KEY POINTS:
Rupert Murdoch was put on the spot by a conservative shareholder at News Corporation's annual meeting last month. Why had the septuagenarian scourge of liberalism written a cheque for the election campaign of Harold Ford, the Democratic challenger in the tight race for the Senate in Tennessee?
A News Corp board member had brought the wannabe senator in, Murdoch revealed, and Ford tried to convince him how conservative he was. With a shrug, Murdoch dismissed the shareholder's concern. "If I haven't given to his Republican rival, I will," he said.
Murdoch's scattergun donating might seem merely politesse, if we were not days away from mid-term elections that look likely to usher in a significant shift to the Democrats. In these circumstances, the media mogul's behaviour looks more like a sophisticated hedge - and it is one which the vast business lobby is frantically copying.
The flow of corporate political donations has been substantially redirected to Democrat candidates in many races in the past few weeks. Lobbyists are struggling to get a hold over the new Democrat Congress members who, polls say, are set to return control of the lower House of Representatives to the party after 12 years of Republican domination. With President George W. Bush and the Republicans slumping at the polls, there are some optimistic Democrats who believe they may even recapture control of the Senate.
With business, and Wall St in particular, staunchly Republican, the shift represents a potentially challenging time for business in general and several giant industries in particular. The Democrats have raised their war cries against the pharmaceuticals industry and the oil giants, and both could expect to see legislative assaults on their profits within days of a Democrat takeover of the House.
Yet Wall St has hardly flinched at the ascendancy of the Democrats, and the Dow Jones Industrial Average remains at record levels over 12,000. Partly this is because Democrat leaders have - with a few exceptions - kept their policy positions vague and modified their talk of rolling back George Bush's tax cuts, at least until after 2008. But mainly this is because, with a Republican President, business hopes that the next two years at least will be a time of political deadlock rather than Democrat policy-making.
Brian Gardner, Washington analyst at the investment bank Keefe, Bruyette & Woods, said: "Wall St wants gridlock. We don't want the Democrats to come in rolling back tax cuts. What we want is stability. Stability and gridlock are synonymous right now."
The Wall St veteran John Bogle, founder of the Vanguard investment management group, said, "Even if you have Democrat control of the House and the Senate, it will be very hard to pass substantial legislation that will be veto-proof. You are going to see a lot of action down in the House, no doubt, but I don't see very much change."
It is on an industry-by-industry, and even a company-by-company, basis that a change in the make-up of Congress could prove most significant, because there are some areas where legislation might be crafted to get past both houses and the President. And, of course, business knows that the House of Representatives which will be elected on November 7 will serve until 2008, not just for the remaining two years of the Bush presidency.
According to an analysis done by the New York Times last week, blue-chip corporate action committees channelled 67 per cent of their funding to Republican candidates in the first nine months of this year, and 33 per cent to the Democrats. In the first 18 days of October, though, Democrats were getting 43 per cent of all contributions, the biggest last-minute shift from one party to another since the Republican landslide of 1994.
One of the most significant shifts has been made by Pfizer, which until September was giving 67 per cent of its donations to the Republicans, but in October Democrats got 59 per cent. THE pharmaceuticals industry has much at stake, as it always has had since the cost of healthcare and the gaps in US health insurance became such important issues to an ageing population. It is no surprise that GlaxoSmithKline was the UK's biggest corporate spender on lobbying in 2004, the last year for which figures were compiled by the Centre for Public Integrity, or that the US pharmaceuticals industry association, PhRMA, has been among the groups most aggressively funneling money into political campaigns this year.
One of the most specific proposals in the manifesto put out by Nancy Pelosi, who is likely to become Speaker of a Democrat-controlled House, is to centralise the buying of drugs paid for by the state Medicare health insurance scheme. The power of the senior citizens lobby in the US means this is a measure that could pass both Houses and prove impossible for the President to veto. The drugs industry could also face tougher scrutiny of new medicines before they can be approved.
Big Oil can also expect an assault on its profits, and more subtle changes to the landscape that emerge from a Congress that is less sceptical about global warming. Incentives to invest in alternative fuels could have a little benefit for companies who already have programmes in this area, such as BP, but mainly they could spur entrepreneurial rivals to Big Oil.
The power of the assault on these industries, and the influence the party can have on the wider direction of economic and social policy, will depend on the numbers of victorious Democrats next week.
- INDEPENDENT
