialized world. In response, the leaders of large corporations—particularly those that increasingly operated across national boundaries—took note, modifying their policy positions and operations. In Japan, for example, the heads of major industrial conglomerates and international traders recognized that their success in foreign markets would require greater sensitivity to the regulatory regimes as well as the cultural expectations of the countries with which they increasingly did business. In 1991, after a decade of prosperity in which Japanese firms invested heavily abroad, the Keidanren—the Federation of Economic Organizations that represented approximately one thousand large Japanese corporations—adopted a Global Environment Charter to tout its commitment to global environmentalism.⁶⁶

Just as Japan’s industrialists invoked the mantra of environmentalism to improve their public appearance and bolster their compliance with global regulations, so too did their American counterpart, the Business Roundtable, strategically shift its position in the 1980s. Although environmentalism had long constituted one of the group’s chief focal points, Roundtable executives in the 1980s understood that clean air and water regulations remained politically popular. Dogmatic opposition in the name of profits, particularly in an economic recovery, promised to alienate far more Americans than it attracted. Although business leaders could not defang the EPA, they injected their market-oriented ethos into the debate by promoting the virtues of voluntary, private sector environmental stewardship. In 1984, for example, the Roundtable’s Environmental Task Force commissioned dozens of case histories to document steps taken by large industrial companies such as U.S. Steel, whose chairman David Roderick headed the task force, to clean the nation’s air and water. Showing off how “U.S. industry has applied expertise and experience to solve environmental problems,” the Roundtable reasoned, would mitigate calls for new, stricter, and more costly pollution standards. Indeed, in April 1990, dozens of Roundtable companies publicized their enthusiastic participation in the twentieth anniversary of the first Earth Day. Such a public celebration of environmental stewardship and embrace of the principles of voluntary self-regulation—the mantra of uncountable antiregulatory industrialists since the nineteenth century—masked the group’s continued hostility to command-and-control regulation. In the late 1980s, Roderick and the Roundtable lobbied unsuccessfully against another round of Clean Air Act Amendments, this time addressing acid rain and global climate change, two issues on which many Roundtable members remained skeptical. Invoking the successful economic argument from the crisis years of the 1970s, Roderick charged that the legislation “would be the most expensive environmental legislation ever adopted and the least cost effective,” potentially leaving “three to four million jobs … adversely affected.” Despite such protestations, the amendments passed in 1990, and the Roundtable’s dire predictions failed to materialize. Business’s longstanding vitriol remained, but in a changed economic and political climate, its effectiveness had been muted.⁶⁷

The Roundtable’s embrace of environmentalism despite its lingering opposition to strict regulation found an echo in another strategic change over the issue of consumer product regulation. United corporate lobbying in the late 1970s had successfully halted the public interest movement’s momentum and the regulatory reform campaign in the early 1980s, while failing to achieve all of business leaders’ aims, further limited the reach of regulatory agencies. As consumer and environmental activists felt their influence with state and national lawmakers wane, many turned to the judicial system for redress. As a result, the number of consumer-based mass tort cases rose dramatically in the 1980s. Such lawsuits, in which a large number of people claim harm from a single source, such as a toxic substance released by a private company or a dangerously defective product, posed a new type of threat to business leaders. In response, politically active business leaders shifted the attention they had previously lavished on consumerism to the issues of product liability and tort law. The Business Roundtable, for example, dedicated substantial lobbying energy during the 1980s and 1990s toward a proposal for what its Tort Policy Task Force chairman called a “single, nationwide, uniform product liability law.” Just as the failed regulatory reform proposal would have leveled the playing field by removing the presumption of validity from any rule issued by a federal agency, this law would have legally shifted the burden of proof in a tort case away from offending companies, reducing, according to the Roundtable, “litigation, large damage awards, and … [un]affordable liability insurance.” Jettisoning conservative notions of states’ rights, the Roundtable worked tirelessly—and ultimately fruitlessly—to nationalize mass class action lawsuits. However, although the debates surrounding tort law helped perpetuate the growing belief that American society was unusually or unreasonably litigious, the Roundtable and its allies failed to achieve significant reform of class action law.⁶⁸

Despite the Roundtable’s failure to win comprehensive regulatory reform and its subsequent struggles over the Clean Air Act Amendments and tort reform, the mobilized business community’s decades-long campaign to refashion the American regulatory state achieved important victories as well. Around the world, the concept of regulation underwent substantial changes—procedural, theoretical, and political—in the last third of the twentieth century, and regulatory governance remains contested and contradictory. The United States emerged as an early adopter and clear leader in risk management and safety regulations for consumer products, workers, and the environment in the 1960s. In Western Europe, particularly among the members of the European Economic Community who would form the European Union in 1993, the push for such risk regulation began somewhat later but followed a different trajectory. While European countries lagged the United States in areas like automobile safety and emissions in the 1960s and 1970s, a shift occurred in the 1990s; since then, Europe has generally enacted stricter product regulations, particularly concerning genetically modified organisms and added hormones in food. To an important degree, this contrast exemplifies the success of conservative arguments in American politics and the ability of producers to frame regulatory issues in terms of consumer costs, skills honed during the fierce lobbying battles of the 1970s and early 1980s.⁶⁹

To be sure, the deregulatory market-oriented ideas that shaped American politics constituted a global phenomenon; the logic of “neoliberalism” shaped regulatory, tax, and even criminal justice policy in industrial powerhouses as well as in developing countries. The Thatcher government in Great Britain, for example, took a famously hard line against labor unions and, in the name of promoting competition, liberalized key elements of its economy, especially telecommunications. France, Japan, and Germany also embarked on deregulatory projects in the 1980s, following the British and American examples. Yet, as political scientist Steven Vogel has argued, these experiments in “deregulation” proved incomplete at best; in many cases, they led to a proliferation of rules despite the allegedly “freer” markets. As in the United States, “deregulation” and “regulatory relief” frequently meant quite different things. Moreover, the persistence of corporatist arrangements in Europe and Japan helped ensure that business prerogatives remained balanced against other interests. In the United States, the political debates surrounding regulatory governance remained similarly muddled. The deregulatory impulse—propelled by both left-wing concerns about capture and right-wing arguments about competition and government interference—achieved lasting legacies, such as the liberalization of telecommunications and financial services, including the refusal by Democrats and Republicans alike to regulate high-risk trading practices like derivatives. And while OIRA and the Reagan administration’s policies of regulatory neglect certainly reduced the compliance burdens many firms faced, the spirit of environmentalism and consumerism remained powerful. Although American business associations operated in a favorable political climate in the 1980s and did not face the same type of institutional constraints that compelled their counterparts in Europe and Japan to cooperate more with labor and public interest groups, they nonetheless failed to construct a coherent political and intellectual vision of regulatory reform.⁷⁰

The politics of regulatory reform thus marked both a capstone and a turning point for the business coalition. As a matter of political organizing and message shaping, the campaign for comprehensive reform drew on a critique of liberalism and social regulations whose roots reached back to the earliest days of industrial capitalism. But business leaders’ failure to achieve all their goals also signaled the limitations of their political power. After their major lobbying victories in the 1970s, the terrain of regulatory reform proved far rockier. As Roundtable executives and other corporate leaders quickly discovered, proactive lobbying in the American political system posed far greater difficulties than reactive lobbying. In the fight to reform regulatory processes, business groups struggled to maintain unity within the ranks, particularly when policy details exposed divergent priorities among small and large firms. Moreover, many members of the conservative intellectual and political establishment did not share the Business Roundtable’s legislative priorities, even if they agreed ideologically with its goals. Those divisions allowed liberal opponents, who still retained vital political power, to thwart the business lobby’s efforts, particularly through the types of procedures (such as keeping a bill locked in the Rules Committee) that business had used so successfully against public interest legislation only a few years earlier. The result was a mixed legacy for the quest to reform regulatory governance.

But regulatory reform was not the only issue that hampered business’s organizational and intellectual unity in the early 1980s. As the next chapter argues, the explosive problems of taxes and the federal budget overran the politics of business during the Reagan administration, leaving a lasting imprint on the fate of the business movement.