The Powell Memorandum
The early 1970s were a rough time for American businesses and the economy in general. Abnormally high levels of inflation and unemployment, two oil price shocks, and the depletion of US gold reserves contributed to the demise of the “Golden Age of US Capitalism” (Reuss, 2009). President Richard Nixon, who was regarded at the time as a no-nonsense politician who attacked his running mates in elections, got to work immediately with a set of neoliberal policies to try and help the United States out of this mess. In order to address the inflation issue, Nixon removed the gold standard by repealing the Bretton Woods System in 1971. This ended the system of fixed exchange rates around the world. Nixon also passed laws maintaining wage and price levels, which led to ridiculous wage demands by workers that outpaced the rate of productivity growth, driving up unit labor costs for businesses. In 1973-1974, the first of two major “oil shocks” increased the price of petroleum four-fold, dramatically raising energy costs for both consumers and businesses (Reuss, 2009). Feeling beaten up by macroeconomic events and changes in the political realm, America’s largest businesses were in need of a platform to have their voices heard.
In 1971, U.S. corporate lawyer and future Supreme Court Justice Lewis Powell wrote a memorandum to his friend Eugene Sydnor, who was the Director of the US Chamber of Commerce. This document laid the groundwork for a pro-business movement in Washington. The document, titled Attack on Free Enterprise System, was praised by politicians across party lines. This memorandum is believed to have led to the creation of a number of pro-business conservative groups, among them the Cato Institute, the Heritage Foundation, and the American Legislative Exchange Council (Hacker & Pierson, 2010).
The History of the American Legislative Exchange Council
The American Legislative Exchange Council was originally the Conservative Caucus of State Legislators in 1973 for the state of Illinois. Because the word “conservative” was unpopular with Americans at the time, the early founders decided to rename the collective to the American Legislative Exchange Council, or ALEC. One of the most notable founders of ALEC is former state senator Paul Weyrich (alec.org). In 1975, ALEC became registered as a 501(c)(3) non-profit organization which means that they are exempt from federal income taxes. ALEC is a non-partisan group that brings policy experts, business leaders, and legislators together to “advance limited government, free markets and federalism at the state level” (alec.org). This has raised some ethical concerns over the years. As the organization grew in size, the breadth of policy issues and geographic regions represented expanded. By 1981, the structure of the organization took a fundamental shift. President Ronald Reagan called upon ALEC to create a “Federalism Task Force” which met with Reagan administration officials. Over the next several years, more task forces pertaining to different policy issues were formed. Today, ALEC reports a membership of about 2,000 state lawmakers, representing about one-third of all current state lawmakers. These legislators are joined by private companies and think-tanks. A unique aspect about ALEC is that they do not publish the names of its private sector members, disclose meeting minutes, or meeting agendas to the public (alecexposed.org).
How ALEC Works
The mission of ALEC is to influence state legislation by bringing together the best and brightest in business, legislation, and policy creation. The organization operates in three ways: publishes research and writing on important issues, hold conferences where people from public and private sectors share their views, and draft model legislation (Hertel-Fernandez, 2014). Task forces lead ALEC meetings that pertain to a particular policy issue. ALEC’s task forces have advocated for “reduced regulation of business, privatize public sector services, cut taxes, and restricted the collective bargaining power and organizing capacity of labor unions, particularly in the public sector” (Gordon, 2013). ALEC’s bills generally coincide closely with the interests of its private sector members. Since ALEC does not give political contributions or engage in electoral politics, they aren’t considered to be a lobbying group. Because of this, ALEC is at the epicenter of alternative means for businesses to affect policy other than campaigning and donations. Business leaders get to weigh in on model legislation that can directly impact their businesses. Another unique aspect of the organization is the fact that ALEC targets state legislatures rather than federal or municipal governments. This affords ALEC the opportunity to examine variation in the legislative success of business across different political and economic environments, unregulated by any governing body.
Criticism of the Organization
ALEC has come under increasing scrutiny over the years for its role in crafting bills to attack worker rights, rolling back environmental regulations, privatizing education, deregulate major industries, and pass voter ID laws. In addition, the organization has a history of secrecy and has received backlash for not releasing information publicly on certain model legislation, membership, and ALEC meeting minutes/agendas at conferences. Further, the issue of corporate influence in government matters is another key criticism. One of the main ethical dilemmas with ALEC is that business as a constituent is unfairly represented in government because of the relationship that ALEC has created. It affirms that “business” as a government stakeholder should not be given a leg up merely because of their value to the overall economy and power they possess.
Chris Christie Bill Review
In 2012 The Star-Ledger analyzed more than 100 bills and regulations previously proposed by the administration of New Jersey Governor Chris Christie and found a pattern of similarities with ALEC model bills that was “too strong to be accidental” (Rizzo, 2012). William Schulter, vice chairman of the New Jersey Ethics Commission and a former Republican state senator, said there was a “clear connection between ALEC and the proposed New Jersey legislation”. What was interesting about this story was the amount of overwhelming similarities that were evident between ALEC legislation and Christie’s (as shown in Figure 1 below). But not just on any random bill – bills with a clear business influence. In the diagram to the left, Assemblywoman Amy Handlin has introduced the New Jersey Right to Work Act, which prohibits unions from automatically deducting member dues from workers’ paychecks in an ALEC conference in NJ. According to the Star Ledger, members of Chris Christie’s administration were present at the meeting as well. This goes to show how large of an influence this organization has on the political system in the United States. This research shows that ALEC certainly has huge control over many state legislatures. This was just one of the dozens of ALEC model bills that showed startling similarities to Chris Christie’s bill on unions. This information isn’t falling on deaf ears. According to the Brookings Institute, almost 400 legislators and 60 corporations have cut ties with ALEC from 2011-2013 (Brookings Institute, 2013).
Direct Evidence for Business Favoritism
To prove that the above article is happening in state legislatures across the U.S., consider the fact that many of the top pro-business states in the United States are also the biggest targets of ALEC legislation. Figure 2 depicts the states with the most ALEC bill enactments during 1995. Virginia, Utah, Indiana, and Wyoming are within the top 10 on this list.
According to the Pollina Corporate poll of the top 10 pro-business states of 2014 (Figure 3), each of the states mentioned are on the top 10. This goes to show that ALEC is generally more supportive of businesses than any other constituency (federalism, libertarian ideals, voter rights, etc.).
More Conflicts of Interest – Atlantic Bridge Case
The Atlantic Bridge was an educational charity founded in 1997 by Margaret Thatcher along with United States senators Joe Lieberman and John Kyl. The initial mission of the organization was to promote relations between the United Kingdom and the United States by having the two countries collaborate on political, economic, and defense issues. In addition, a key component of the charity would be to host educational events for children surrounding key issues. ALEC partnered with the Atlantic Bridge Charity soon after its inception. However, in 2009, the Charity Commission for England and Wales published a report detailing why the Atlantic Bridge was more a political platform to spread awareness about a certain political ideology and less about educating the country’s youth on global issues. The Atlantic Bridge was dissolved shortly after the report was released (Regulatory Case Report, 2009). This event shows yet another example of how ALEC continues to push its political agenda and invade spheres of life. It is sad to see another meaningful cause get swept up in party politics and the agendas of constituencies that aren’t involved to begin with.
An Ethical Review: Walzer’s Spheres of Justice
Michael Walzer’s Spheres of Justice was a groundbreaking philosophical piece about justice and potential breaches of justice. Taking a liberal lens, Walzer argues that all goods in society, from one’s reputation to a beautiful sunset, are social goods. An uneven distribution of social goods within society can lead to injustice. Walzer refers to the Spheres of Life at points throughout his paper, and I think that these raise some serious ethical questions in light of what we have learned about ALEC. Different spheres of life include political, economic, community, and many others. These spheres should typically operate independently of one another so long as there are no conflicting interests between parties occupying separate spheres (Walzer, 1983). Walzer would argue that what ALEC is doing is unjust because of the conflicts of interest that arise when the state commingles with business. In the early days of the drafting of the U.S. Constitution, a system of checks and balances was formed to ensure that certain spheres did not conflict and that if one branch failed, others would be there to hold the tree up.
It is important to contrast the role of the Special Interest Group in government with the American Legislative Exchange Council. Special Interest Groups, also known as lobbyists, certainly uses donations and influence from other constituencies (even businesses) to influence legislation. However, Special Interest Groups lobby for legislation. They work independently of state legislatures and policy experts to draft bills. Once an idea is formulated, they testify themselves before Congress. What ALEC does is different – businesses work with lawmakers throughout the process in the drafting of model legislation. And as we saw with the Chris Christie example, politicians will often use ALEC products without even changing the language. Gabriela Schneider of the Sunlight Foundation summed it up best: “The public has a right to know how these bills are being shaped. ALEC is a group that wields tremendous influence in shaping public policy that affects a huge number of people. Those same people aren’t at the table” (Rizzo, 2012).
There is certainly strong evidence that the American Legislative Exchange Council favors the business constituency in meetings across the United States. Because of their unique role as a nonprofit organization and not a Special Interest Group or lobbyist, this raises some ethical questions about whether or not there are checks and balances in our state legislatures. Supporters of ALEC return to the business injustices that were experienced during the early 1970s during the Nixon administration. Furthermore, ALEC membership is completely voluntary. If businesses don’t like the organization, they are free to leave at any time. However, opponents of ALEC have long argued that not only is transparency about the organization a huge issue, but that businesses are the heavy favorite constituency within the ALEC organization. Yes, the nonprofit will occasionally help the NRA draft up model legislation, but as the Brookings Institute study demonstrated, it’s business before all else. Michael Walzer’s Spheres of Justice is an interesting take on conflicts of interest in society. The uneven distribution of justice within certain spheres can lead to injustices, as we have seen evident in the ALEC organization.
Regulatory Case Report: The Atlantic Bridge Education and Research Scheme, (2009). From the Charity Commission for England and Wales.
Gordon, C. (2013). ALEC in plunderland. Dissent Magazine.
Hacker, J. S., & and Pierson, P. (2010). The powell memo: A call-to-arms for corporations. Simon & Schuster.
Hertel-Fernandez, A. (2014). Who passes business’ “model bills”? policy capacity and corporate influence in U.S. state politics. American Political Science Association, 12(3).
Jackman, M. (2013). ALEC’s influence over lawmaking in state legislatures. Brookings Institute.
Pollina, B. (2014). Pollina corporate top 10 pro-business states for 2014. American Economic Development Institute.
Reuss, A. (2009). What can the crisis of U.S. capitalism in the 1970s
teach us about the current crisis and its possible outcomes? Dollars and Sense, (That ’70s Crisis).
Rizzo, S. (2012). Some of christie’s biggest bills match model legislation from D.C group called ALEC. Star Ledger.
Walzer, M. (1983). Complex equality. Spheres of justice: A defense of pluralism and equality. New York: BasicBooks.
www.alec.org. 2015. The american legislative exchange commission. Website.