Ferdinand Marcos - Apotheosis of The Philippine Historical Tradition
Ferdinand Marcos - Apotheosis of The Philippine Historical Tradition
Ferdinand Marcos - Apotheosis of The Philippine Historical Tradition
ABSTRACT
This paper seeks to enter into the academic debate on the nature
and context of the dictatorship of Philippine President Ferdinand
Marcos (1972-1986). In contrast to the entrenched view of Macros
as an exception to the Philippine political tradition, I argue, in a
vein similar to John T. Sidel‟s recent work on “bossism,” that
rather than being an anomaly within the system, Marcos was in fact
its apotheosis. By focusing on the relationship between Marcos and
the judiciary, I reveal how the President used the court to legitimize
his rule and manipulate the Cold War context to his advantage.
Under the cloak of legality, Marcos thus extended the political
tradition to include him, bringing it to its logical conclusion.
I. INTRODUCTION
With regard to the political system, I instead side with the more recent
characterizations of John Sidel's 1999 work on "Bossism" and Juan J. Linz‟s
1998 version of Max Weber‟s “Sultanism.” Sidel and Linz‟s theories
dethrone the patron-client framework, which places undue importance on
landholders and pairings of individuals, and instead emphasize the role of
American colonialism. Their visions are of personalistic rule and of Marcos
as the single, national “sultan” operating in a country of small, local
“bosses.” Yet, though I agree with this overall vision, I nevertheless reject
Sidel‟s conception of Ferdinand Marcos as the aberration of the political
tradition.
Mark R. Thompson, a proponent of Juan J. Linz‟s sultanism and a
recent scholar on the Marcos years, also shares Sidel‟s view and argues
similarly: “Marcos broke the informal rules of Philippine democracy and
later changed the game altogether by launching a dictatorship … [the game]
had survived until confronted with [Marcos].”3 Though Marcos did
heighten the “game,” I believe it is important to view his rule as very much
within the tradition, rather than as a departure from the tradition. My
interpretation shifts the blame away from one individual operating within a
flawed yet largely healthy system and instead draws attention to the failures
of the system itself.
Arguments that Marcos should be viewed as the master of the
tradition do appear in the existing scholarship. In “Cacique Democracy in
the Philippines,” Benedict Anderson introduces Marcos as a historical
inevitability. He writes:
[I]t was only a matter of time before someone would break
the rules and try and set himself up as Supreme Cacique
for Life … From one point of view, Don Ferdinand can
be seen as the Master Cacique or Master Warlord, in that
2 Carl H. Landé, Leaders, Factions, and Parties: The Structure of Philippine Politics (New
Haven: Yale University, 1965).
3 Juan J. Linz and H.E. Chehabi, eds., Sultanistic Regimes (Baltimore: the Johns Hopkins
A. Bossism
B. Sultanism
Max Weber first espoused the theory of sultanism and Juan J. Linz
later developed it for application to the Marcos regime and others such as
those in Cuba, Nicaragua, Iran, Haiti, and the Dominican Republic. Weber
8 John T. Sidel, Capital, Coercion, and Crime: Bossism in the Philippines (Stanford: Stanford
University Press, 1999), 12.
9 Ibid., p. 144
10 Ibid.
6
11 Weber, Max, Economy and Society: An Outline of Interpretive Sociology, ed. Guenther Roth
and Claus Wittich (Berkeley: University of California Press, 1978), 231-232.
12 Ibid., p. 24-25.
13 David Wurfel, “Martial Law in the Philippines: The Methods of Regime Survival,”
entrenched system, i.e. as the embodiment of all the ills already present, or
an aberration, breaking all the norms and departing from the tradition.
Romulo concludes that Marcos truly was both, “he was riding the course of
history quite well and manipulated it to his advantage.”14 Analyzing the
thinking that he believes led Marcos to declare martial law in 1972, Atty.
Romulo recounts:
He was a brilliant man and a very, very clever politician,
and I think what he did was both to look at the trends and
manipulate some of it to his advantage. 1) He could not
run again because he had, had two terms 2) the
Communist threat really was increasing and that was the
time for radicalism … So I think he could see that he
could manipulate [the] protest and radicalism to show
enough danger to invoke martial law. That‟s how I would
look at Marcos, not so much that he was an aberration, but
… [as] the leader … at the right place at the right time in
so far as autocratic rule.15
Many believe that Imelda Marcos‟s desire to remain in power helped to lead
Marcos down his eventual path. Mrs. Marcos‟s unabashed immoderation
focused the spotlight on her. In contrast, Ferdinand Marcos was a near
ascetic, who did not indulge himself in the same fineries as his wife.
However, one should also note that Marcos was very skillful at handling all
those around him. In the same way that he married Imelda for political
reasons, it has also been suggested by observers, including President
Ramos, that Marcos chose to paint her as the corrupt one to deflect
attention away from himself.21
Amb. Stephen Bosworth, the US Ambassador to the Philippines
from 1984-1987, differentiates Ferdinand Marcos from the other Filipino
politicians of his time and tradition. Putting aside all theories, Bosworth
simply places primary importance upon Marcos‟s desire to stay in power.
Bosworth states plainly, “Marcos was much smarter than his
contemporaries and more ruthless than his contemporaries and by the mid
1970s he was at a point when he could not envision any future for himself
beyond being President of the Philippines.”22 Power, indeed, drove Marcos,
and though Presidents before him had been equally power hungry, Marcos
was the first to even win reelection.
Striking a very different note, Atty. Estelito Mendoza, Marcos‟s
former Solicitor General and Minister of Justice, contextualizes Ferdinand
Marcos, asserting:
I think he practiced the same [patronage politics], but in a
more sophisticated way. For example, it‟s because he was a
to Cong. Locsin‟s avid interest in political theory at the age of 21, Ferdinand Marcos
would invite him to Malacañang Palace and Ferdinand Marcos directed an informal
course of study on political philosophy and theory for Cong. Locsin.
34 Cong. Teodoro Locsin Jr., Personal Interview, 14 Aug. 2008.
13
each other: you never shot each other, you respected each
other‟s privacy.35
The grave toll that the Marcos years took on his family explains
Congressman Locsin‟s position. His is a historically political family,
therefore rather than denounce the entire political tradition that his family
helped to build, he is instead inclined to emphasize its limits. Certain rules
did govern the political tradition: power passed back and forth between elite
factions and historical political killings occurred on a local, not national
level. Marcos thus differed from the rest only in superficial terms, but in
kind, he very much resembles the others of the senatorial class.
Congressman Locsin also points to several lingering vestiges of this
old republicanism in Ferdinand Marcos‟ actions. In addition to his regime‟s
need for an appearance of legality, Congressman Locsin attests that Marcos
continually went through the charade of fake elections because he thought
that doing away with them would be improper. Rather than sincere
democracy, the so-called elections were merely a superficial observation of
tradition. Congressman Locsin further recounts:
We later found out that he never actually touched the
national treasury, although we overthrew him on that
condition – that he was stealing from the government. He
would take kickbacks from Japanese contractors etc., but
we found out that he didn‟t touch the national treasury.
That‟s another throwback of his – that you use your power
to enrich yourself but you never put your hand in the
public till, which is the way it was in the old Republic.36
habeas corpus for the first time in Philippine history.37 The bill – essentially
the first of three constitutions imposed under American authority –
ascribed suspension powers to the governor-general in Section 5, and the
provision bears nearly the precise language that would later be used in the
1935 Philippine Constitution‟s Article VII, Section 10, Paragraph 2:
The President shall be commander-in-chief of all armed
forces of the Philippines and, whenever it becomes
necessary, he may call out such armed forces to prevent or
suppress lawless violence, invasion, insurrection, or
rebellion, or imminent danger thereof; when the public
safety requires it, he may suspend the privilege of the writ
of habeas corpus, or place the Philippines or any part thereof
under martial law.38
Unlike the United States, the Philippines explicitly vested this power in the
executive.39 As a consequence, the judiciary does not enjoy the same
prerogatives as the executive in cases of martial law.
In Barcelon v. Baker in 1905, the Philippine Supreme Court affirmed
the validity of the governor-general‟s basis for suspending the writ of habeas
corpus and, more importantly, established the suspension of that writ as a
political question over which the Supreme Court does not have judicial
review. The Supreme Court ruled, “The findings of the executive upon
which he bases his order suspending the privileges of the writ of habeas
corpus are conclusive and final upon the Courts.”40 On this, Philippine legal
history scholar Anna Castañeda writes,
As it would in the subsequent investigations of the colonial
period, Commonwealth period, and beyond, the Supreme
Court “terminated” its investigation, bowing to the
executive as “the sole and exclusive judge” as to whether a
state of “invasion, insurrection, or rebellion, or imminent
danger thereof” existed.41
77.
40 John H. Romani, The Philippine Presidency (Manila: University of the Philippines, 1956),
79.
41 Anna Leah Fidelis T. Castañeda, “The Origins of Philippine Judicial Review: 1900-
Therefore, the later Supreme Court‟s passive deference to the executive and
legislature had its roots in the American colonial period.
During the 1934 Constitutional Convention, Delegate Araneta
warned that the martial law provision as it stood allowed only the President
to determine the existence of “lawless violence, invasion, insurrection, or
imminent danger thereof.” In addition to the general Philippine distrust of
executive power, Delegate Araneta feared that due to the existing judicial
precedents in 1934, the Supreme Court would be unlikely to review the
basis for the President‟s decision to suspend the writ of habeas corpus.47 It
seems that Araneta was right to fear the executive‟s abuse of this power.
President Quirino was elected in 1950 and though his term was
wild with graft, corruption, and electoral fraud, he is most remembered for
his decision to suspend the writ of habeas corpus to fight the communist Huk
rebellion. President Quirino‟s suspension, issued in Proclamation 220 on
October 22nd, 1950, met widespread criticism and outrage despite the fact
that the 1935 Philippine Constitution explicitly provided for the suspension.
In August of 1952, the Supreme Court ruled in Montenegro v. Castañeda that
the suspension was constitutional, with a decision that echoed the language
of Barcelon v. Baker in 1905.
After each historical suspension of the writ of habeas corpus,
beginning in 1905 with Governor-General Smith, then later in 1953 with
President Quirino, and finally in 1971 with President Marcos, the Supreme
Court would sustain the executive‟s decision. In this way, Marcos‟s
relationship with the Supreme Court joins an unbroken historical precedent
in Philippine history. He is not an aberration of the system, but merely a
progression of the political tradition. Marcos was the last in a line of strong,
post-colonial presidents, each of whom strengthened the executive branch
alongside a weaker, complicit judicial branch.
Albert F. Celoza, Ferdinand Marcos and the Philippines: The Political Economy of
48
Marcos only took this final step after September 22nd, 1972, when the
Secretary of Defense, Senator Juan Ponce Enrile, was ambushed. Despite
Marcos‟s feigned shock and worry, Senator Juan Ponce Enrile admitted at a
press conference with Fidel Ramos in February 1986 that the ambush was
staged.52 The Philippine Inquirer further reports that “[Enrile] and Ramos
were part of the „Rolex 12,‟ the group of military advisers who had helped
Marcos plan martial law.”53
Martial law would far outlast its original purpose – only lifted in
1981, long after the Communists had been beaten back. In a New York
Times interview on June 17th, 1974, President Marcos admitted that he had
“largely „neutralized‟ the „public disorder and rebellion‟ that led him to
impose martial law” in 1972.54 However, he went on to explain that “he had
not been able to complete the social and economic reforms that he said
were necessary to prevent recurrence of the so-called rebellion.”55 Until he
was removed from power by the People‟s Power Revolution of 1986,
Marcos would seek to, as Rolando V. del Carmen describes, “portray to
observers at home and abroad … [that] despite the realities of martial law,
constitutional procedures [had] not been abrogated and that the judiciary
[was] alive and well.”56
A. Public Reactions
In a country that was a strong American ally and located very close
to Vietnam, the Philippine people were very scared of what in 1972 was
quite a serious Philippine Communist threat. Marcos played on that fear
Times, June 17, 1974, p. 7, ProQuest Historical Newspapers The New York Times
(1851-2005).
55 Ibid.
56 Rolando V. Del Carmen, “Constitutionalism and the Supreme Court in a Changing
very well. The Philippines and Ferdinand Marcos, however, were not alone
in this situation and the trend within Southeast Asia was a move toward
more authoritarian and controlled states. Echoing this sentiment, Secretary
of Finance Cesar Virata, who was attending the World Bank Meeting in
Washington, DC when martial law was declared, recounts that a senior
reporter from the Department of State called him at about four in the
afternoon and asked him if he was aware of the recent events.57 When the
reporter asked him how he felt Virata replied, “We just joined the Asian
people.”58 Mr. Virata explained this to me: “Everything here [at the time]
was martial law: Korea, China, Taiwan, Malaysia, Thailand, Singapore...
Malaysia had its internal security act. So I said, „Well, we are now part of
Asia as well.‟”59 Therefore, despite Congressman Locsin‟s belief that it was
not in the Philippine historical tradition to take so extreme an action, there
was not only a history of strong executive action in the Philippines, but also
concurrent examples in the region.
President Ramos recounts, “In the beginning, those of us in the
armed forces really supported the idea, but it lasted too long and became
subject to abuse of power.”60 President Ramos frames his support for
martial law in terms that extend beyond merely communism, which explains
his early accession into Marcos‟s “Rolex 12” group:
[To] those of us in the armed forces and law enforcement,
it was something that we could support because we felt
that it would … return … the rule of law. We would be
able to go after the private armies of the warlords in the
provinces. [Over the first three years] we collected so
many loose firearms and jailed a lot of abusive politicians
who were breaking the law.61
So it seems that from the beginning, Marcos – and to a degree, the “Rolex
12” – had intended for martial law to address a variety of issues, though he
argued for it legally and to the public solely in terms of the Communist
threat.
Nevertheless, this was not immediately a dictatorship and the
contours of Ferdinand Marcos‟s authoritarianism developed only gradually,
and with the protection of full – albeit perverted – legal backing. Yet, when
asked how early into 1971 (when Plaza Miranda was bombed) or 1972
(when Marcos promulgated Proclamation No. 1081 declaring martial law)
Marcos had first begun toying with the idea, Senator Juan Ponce Enrile
replied, “We started studying martial law in December of 1969” – just one
month after Marcos‟s second term began and a year and a half prior to his
suspension of the writ of habeas corpus.62 Senator Benigno Aquino, Jr.,
Marcos‟s archrival, expected marching in the streets when martial law was
declared, but instead everyone stayed home. He said, “I was correct about
Marcos, I was wrong about the Filipino people.”63
B. Constitutional Authoritarianism
In his analysis, Lazaro doesn‟t focus on Marcos stretching the law to fit his
needs. Rather, he applauds Marcos for his insistence upon obtaining legal
support for his actions. Unfortunately, this entirely ignores the fact that
Marcos had to first break the law and rewrite it to gain such legal backing.
67 Tillman Durdin, “Marcos Gets his Kind of Democracy,” The New York Times, January
21, 1973, p. 207, ProQuest Historical Newspapers The New York Times (1857-2005).
68 “Dissent in Manila,” The New York Times, January, 12, 1973, p. 32, ProQuest
In the March 31st, 1973 Javellana v. the Executive Secretary decision, six
justices agreed that “the validity of Proclamation 1102 (announcing the
ratification of the proposed Constitution) is a justiciable question,” with
four justices dissenting.83 According to Article XV, Section 1 of the 1935
Constitution, the only means of ratifying a new constitution is through “an
election or plebiscite held in accordance with law and participated in only
by qualified and duly registered voters.”84 For this reason the Supreme
Court decided that the ratification was not in “substantial compliance of the
law.” Yet, the decision states:
[F]our Justices hold that the proposed Constitution has
been acquiesced in by the people; two Justices hold that
the people have not expressed themselves; one Justice
thinks the doctrine of „Constitution by acquiescence‟
inapplicable; while the three other justices agree that they
lack the knowledge or competence to make a
determination.85
80 Ibid.
81 Atty. Estelito Mendoza, Personal Interview, 13 Aug. 2008.
82 Ibid.
83 Central Lawbook Publishing Co., Inc. ed., Supreme Court Reports Annotated, Vol. 50 01
Because the Court could not obtain the six votes required to decide
whether the public had acquiesced in the constitution or to declare the new
constitution not in force, the Constitution, which was in de facto operation,
continued to be in force. Rolando V. del Carmen writes in the Asian Survey,
“It is here that President Marcos‟ unilateral ratification proclamation of
January 17, 1973, assumed the proportion of a far-sighted anticipatory legal
strategy.”88 Marcos never truly implemented the new constitution, never
elected a new prime minister, and in the end the Transitory Provisions ruled
the country with him positioned as de facto dictator.
It is notable that the Supreme Court did not issue an outright
endorsement for the constitution, but when given an opportunity to assert
the rule of law and denounce Marcos‟s actions, it crumbled. The ratification
of the 1973 Constitution and the Javellana v. Executive Secretary case were the
most pivotal Marcos victories. The Transitory Provisions granted Marcos
full powers and the case legitimized his actions before the law, undercutting
the opposition‟s arguments against him.
The Supreme Court had long operated alongside blatant political
violations of the rule of law. While a passive body with powers to decide
only those cases brought before it, the Court could always turn a blind eye.
Then, when confronted with the question of what was officially acceptable,
the Supreme Court did not rise to assert the constitutional constraints upon
the executive. As it had three times before, the Supreme Court once again
bowed to the executive branch. Marcos may have been more extreme than
his predecessors, but the Supreme Court‟s acquiescence places him firmly
within the political tradition.
VI. CONCLUSION
BIBLIOGRAPHY
Interviews
Primary Sources
Central Lawbook Publishing Co., Inc. ed., Supreme Court Reports Annotated
Vol. 50 01 (Manila: Central Book Supply, Inc., 1973).
Del Carmen, Rolando V. “The Philippine Judicial System Under the New
Constitution and Martial Law.” Texas International Law Journal 9 (1974):
143-155.
“Dissent in Manila,” The New York Times, January 12, 1973, p. 32, ProQuest
Historical Newspapers The New York Times (1851-2005).
29
Durdin, Tillman, “Marcos Gets his Kind of Democracy,” The New York
Times, January 21, 1973, p. 207, ProQuest Historical Newspapers The
New York Times (1857-2005).
“Marcos Charter Challenged by 5,” The New York Times, January 27, 1973, p.
5, ProQuest Historical Newspapers The New York Times (1857-2005).
Schanbergn, Sydney H., “Marcos Says He Must Keep Martial Law,” The
New York Times, June 17, 1974, p. 7, ProQuest Historical Newspapers
The New York Times (1851-2005).
Secondary Sources
Celoza, Albert F. Ferdinand Marcos and the Philippines: The Political Economy of
Authoritarianism. Westport: Praeger, 1997.
Landé, Carl H. Leaders, Factions, and Parties: The Structure of Philippine Politics.
New Haven: Yale University, 1965.
Linz, Juan J., and H.E. Chehabi, eds. Sultanistic Regimes. Baltimore: Johns
Hopkins University Press, 1998.
30
Migdal, Joel S. Strong Societies and Weak States: State-Society Relations and State
Capabilities in the Third World. Princeton: Princeton University Press,
1988.
Seagrave, Sterling. The Marcos Dynasty. New York: Harper & Row
Publishers, 1988.
Sidel, John T. Capital, Coercion, and Crime: Bossism in the Philippines. Stanford:
Stanford University Press, 1999.
Tate, C. Neal. “Courts and Crisis regimes: A Theory Sketch with Asian
Case Studies.” Political Research Quarterly 46.2 (1993): 311-338.
ABSTRACT
The public outcry for reforming Wall Street in the wake of the
global financial crisis has been overwhelming: the discourse ranges from
those saying the recent crisis is nothing more than a natural course of the
business cycle, to those saying the economic downfall of the United States
is imminent. But to analyze reform efforts requires looking underneath
these effects and consequences at the roots of the regulatory regime.
Simon Johnson posits that the U.S. has been captured by a financial
oligarchy, and that comprehensive regulatory reform is impossible until the
intimate relationship between Washington and Wall Street is broken.
Commentary on the economic condition after the crisis seldom provides
more than narrative, with even more infrequent looks at quantitative data.
This study provides some empirical backing to Johnson‟s claims and
analyzes the relationship between congressional policy making and financial
influence from the financial sector. This study‟s analyses demonstrate that
the strength of the financial sector‟s grip on the U.S. economy has indeed
been aided by Washington policy and that Congress is heavily susceptible to
political manipulation by Wall Street.
1
Jonathan Kim recently graduated with honors from the University of Denver. He
double majored in Public Policy and Political Science and received the Outstanding
Graduating Senior award from both departments. He first became interested in the
financial crisis while studying economic policy issues in March 2008, months before a
crisis was apparent. He will soon be attending law school where he hopes to continue
studying financial regulatory issues.
32
I. INTRODUCTION
The first decade of the new millennium ended with the United
States being in no better economic shape than when the decade began. The
U.S. started off in 2000 at its apex: the Dow Jones Industrial Average,
NASDAQ Composite, and S&P 500 had been consistently on the rise and
were trading at all time highs.2 The end of the 1990s brought a 20 percent
increase in the number of jobs, a 38.6 percent increase in gross domestic
product, and an impressive 58 percent increase in household net worth
(after adjusting for inflation).3 Unemployment rates were the lowest that
the country had seen in years and prosperity seemed to be flowing to all
levels of the population. Fast forwarding to the beginning of 2010,
however, the economic picture is starkly different and the optimism with
which the previous decade began has been replaced with incredulity. Data
from the Bureau of Labor Statistics and Bureau of Economic Analysis
shows that the first decade of the 2000s ended with negative growth: gross
domestic product grew by a meager 17.8 percent and household net worth
shrunk by four percent. The decade ended with zero net job creation and
unemployment persistently lingered around 10 percent in the early months
of 2010. From peak-to-trough, the decade saw a massive rise in net wealth,
only to lose a baffling $17.4 trillion of it a few years later.4 These years are
the first in modern history in which the U.S. has digressed from the norm
of prosperous growth: every decade since the 1940s posted a growth of at
least 30 percent in gross domestic product and 20 percent in household net
worth by its end.5 For a country that has experienced perpetual and
tremendous economic growth in modern times, the story told by the
numbers of the most recent decade are troubling and demands a
fundamental evaluation of what went wrong. How and why was the decade
bookended with prosperity on one end and hardship on the other?
The calamitous events of the financial crisis began on September 7,
2008 as the federal government seized the government-sponsored
enterprises Fannie Mae and Freddie Mac. On September 15th, Lehman
Brothers filed for bankruptcy and later in the day, Merrill Lynch was sold to
Bank of America. On September 16th, the Federal Reserve intervened in
January 2, 2010
4 Ezra Klein, Americans’ Net Worth Rises for Third Straight Quarter, March 12, 2010.
5 Irwin, Aughts were a Lost Decade for U.S. Economy, Workers, January 2, 2010.
33
Quarterly 124(4).
34
11Ross Levine, “An Autopsy of the U.S. Financial System,” National Bureau of Economic
Research, 28.
36
12 John Cassidy, How Markets Fail: The Logic of Economic Calamities (New York: Farrar,
Straus, and Giroux, 2009), 338.
13 Simon Johnson, “The Quiet Coup,” The Atlantic, 49.
15 Simon Johnson and James Kwak, 13 Bankers (New York: Pantheon Books, 2010), 90.
16 John Wright, Interest Groups & Congress: Lobbying, Contributions, and Influence (Boston:
Allyn & Bacon, 1996), 143.
17 Wright, Interest Groups & Congress, 143.
38
The financial crisis of 2008 was not a failure that can be principally
attributed to politics, policy, economics, or the financial sector; it was,
rather, a systematic failure of all participants. To focus on politicians and
policymakers ignores the recklessness of the financial sector; to blame the
system is to remove the burden of responsibility from the actors; and to
blame the financial sector is to ignore the faults of a government that
ignored its duties as a regulator.
Greenspan and Bernanke speak specifically of the role that
monetary policy played in the crisis. Greenspan‟s rude awakening from free
market ideology is readily apparent in his testimony given to Congress
following the crisis, but his analysis still holds vestiges of his complicity in
fostering the crisis. For example, Greenspan argues at one point that there
is an inherent lag between policy implementation and impacts on the
economy. For this reason, he says, it may not have been possible to diffuse
the housing bubble. Yet, The Economist was able to spot the housing bubble
by September of 2002 – a full four years before there were even any
indications of an impending crisis.20 The flaw of Greenspan‟s argument
suggests that though his ideology may have been challenged and adjusted,
he is still unable to have a completely honest discussion of the events that
led up the crisis. Levine, Posner, and Cassidy all provide significant
arguments regarding the policies and the systems that fostered the financial
crisis, but their claims are largely theoretical and polemic. This is not to
22 David Kennedy, Freedom from Fear (New York: Oxford University Press, 1999), 366.
23Kennedy, Freedom from Fear, 366.
44
these laws for greater capital in financial activities are fairly clear, but its
effect on the growth of the financial sector is not readily apparent.
Growth in any economic sector can be analyzed by both changes in
number of personnel and total output – in other words, employment levels
and profits. Figure 1 shows the data for employment in the financial sector
from 1948 to 2009 overlaid with markers representing the passage of
regulatory and deregulatory laws. The data shows that employment has
grown at a linear pace with no discernible correlation between the passage
of laws affecting the financial sector and employment growth. The data
does show reduced and negative growth during the late 1980s, late 1990s,
and in 2008, however. These dates coincide with the savings and loan crisis
(late 80s), Long Term Capital Management and high-tech bubble collapses
(late 90s), and the most recent financial crisis (2008). The correlation
between these time periods and the data indicates that employment levels
are relatively unaffected by laws that change the regulatory framework for
the financial sector, but are instead mostly affected by major banking crises
that affect output.
4 Regulation
3
2 Deregulation
1
0
1920 1940 1960 1980 2000 2020
Sources: U.S. Department of Commerce, Bureau of Economic Analysis; CQ
Researcher
46
$2,500.00
$2,000.00
(in billions)
Profits
Profits
$1,500.00
Regulation
$1,000.00
$500.00
$-
1940 1960
1980 2000 2020
Year
Source: U.S. Department of Commerce, Bureau of Economic Analysis; CQ
Researcher
47
$3,000.00
y = 85.093x - 168205
$2,500.00
(in billions)
Profits
$2,000.00
$1,500.00
$1,000.00
25
20 Manufacturing
Percent of
U.S. GDP
15
Agriculture
10
5 Mining
some relationship does exist between Washington and Wall Street and that
this relationship is significantly bound by economic interest.
$2,500.00
$2,000.00
Value Added
in billions
$1,500.00
$1,000.00
$500.00
$-
$4.500
$4.000
$3.500
$3.000
$2.500
$2.000
$1.500
$1.000
$0.500
$-
$300.00
$250.00
$200.00
$150.00
$100.00
$50.00
$-
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
$500.00
$300.00
$200.00
$100.00
$-
54
Against
Democrats
Republicans
For
Independents
0 100 200 300 400
$150,000.00
$100,000.00
$50,000.00
$-
Democrat Democrat Republican Republican
Voting Yes Voting No Voting Yes Voting No
Source: U.S. House of Representatives, Clerk’s Office and calculations based on
data from Center for Responsive Politics
bill was not considered of its own merit – instead, Senator Gramm, the
sponsor of this bill and of the Financial Services Modernization Act,
“inserted this 262 page bill into a $384 billion omnibus spending bill” that
was over 11,000 pages long.25 The tactical and political advantages of
folding the bill into an omnibus spending bill clearly worked: the
appropriations act of which the Commodity Futures Modernization Act
was a part of passed the House in a vote of 292-60 and passed the Senate
unanimously. Michael Greenberger is a former senior official for the
Commodity Futures Trading Commission. He remains convinced that
“there was no one except the drafters of the bill that understood what it
did” and could guarantee “that the drafters of the bill were not members of
Congress, they were the lawyers for the investment banks on Wall Street
that convinced Senator Gramm to introduce this.”26 For this election cycle,
Senator Gramm received $710,994 from the financial sector in campaign
contributions. Reiterating a point made by Wright, campaign contributions
go a long way in establishing interest group access to a legislator.
As previously mentioned, the assignment of bills to committees is a
critical step in the legislative process. When bills are first introduced into
Congress, they are referred to committees where they are debated and a
decision is made on whether or not the bill ought to be considered by the
entire chamber. Committees in this sense, hold a great amount of power
over the fate of a bill. Because of their ability to kill a piece of legislation or
to encourage its progress in the legislative pathway, committees are prime
targets of interest group money. The availability of campaign contribution
receipts on an individual level from the CRP makes it possible to group
senators and representatives according to their respective committee
assignments. Doing so allowed for further analysis of the distribution of
financial sector money in the legislative process. Because the data is
specific to the financial sector, it is possible to calculate the total that a
committee received in campaign contributions as well as the mean and
median received by its members from the financial sector. The names of
the committees denote the issues over which the committee has
jurisdiction. Table 2 lists the committees of the Senate and House.
At an initial glance, the delineations between some of the
committees seem unclear. For example, the Senate has committees
dedicated to Banking, Commerce and Finance. While under their
Transportation and…
$-
Budget
Veterans' Affairs
Resources
Agriculture
House Administration
Rules
Science
Appropriations
Small Business
Armed Services
International Relations
Government Reform
Government…
House…
Transportation…
International…
$- Education and…
Budget
Commerce
Judiciary
Veterans' Affairs
Ways and Means
Resources
Science
Small Business
Agriculture
Rules
Appropriations
Armed Services
Campaign contribution data from the financial sector for the 106th
Congress compared against the political dynamics involved in the passage
of the two aforementioned bills show that funds from the financial sector
were considerable and likely played a significant part in the legislative
outcomes. This is a critical lesson when considering the 111th Congress and
its efforts at reforming the failures that caused the financial sector‟s near
collapse in 2008. There are two pieces of legislation that are analyzed in
this study. The first is the Wall Street Reform and Consumer Protection
Act, which passed in December of 2009, and the second is the Restoring
American Financial Stability Act of 2010, which was recently passed by the
Senate on May 20, 2010. Though it is outside the frame of this study, the
process of reconciling the Senate version of the bill with its House
counterpart should be noted as another step on the legislative pathway
where financial sector money could be used to exert influence.
The financial regulatory framework is about to see the greatest re-
shuffling since the New Deal. As such, the legislative initiatives of the 111th
session of Congress make its members a prime target of financial sector
influence. Figure 13 shows a quarterly breakdown in lobbying spending by
60
the financial sector. During the quarters when the crisis was at its peak,
lobbying spending was at its lowest. There is a significant increase,
however, and lobbying efforts by the financial sector are at their highest in
the fourth quarter of 2009 and first quarter of 2010. The Wall Street
Reform and Consumer Protection Act was passed in December 2009 while
debate on the Restoring American Financial Stability Act of 2010 took place
in the first quarter of 2010 and was finally voted on and passed in the
second quarter. It is no coincidence that financial sector lobbying efforts
skyrocketed during the same time periods that Congress was considering
major regulatory legislation. The significant increase in spending by the
financial sector during Congress‟ reform efforts shows the readiness with
which Wall Street interests are able to mobilize its lobbyists.
$135
$130
$125
$120
$115
$110
$105
$100
2008
2008
2008
2008
2009
2009
2009
2009
2010
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Ways and Means Committee are by far the most courted by campaign
contributions from the financial sector; the other committees to which the
legislation was referred to still received more campaign contributions in
most cases than those committees that had not received the bill. Put
simply, financial sector money was concentrated around points of financial
sector interest.
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
Budget
Veterans' Affairs
Ways and Means
Judiciary
Homeland Security
Foreign Affairs
Administration
Agriculture
Resources
Rules
Science
Education and Labor
Financial Services
Small Business
Appropriations
Transportation
Armed Serviced
Government Reform
Energy and Commerce
$200,000
$150,000
$100,000
$50,000
$-
Budget
Judiciary
Veterans' Affairs
Ways and Means
Foreign Affairs
Resources
Administration
Homeland Security
Rules
Science
Small Business
Agriculture
Financial Services
Transportation
Appropriations
Armed Serviced
Government Reform
Education and Labor
Energy and Commerce
sector, Senator Schumer severely skews the data. The impacts of this
statistical extreme are ameliorated by the use of the median, however.
Because the median is able to take into account extreme outliers in the
dataset, the median calculations shown in Figure 17 are a more reliable
gauge of financial sector influence on committees. Even the median
calculations show that the Banking Committee receives the most in
campaign contributions.
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
While the roll call and campaign contribution data for the Financial
Services Modernization Act made a strong case for higher spending leading
to more favorable legislative outcomes, this rule does not seem to apply to
the bills considered by the 111th Congress. The roll call data for these bills
shows that voting is almost completely along party lines; a comparison of
campaign contributions in those voting for or against the bill and by party
shows that there is negligible difference in the amount of funds received
from the financial sector, but this does not mean that the financial sector‟s
efforts to favorably manipulate the new regulatory regime have diminished.
Though it would be tempting to say that these results go against a perceived
higher spending-favorable outcome pattern, it is important to keep in mind
that no such definite link exists. In addition, today‟s constituent demand
for changing the regulatory framework is almost certainly different from
65
what it was during the 106th Congress. Whereas the bills passed by the
106th Congress were entirely led by deregulatory initiatives and efforts, the
bills of the 111th Congress are being considered out of reaction to a crisis
that negatively affected the entire country. Keeping this in mind, it almost
certainly would not be in a politician‟s best interest to be seen as more
susceptible to money from the financial sector than his or her colleagues.
This does not mean, however, that financial interests are not
utilizing different means of influencing the legislative process. The
Commodity Futures Modernization Act, as claimed by Greenberger,
exhibited an instance of direct participation in the drafting of legislation by
lobbyists representing Wall Street. What better way for the financial sector
to ensure a favorable legislative outcome than by having a direct hand in the
bill‟s formulation itself? To reiterate a point made by Wright, interest group
action during the stages of bill formulation and markups is not only
possible, but commonplace. In Johnson‟s 13 Bankers, Greenberger further
claims that the Wall Street Reform and Consumer Protection Act “had to
be written by someone inside the banks, because buried every few pages is a
tricky and devilish „exception‟” and that he would be greatly surprised “if
these poison pills originated from anyone on Capitol Hill or the
Treasury.”27 The pressure for reform, post-crisis, is extremely high, and any
blatant attempt to derail the reform process would be strategically perilous
for the financial sector in the public‟s eyes, especially in the wake of a
financial crisis that has wiped out trillions of dollars in wealth and absorbed
billions in tax payer money. Lobbyists for the financial sector chose instead
to achieve their influence by a stealthier method: by having a hand in the
drafting of the legislation itself, or by working with members of Congress
to submit amendments. The Restoring American Financial Stability Act
had 434 amendments proposed to it by last count. By comparison, the Wall
Street Reform and Consumer Protection Act had 24 amendments proposed
and the Financial Services Modernization Act had 26 amendments
proposed. The financial sector interests‟ consistent levels of funding and
dynamic forms of involvement in the legislative process lend weight to the
argument that financial sector contributions seek not the purchasing of
votes, but a hand in the creation of favorable legislative outcomes.
Indeed, while the passage of the recent reforms could be seen as a
major regulatory achievement and blow to the financial sector, there is
more that needs to be taken into consideration. Major reform following the
28Eric Lichtblau, “Ex-Regulators Get Set to Lobby on New Financial Rules,” The New
York Times, July 27, 2010.
67
about which most people outside Washington and New York have little
knowledge” at the time.29 In the context of this study, then, it can be
concluded that party dynamics, constituent demand, and public opinion
cannot be considered as significant contributors to creating legislative
outcomes that are favorable for the financial sector. Rather, it can
reasonably be concluded that contributions from the financial sector do
create the opportunities for access and influence necessary to generate
favorable legislative outcomes for the financial sector.
Despite these conclusions, this study is limited by its relative
simplicity and narrowed scope of analysis. This study focuses specifically
on how traditional and human capital from the financial sector has been
utilized to create a mutual relationship between Washington and Wall
Street. Within these parameters, the study has some shortcomings. The
analysis of the financial sector‟s impact on the overall GDP would require
far more macroeconomic study. This study merely sought to gauge the
effects of regulatory/deregulatory legislation on the general growth trends
of the financial sector and determine if there was any visible correlation
between the two elements. Furthermore, the lack of detailed data that
shows lobbying expenditures towards each member of Congress (like the
campaign contribution data) was a great shortcoming. Though campaign
contribution data is useful for gauging the general level of influence that a
sector has over a particular candidate, lobbying spending is much more
focused on influencing specific legislative outcomes. In this respect, the
detailed lobbying data would have been invaluable in the overall analysis.
Overall, however, the study did provide a significant empirical basis
to analyze the notion of a financial oligarchy through the lens of interest
group influence as articulated by Wright. The completion of this study
comes on the eve of the greatest re-shuffling of financial regulation since
the New Deal. In this respect, the study is also limited by the pace of
events in the here and now and lacks the luxury of hindsight to provide a
more thorough analysis. What remains clear, however, is that the new
pieces of legislation proposed in Congress and the members themselves are
fighting against a wall of well-established money and influence.
VII.CONCLUSION
Daniel Parks, “United at Last, Financial Industry Presses Hill to Clear Overhaul,” CQ
29
The core findings of this study are two-fold: first, the deregulatory
policies of Washington have helped to propel the financial sector‟s
economic growth and have consequently created a mutual economic
interest between the United States and its financial sector. Washington has
a vested interest in encouraging the growth of the financial sector while the
financial sector only stands to gain from its profits. Second, the financial
sector uses campaign contributions, lobbying spending, and lobbyists in
politically coordinated and sophisticated ways to exert their influence on
regulatory and deregulatory acts. The campaign contributions and
lobbying efforts by those representing the financial sector‟s interests are
extensive and outpaces all other represented sectors in Washington. An in-
depth analysis of roll call votes, committee referrals, and drafting of
legislation shows that capital from the financial sector is intentional,
focused, and politically lethal. These two elements combined make a
considerable case regarding the potency of the financial oligarchy.
The power of the financial sector, both politically and
economically, is far-reaching. The United States began the new millennium
on what seemed like an unending ascent to prosperity, but then ended the
decade in no better shape than how it began. The aftershock of the
financial sector‟s meltdown was not isolated to Wall Street, but spread to
the economy at large, causing what Posner unapologetically calls a
depression. Indeed, Carmen Reinhart and Kenneth Rogoff call financial
crises “protracted affairs” that induce three ailments to the society at large:
a collapse in asset markets, declines in output and employment, and an
explosion in national debt due not to the associated costs of bailing out the
financial system, but to the collapse in tax revenues caused by the drop in
output and employment.30 From peak-to-trough, the U.S. housing market
has already seen a 35 percentage point decline in home prices.31 The stock
market saw a 54 percent loss in value from its high in October of 2007 to
its low in March 2009.32 The financial crisis caused U.S. GDP to decline
for the first time since the Great Depression, sent unemployment rates
soaring near ten percent where it persistently lingers, and continues to force
the national debt upwards. It is clear that what is at stake in the
30 Carmen Reinhart ad Kenneth Rogoff, This Time is Different: Eight Centuries of Financial
Folly (Princeton: Princeton University Press, 2009), 224.
31 David Guarino and David Blitzer, Home Prices Continue to Send Mixed Messages as 2009
http://www.djaverages.com/?view=industrial&page=index-data
69
BIBLIOGRAPHY
Bernanke, Ben. Monetary Polciy and the Housing Bubble. Address, Atlanta:
Board of Governors of the Federal Reserve System, 2010.
Cassidy, John. How Markets Fail. New York: Farrar, Straus and Giroux,
2009.
Center for Responsive Politics. Influence & Lobbying. February 21, 2010.
http://www.opensecrets.org/industries (accessed March 8, 2010).
Guarino, David, and David Blitzer. Home Prices Continue to Send Mixed
Messages as 2009 Comes to a Close. Press Release, New York: Standard &
Poor's, 2010.
Johnson, Simon, and James Kwak. 13 Bankers: The Wall Street Takeover
and the Next Financial Meltdown. New York: Pantheon Books, 2010.
Kansas, Dave. The Wall Street Journal Gude to the End of Walls Street as
we Know it. New York: HarperCollins Publishers, 2009.
Klein, Ezra. "Americans' Net Worth Rises for Third Straight Quarter."
Washington Post, March 12, 2010.
71
Paulson, Henry M Jr. On the Brink: Inside the Race to Stop the Collapse of
the Global Financial Systm. New York: Hachette Book Group, 2010.
Phillips, Kevin. Bad Money: Reckless Finance, Failed Politics, and the
Global Crisis of American Capitalism. New York: Penguin Group, 2008.
United States Senate. U.S. Senate: Legislation & Records. May 6, 1999.
http://www.senate.gov/legislative (accessed March 10, 2010).
Ty Otto1
ABSTRACT
Prospect theory is an influential psychological theory that describes
how individuals make decisions involving risk. One of its key
findings is that decision-makers are risk averse when in a ―domain
of gain‖ (when they have experienced success), and risk acceptant
when in a ―domain of loss‖ (when they have experienced setbacks).
In this paper, I use prospect theory to examine George H. W.
Bush’s political and military choices as they led to American
involvement in the 1991 Persian Gulf War. Specifically, I explore
whether there is a correlation between Bush’s domain and his
willingness to accept risk. Although I find that Bush’s willingness
to go to war is consistent with the predictions of prospect theory,
the task of establishing Bush’s domain makes it is difficult to
exclude competing explanations such as rational-choice theory.
I. INTRODUCTION
Iraq emerged from the Iran-Iraq war in 1988 with the world’s fourth
largest military. Motivated by historical territorial claims and disputes over
financial issues and oil drilling, Saddam Hussein invaded Kuwait on 2
August 1990. The United States perceived Saddam’s aggression as a threat
to American geopolitical and economic interests in Saudi Arabia and in
response sent a force to defend the kingdom as part of Operation Desert
Shield. Iraq initially pledged to withdraw from Kuwait, but after it reneged
on its promise and annexed that territory instead, world leaders began
considering military intervention to expel the Iraqi forces. In November
1990, the United Nations issued an ultimatum demanding that Iraq
withdraw by January 1991 or face a military response.2
2 Bob Woodward. The Commanders. New York: Simon and Schuster, 1991.
74
3 John E. Mueller. Policy and Opinion in the Gulf War. Chicago: University of Chicago
Press, 1994.
4 Kahneman and A. Tversky, ―Prospect Theory: An Analysis of Decision Under
prospect. Domain, risk tolerance, and other cognitive biases all affect which
prospect is ultimately chosen.
IV. METHODOLOGY
V. EVALUATION
7 ibid.
76
8 Woodward. 1991.
9 Steve Yetiv. Explaining Foreign Policy: U.S. Decision-Making and the Persian Gulf War.
Baltimore: Johns Hopkins University Press, 2004.
10 Thomas Friedman. ―Confrontation in the Gulf: Gulf Policy and Vague Vital
14 Yetiv. 2004.
15 McDermott. 1998.
16 George H. W. Bush. All the Best, George Bush: My Life in Letters and Other Writings. New
Press, 1994.
18 George H. W. Bush and Brent Scowcroft. A World Transformed. New York: Alfred A.
Knopf, 1998.
19 Mueller. 1994.
20 Yetiv. 2004.
78
21 Woodward. 1991.
22 Yetiv. 2004.
23 Yuen Foong Khong. Analogies at War. Princeton, NJ: Princeton University Press,
1992.
24 Bush. 2006.
25 Yetiv. 2004.
26 Woodward. 1991.
27 Rose McDermott and Jacek Kugler. ―Comparing Rational Choice and Prospect
Theory Analyses: The U.S. Decision to Launch Operation Desert Storm.‖ Journal of
Strategic Studies 24 (2001): 49–85.
79
illustrate Bush’s beliefs shared in private with close aids, not rhetoric
employed to rally public support.
Bush’s use of the Munich analogy led him to several comparisons.
The most prominent was his equation of Saddam Hussein with Hitler,
made numerous times in public speeches.28 This comparison established—
and likely exaggerated—the stakes of the conflict. Saddam was portrayed as
an evil aggressor whose insatiable appetite for expansion would undermine
regional security. Bush claimed that the Iraqi invasion was, ―a throwback to
another era, a dark relic from a dark time . . . [that] threatens to turn the
dream of a new international order into a grim nightmare of anarchy in
which the law of the jungle supplants the law of nations.‖29 This appraisal
of the status quo no doubt heightened Bush’s perceptions of loss: he no
longer merely faced a regional bully seeking to manipulate OPEC, but a
ruthless and aggressive dictator bent on undermining the international
system.
A second framing effect, the establishment of a reference point,
further pulled Bush further into a domain of loss. With the disintegration of
communism in Eastern Europe and Mikhail Gorbachev’s policy of ―new
thinking‖ towards the West, it was clear to Bush that the international
system was dramatically changing. As a vision for the post-Cold War era,
Bush conceptualized a ―new world order,‖ based on great power
cooperation, collective security, the rejection of aggressive force, and
American hegemony.30 Bush’s frequent use of this concept makes it
possible that he had adjusted to a reference point not based on the status
quo ante bellum but instead on an international condition that he aspired
to. This shifted reference point would only exaggerate his losses.
Bush did experience some important successes. His overall approval
rating showed moderate satisfaction, and the American public was pleased
with his handling of foreign policy.31 He passed landmark legislation such as
the Americans with Disabilities Act and the Clean Air Act.32 However,
primary indicators—including international events, economic performance,
28 Woodward. 1991.
29 Yetiv. 2004.
30 Eric Miller and Steve Yetiv. ―The New World Order in Theory and Practice: The
C. Risk Tolerance
33 Woodward. 1991.
34 Friedman. 1990.
Yetiv. 2004.
35 Woodward. 1991.
81
36 Ibid.
37 McDermott & Kugler. 2001.
38 Woodward. 1991
39 Anonymous. ―And Now the War Forecast.‖ The Economist, September 15, 2005.
40 Woodward. 1991.
82
even the most modest casualty estimates predicted a few thousand deaths–I
conclude that the predicted costs of war outweighed its predicted benefits
over sanctions. This deviation from rational-choice suggests that the
psychological forces described by prospect theory were at work.
This rational-choice comparison is fraught with difficulties. Certain
evidence could alter the rational-choice prescription. For instance, if Bush
was truly so invested in the Munich analogy that he believed more Iraqi
aggression was inevitable, then waiting for sanctions to have their effect
(while Iraq was busy developing nuclear weapons), would be a profoundly
risky option. Furthermore, administration officials debated the effectiveness
of sanctions. Although key advisors like Chairman Powell, Defense
Undersecretary Paul Wolfowitz, and Secretary of State James Baker saw the
promise in sanctions, there was not complete consensus throughout the
administration (Cheney was ambivalent and National Security Advisor
Brent Scowcroft rejected sanctions).41 If Bush believed that sanctions were
destined to fail, then it would make war a comparatively more attractive
option. While not supported by the body of evidence that I encountered,
this type of disconfirming evidence is plausible. By showing that Bush
actually behaved rationally, such evidence would undermine a prospect
theory explanation.
VII. CONCLUSION
41 Ibid.
83
BIBLIOGRAPHY
Woodward, Bob. The Commanders. New York: Simon and Schuster, 1991.
Mueller, John E. Policy and Opinion in the Gulf War. Chicago: University of
Chicago Press, 1994.
Yetiv, Steve. Explaining Foreign Policy: U.S. Decision-Making and the Persian Gulf
War. Baltimore: Johns Hopkins University Press, 2004.
Bush, George H. W. All the Best, George Bush: My Life in Letters and Other
Writings. New York: Scribner, 2006.
Miller, Eric and Steve Yetiv. ―The New World Order in Theory and
Practice: The Bush Administration’s Worldview in Transition.‖
Presidential Studies Quarterly 31 (2001): 56–68.
Anonymous. ―And Now the War Forecast.‖ The Economist, September 15,
2005.
84
ABSTRACT
I. INTRODUCTION
Another key aspect of Israel‟s party system is that no party has ever
won a majority of seats in the Knesset. As a result, the winning party has
always been tasked with forming a coalition government. This usually
involves entering into agreements with the smaller parties of the Knesset,
and typically concessions must be made if the winning party wants a chance
to govern. From 1948 until 1977, Israel was dominated by the left-of-
center Labor Movement (operating under different names over time); it
won a plurality of votes in every election, and thus led the government for
the first thirty years of Israel‟s existence. In the 1977 legislative elections,
the right-of-center Likud party won a plurality and successfully formed a
government, ending the period of Labor hegemony. From 1977 to 1996,
86
the electoral process was controlled by both Likud and Labor; the two
parties wrestled for power, often resulting in extremely close electoral
outcomes. As a consequence, smaller parties began to gain power as
coalition partners. Their ability to “make or break” a coalition made them
necessary to the success of any government.
In 1992, the Knesset passed a new electoral law; the law created a
separate ballot for Prime Minister, allowing constituents to vote for a party
in the Knesset elections and a candidate for Prime Minister. This system
was implemented from 1996 to 2003, at which point the direct election of
the Prime Minister was abandoned, and Israel returned to its original
electoral system. 1996 marks a fundamental and observable shift in the
nature of Israeli government. The question thus becomes how the
fragmentation of the Israeli party system since 1996 has affected coalition
formation and governance in Israel.
This study finds that the fragmentation of the Israeli party system
since 1996 has led to a rise in the power of small parties, specifically within
the governing coalition. This has led to an equal decline in the power of
larger parties, and the subsequent growth in the size of governing coalitions.
Finally, the fragmentation of the system has led to a change in both the
number and nature of cabinet appointments for smaller parties, and has
ultimately shifted the benefits accruing to small parties from portfolio
payoffs to policy payoffs (for the purposes of this examination, “portfolio
payoffs” are cabinet positions awarded to groups or individuals and “policy
payoffs” are governmental policies that benefit certain groups or
individuals). This analysis will begin with a survey of available literature; it
will then proceed to the main argument, after which the manner of how the
analysis was conducted will be explained. The data will then be presented,
followed by an analysis of the data. Finally, conclusions on the nature of
the data will be drawn and implications for future research will be made.
87
law called for a run-off between the top two candidates in the event that no
candidate received a majority on the first ballot.
The second argument insinuates that the system will cause voters
to engage in vote splitting. Whereas before voters had to cast their ballots
strategically for the largest party of the bloc they supported (in the hope
that a smaller party that may be ideologically similar to a specific voter‟s
preference might join the coalition), the new law eliminated the logic of this
strategy. Nachmias and Sened write, “under the new law, voters can cast a
ballot for the head of the party that leads the parliamentary bloc they prefer,
and then vote sincerely for the party of their choice.”5 This inevitably will
lead, they say, to a decline in the power of the larger parties relative to
smaller parties in a given coalition.
5 Ibid, 277.
6 Ibid, 276.
89
III. ARGUMENT
This paper argues that, since the failed experiment between 1996
and 2003 to directly elect the Prime Minister, voters have more thoroughly
committed to small, particularistic parties (i.e. parties with relatively small
bases of electoral support—the non-Labor/Likud types) rather than return
to larger constituencies, because of the higher potential to reap coalition
benefits (in terms of payoffs) in a smaller constituency. Thus, small parties
have continued to assert a relatively high degree of what Alan Ware refers
to as “coalition potential” and “blackmail potential” in his text, Political
Parties and Party Systems. Ware defines coalition potential as a situation in
which “the party must be needed, at least on some occasions, for a feasible
coalition that can control government,” while blackmail potential refers to
7 Haberman, Clyde. "Israel Shifts Way of Picking Premier: Direct Vote Will Begin in
'96 in Move to Enhance Office Israel Approves Direct Vote For Its Prime Minister in
'96." New York Times (1923-Current file), March 19, 1992, 276.
8 Ibid.
90
9 Ware, Alan. Political Parties and Party Systems, New York: Oxford University Press,
1996, 145-146
10 Nachmias and Sened, 273.
91
After fifteen years of this, the Knesset passed the new electoral law
in 1992, which went into effect in the next election cycle in 1996. The
intent was to give greater power, as well as higher stability, transparency and
accountability to governing coalitions. Uriel Reichman, a Tel Aviv
University law professor and champion of the reform law, believed that
“„[the law] makes the Prime Minister the one with the upper hand in
negotiations. It should reduce the strangling that now takes place by the
religious parties and the others.‟”11 Reformers believed that if people
directly elected the Prime Minister, the position would gain a greater
legitimacy in the eyes of the people, thus creating a more powerful mandate
to form a government. The hope was that the law would reduce
fragmentation of the party system as well as the power of small parties to
reap disproportionate benefits. Finally, reformers desired to maintain the
pluralism of the old Israeli system while eliminating problems in governance
resulting from the executive‟s reliance on the support of small parties. The
new system ultimately achieved the opposite of the intent of the reformers,
and was abandoned in 2003. However, its effects have persisted despite the
return to old electoral system.
11Haberman, Clyde. "Israel Shifts Way of Picking Premier: Direct Vote Will Begin in
'96 in Move to Enhance Office Israel Approves Direct Vote For Its Prime Minister in
'96." New York Times (1923-Current file), March 19, 1992.
92
V. DATA
The first piece of data I scrutinized was information about the size
of the largest party in a coalition, relative to the rest of that coalition.
Overall, the period of 1948-1977 is fairly static, as would be expected.
Seventeen governments convened during this time period, and on average,
the coalition was made up of around 6.53 parties. The average strength of
the largest party in the coalition, measured as a percentage of seats, was
62.40%. For the most part, the size of the largest party fluctuated between
55 and 65 seats. If we take the number of 6.53 and assume that 5.53 of
those parties were small parties (as was the case for the first seventeen
governments), then we can determine the average amount of power a small
party held by dividing the share of seats accorded to small parties between
1948 and 1977 (since the large party controlled 62.40% of coalition seats on
average, small parties controlled the other 37.60%). The number comes out
to 6.80%, meaning that each smaller party in the coalition controlled 6.80%
of party seats on average. One point of note is that the fourteenth and
fifteenth governments that lasted from March of 1969 to December of
1969 and from December of 1969 to December of 1973, respectively, were
both national “unity” governments since the opposition parties chose to
join the government in the wake of the Six Days War (the thirteenth
government became a unity government in the middle of its cycle). This is
an issue that will come up multiple times as the research moves forward
chronologically. Controlling for the preceding fact in this specific instance,
the average number of parties in coalition during this time period was 6.47,
with the largest party controlling 63.02% of the coalition, on average. Small
parties thus accounted for 36.98% of the coalitions, with each party
averaging 6.76% control of the coalition.
Finally, the research looked at the period between 1996 and 2009.
There have been six governments during this thirteen-year period (as well as
six elections). The twenty-ninth government is not included in this analysis
because it was a unity government comprising every MK (this occurred in
the wake of the Al Aqsa Intifada). Therefore, the average number of
parties included in each of the five coalition governments during this time
period is 5.60 and the average strength of the largest party in the coalition
42.95%. The smaller parties have controlled an average of 57.05% of the
seats in the coalition, giving each party around 12.40% control of the
coalition.
100
80
60
40
20
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
70
60
Size of Small
50
Parties as a % of
40
Coalition
30
% of Vote
20
Allocated by Small
10
Parties
0
1 3 5 7 9 11 13 15 17 19 21 23 25
1949-1995 1996-2010
Size of Governing 66.63 MKs 71.8 MKs
Coalition
Strength of Largest 66.17% MKs 42.95% MKs
Coalition Member
Table 1.2: Coalition Size and Change in Strength of
Largest Coalition Member
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VI. ANALYSIS
The picture painted by the data is very clear - the 1996 electoral law
had the opposite effect from its intent, which was to reduce the occurrence
of party fragmentation. Additionally, the data shows that these effects have
persisted even after the return to the original law.
The most important data set looks at the growth in the size of
smaller parties in government in two ways: relative to the size of the
coalitions of which they are a part, and relative to the percentage of the
popular vote they received. As was to be expected, the size of the largest
party in governing coalitions for the first thirty years was above 60%.
Interestingly, that number rises to over 70% during the beginning of the so-
called “competitive” phase of the electoral history. The important statistic,
however, covers the period from 1996 until the most recent elections:
42.95%. This is a drop of over 20% compared with the first forty-eight
years of Israel‟s existence. Essentially, this means that small parties, as a
group, have increased their presence in the government by 20% in the last
fourteen years; this presence has inevitably led to an increase in
governmental sway. This data set is telling because it speaks not only to
how much power small parties have, but how much power they have
relative to the formerly dominant hegemons of the party system.
One piece of data that did not turn out as expected was the
number of parties in the coalition. Whereas one might have expected this
to rise in 1977 and again in 1996 given the increased necessity for small
parties, the number falls both times. However, close examination of
electoral data indicates that while the number of parties may have fallen, the
size of small parties has risen—not for all, but for a substantial amount.
This indicates that the small parties may not be so “small” any more.
Further, one can sense the coming of yet another seismic shift in the Israeli
electoral system: if these small parties are growing in popularity, and thus in
power, Israel might be moving toward a system with even more
competition than it currently has.
99
The other major independent variable studied was the raw number
of parties in the Knesset. This statistic did not particularly help prove the
argument of this article, as the average does not rise from the 1977-1996
data to the 1996-2009 data. The intent in studying this data was to
determine whether the electoral law had led to an increase in popularity for
small parties that were previously marginalized to the point where they were
able to crack the threshold and gain seats in the Knesset; however, this was
not the case. This may have to do with the increase in the popular vote for
the existing smaller parties, as described above. Again, one might
hypothesize that the lack of increase in the amount of parties in the Knesset
indicates that Israel is moving away from a system with many small parties,
and instead toward a system with multiple medium-sized parties.
14
12
10
8
6
4
2
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
The true power of small parties in Israel now lies in the nature of
the portfolios they hold and the policy outcomes they can affect as a result.
Take, for example, Israel‟s Ministry of Housing and Construction.
Currently, Israel‟s Housing Minister is Ariel Atias, a member of the small,
right-of-center, religious party Shas. According to an Israeli civic education
website, Shas “[was] prepared [in the past] to relinquish land in return for
peace, but [they are] uncomfortable with this policy given increased
terror.”12 As holders of Israel‟s Housing Portfolio, Shas has a fairly sizeable
say in whether or not Israel will continue a freeze on building settlements in
the West Bank and East Jerusalem, territories currently being negotiated
over for the purposes of a Palestinian state. Evidently, negotiations for a
two-state solution are contingent on a freeze of settlement building. While
The ultimate aim of a small party is to make its voice heard. The
ultimate achievement of this goal is through affecting policy outcomes that
benefit the constituents of the party. It seems that Israel‟s small parties
have moved from the periphery to the center of the political sphere. Their
presence has been felt on many levels; most of all, and most importantly for
the future of the State of Israel, parties representing small populations are
shaping policy that affects Israel in big ways.
13 Ibid.
14 Rapoport, Meron. "Gov't promoting plan for new ultra-Orthodox East Jerusalem
neighborhood” Haaretz. (2007-02-28),
15 Ibid.
102
VII. CONCLUSION
In the end, the Israeli political system has endured multiple changes
of an extremely dynamic nature since 1977. While the system has been
designed to prevent a tyranny of the majority, Israel may be moving toward
a tyranny of the minority, as it is increasingly held hostage by its various
small, fringe parties. Striking the balance between popular opinion and the
protection of minority rights is one of the greatest challenges facing free
democracy today; the question is, how will Israel respond?
103
BIBLIOGRAPHY
Haberman, Clyde. "Israel Shifts Way of Picking Premier: Direct Vote Will
Begin in '96 in Move to Enhance Office Israel Approves Direct
Vote For Its Prime Minister in '96." New York Times (1923-Current
file), March 19, 1992, http://www.proquest.com.proxy.lib.umich.e
du/ (accessed April 25, 2011).
Ware, Alan. Political Parties and Party Systems, New York: Oxford University
Press, 1996.