Businessmen as Presidents: A Historical Circle

November 3, 2012

WP

By ROBERT J. SHILLER

WITH so much attention on the income divide between the top 1 percent and the other 99 percent of Americans, it might seem that having enormous business wealth wouldn’t be a great qualification for election as president. And if such a candidate pledged to keep taxes low for the wealthy, he would appear to have no chance at all in a troubled economy.

Mitt Romney’s campaign has been showing that these factors may not be insurmountable. To the contrary, many Americans are showing deep affection for stories of business success — like Mr. Romney’s at Bain Capital — and many are shrugging off the inequality issue.

In some ways, this isn’t so surprising. Americans have long been seen as admirers of business wealth. In 1840, Alexis de Tocqueville observed in “Democracy in America” that “in no country in the world is the love of property more active and more anxious than in the United States.”

And in his 1906 book, “Why Is There No Socialism in the United States?,” the German sociologist and economist Werner Sombart wrote: “If the American prays before the god of Success, he strives to lead a life acceptable to his god. Therefore we see in every American — beginning with the paperboy — restlessness, yearning and compulsion to be way and beyond other people.”

Sombart’s observation about American national identity still looks spot-on. The other day in Chicago, a taxi driver told me that he had emigrated from Romania and had grand plans to develop at a distance a vacation resort in his home country. America continues to attract people who have the utmost respect for wealth.

Not long after, a taxi driver in New Haven confided to me that he was a high-school dropout. When I asked if we should tax the rich more, he replied with an emphatic “No!” He saw himself as a small-businessman who happened to be in the taxi business, and he identified strongly with the rich.

The pursuit of wealth is a real source of identity in America. We are accustomed to seeing ourselves chasing riches, even if we’re not in business the way Mr. Romney was.

Still, Americans haven’t elected many businessmen as presidents. The principal examples come from the Roaring ’20s, a time of huge stock market gains, when faith in business reached all-time highs. Consider our presidents in that decade: Warren G. Harding had been a newspaper publisher in Ohio. Calvin Coolidge, trained as a lawyer, was once a vice president of the Nonotuck Savings Bank in Northampton, Mass., and was known for saying that “the chief business of the American people is business.” And Herbert Hoover was a mining expert who traveled to Australia in its 1890s gold rush and became a mine manager.

But businessman presidents disappeared after the market crash of 1929 and during the Great Depression of the 1930s, when many Americans believed that the business world had failed the nation. Franklin D. Roosevelt, who came from a wealthy family but was never a businessman and never talked like one, handily defeated both Hoover in 1932 and Alf Landon, a banker and independent petroleum producer, in 1936.

Not until the Bush presidencies did businessmen, in the suit-and-tie sense of the word, retake the White House — though it otherwise could be argued that Jimmy Carter, a peanut farmer, was a businessman, too. George H. W. Bush was elected during a soaring stock market, and his son George W. Bush won during a real estate boom. Both men were oil venture entrepreneurs.

You might think that the current economic slump would drain support for businessmen, as it did in the Great Depression. But there are differences. Back then, the United States hadn’t yet reached the pinnacle of economic power. Today, many people worry about an apparent crumbling of American economic growth as emerging markets surge around us. There is a widespread fear that the American wealth machine is faltering — and, as a result, many people are aiming to rediscover the nation’s traditional strengths.

In Connecticut, the typically “blue” state where I live, Linda McMahon, the Republican candidate for senator, is campaigning on a story of self-made riches, and is presenting a serious challenge to the Democrat, Representative Christopher S. Murphy.

Ms. McMahon lacks legislative or governmental experience, but she cites her success in managing World Wrestling Entertainment as evidence that she can be an effective legislator. Her life story — involving an early bankruptcy, then redemption through earning millions running staged wrestling bouts — is a rags-to-riches tale, and she says it demonstrates her capacity to succeed as a senator. Americans have long heard stories of how entrepreneurs from John D. Rockefeller to Steven P. Jobs have achieved phenomenal success, and many derive a sense of identity from seeing themselves as having the qualities that could lead to riches, too.

FOR many voters this year, a central question is how to maintain what they consider as America’s greatness, its exceptionalism. They are concerned with both lowering the unemployment rate and creating good jobs — jobs that are exciting and can create substantial wealth. This attitude may be improving the odds for businesspeople seeking office.

If elected, Mr. Romney wants to enforce a general pro-business mandate and to bolster business confidence. That is quite possible. Still, any such confidence boost will most likely be offset by his promise to drastically cut government spending. The weight of evidence from studies of fiscal austerity indicates that, at least in times like these, it is very costly to economic activity. Big cuts now could easily plunge the country back into a recession.

Yes, many Americans admire business success and believe that business experience is a plus in a president. But Americans have usually also understood that other factors — like wise policies and strong leadership ability — are much more important.

Robert J. Shiller is professor of economics and finance at Yale.