The investment theory of party competition is a political theory developed by Thomas Ferguson, Emeritus Professor of Political Science at the University of Massachusetts Boston. The theory focuses on how business elites, not voters, play the leading part in political systems. The theory offers an alternative to the conventional, voter-focused, voter realignment theory and median voter theorem, which has been criticized by Ferguson and others.
History The Investment Theory of Party Competition was first outlined by Thomas Ferguson in his 1983 work Party Realignment and American Industrial Structure: The Investment Theory of Political Parties in Historical Perspective. The theory is detailed most extensively in Ferguson's 1995 book Golden Rule: The Investment Theory of Party Competition and the Logic of Money-driven Political Systems, in which his earlier work is republished as a chapter.
Overview Ferguson frames his theory as being both inspired by and an alternative to the traditional median voter theories of democracy such as that posited by Anthony Downs in his 1957 work An Economic Theory of Democracy. Quoting Downs, Ferguson accepts that 'the expense of political awareness is so great that no citizen can afford to bear it in every policy area, even if by doing so he could discover places where his intervention would reap large profits'. While Downs largely overlooked the implications of this insight, Ferguson makes it the foundation of the Investment Theory of Party Competition, recognizing that if voters cannot bear the cost of becoming informed about public affairs they have little hope of successfully supervising government.
The central claim of the Investment Theory is that since ordinary citizens cannot afford to acquire the information required to invest in political parties, the political system will be dominated by those who can. As a result, the investment theory holds that rather than being seen as simple vote maximizers, political parties are best analyzed as blocs of investors who coalesce to advance candidates representing their interests.
The role of political parties Contrary to the median voter theorem where political parties have traditionally been seen as vote maximizers who will seek out the position of the 'median voter' on any particular issue, the Investment Theory holds the real area of competition for political parties is major investors who have an interest in investing to control the state. This is because, in situations where money is important, political parties must take positions that enable them to attract the investment required to run successful campaigns. This is the case even if those positions are not supported by the majority of the population, since it is futile for a party to adopt even a popular position if it cannot afford the expense of communicating that position to the electorate in an election campaign. In fact the Investment theory predicts that in many cases political parties are more likely to try and change the position of the public to match those of its investors than vice versa. Instead political parties will try to assemble the votes they need through appeals to the electorate on issues that do not conflict with the interests of their investors. Vigorous debate may take place on issues where an opposing bloc of investors is able to mobilize and advertise their position. A further consequence of this theory is that in policy areas where large investors agree on policy, no party competition will take place. This is the case regardless of the views of the general population, unless ordinary citizens are able to become major investors in their own right through expenditure of time and income.
The role of ordinary voters The Investment Theory of Party Competition does not deny the possibility that masses of voters can become major investors in an electoral system, and accepts that in cases where this does happen the effect may resemble classical voter competition models. For this to happen, however, generally requires channels that facilitate mass deliberation and expression, typically 'secondary' organizations capable of spreading the cost of acquiring information and concentrating contributions from many individuals to act politically. Such conditions may enable high information flows to the general population and make political debate and action a part of everyday life. Where these conditions do not exist, however, it is unlikely that ordinary citizens will be able to afford the costs required to control policy.
A consequence of the Investment Theory is that it is not necessary to assume that the voting population is stupid or malevolent to explain why it will often vote for parties whose policies are opposed to their own interests. In fact, Ferguson suggests, the general population is far from ignorant or uninterested in the outcome of elections, and will often make considerable effort to understand the issues under discussion. Voting decisions ultimately, however, must be made on the basis of the information that is available, and if acquiring information is expensive in terms of time or money then most likely those decisions will be made on the basis of information subsidized by wealthy investors.
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