Can Wisconsin Democrats Rebuild Their Brand?
Maybe the party needs to think like a business and rethink the product it offers.
The challenges facing the Democratic Party are not easily solved, but its possible the party could learn lessons from business. Successful businesses add value. That is, the value to the customer of the product or service they offer exceeds the cost of offering that product or service. Thus there are two basic strategies for increasing the amount of value added: cutting costs or increasing the value of the product to the customer.
The first strategy, generally called cost leadership, has been used by very large and successful businesses, notably Walmart and McDonalds. The big advantage of the strategy is that it’s easy to describe: relentlessly chipping away at costs. But that’s also its big disadvantage: there are always others looking for ways to drive down costs even more. Walmart is feeling pressure from on-line retailers and dollar stores. Most of these potential competitors will likely fail, but Walmart’s management must worry that someday it will suffer the fate of its predecessors — Kmart and earlier discount chains. The very obviousness of the cost strategy is a key danger to its continued success. Someone is always trying to figure out how to make and deliver things more cheaply.
The second business strategy goes under a variety of names. Some authors call it a responsiveness strategy—to respond quickly and flexibly to customers’ needs. For others it is an innovation strategy—keep bringing out new and improved products before competitors do. This approach can also be built around a trusted brand. The variety of names is telling because the second strategy is not really a single strategy, but a variety of strategies, all aiming to differentiate a business from its competitors in a way that’s meaningful to its customers. I will group them all as “differentiation” strategies.
It turns out it’s very hard to combine a cost leadership strategy with a differentiation strategy. Businesses trying to do a little of each end up with higher prices than those pursuing a pure cost leadership strategy and less interesting products than those concentrating on differentiating themselves.
Another example is Carly Fiorina’s regime at Hewlett-Packard in which she substantially cut the research budgets. This did not work out as well for her as for Kalmanowitz; after the stock price tanked, the board fired her. Currently she is running for president, suggesting that business incompetence is no barrier to a political career.
The strategy to attract business adopted by the Walker administration for Wisconsin falls solidly into the cost leadership mold. It is a strategy promoted by numerous conservative think tanks that claim this approach is guaranteed to bring economic success. The underlying assumption is that reducing labor costs, the size of government, and taxes—particularly on the wealthy–will attract businesses and jobs.
The widespread advocacy for this strategy points up one obvious limitation. The more states adopt this strategy, the lower the odds that any one state will see success. As I’ve previously shown, the data shows this approach really isn’t working very well.
In a global economy, there is a limit to how much any American state can win through a cost leadership strategy. At one time the labor and other cost differences between New England and southern states was sufficient to induce textile and furniture manufacturers to move their operations to the south. With globalization, these operations have moved to countries with far lower costs than offered in any American state. While Apple designs its phones in California, it manufactures them in Asia, not Mississippi. Unless Wisconsin is prepared to accept wages competitive with those in Bangladesh, there is no way it can win global competition based purely on costs.
One can point to special cases where a relative cost advantage between states may win the day. One reason Amazon’s distribution center was located in Kenosha rather than Lake County was probably to avoid the Illinois sales tax on sales to the Chicago market. However, such cases are pretty rare.
The Republican fixation on a cost leadership strategy for Wisconsin offers an opportunity for Democrats to develop a coherent differentiation strategy. Democrats could start by looking at the traditional strengths of Wisconsin and exploring how to build on them. These include:
- An emphasis on environmental protection.
- Leading edge regulation.
- High quality and advanced education and research
Such a strategy would emphasize investment in tomorrow’s technologies such as those that offer alternatives to carbon-based energy, in sharp contrast to the present state policy aimed at protecting the primacy of coal.
Locally, this strategy would emphasize enhancement of Milwaukee’s lifestyle to better compete with cities like Portland.
In many ways such a strategy would be a natural fit for Democrats. It includes issues that Democrats—particularly those in Wisconsin—have supported traditionally, such as environmental protection. In contrast to the very ideological offerings of the Walker administration, it fits with the pragmatic liberal tradition, as expressed by Franklin D. Roosevelt: “It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something.”
Unfortunately, this pragmatic tradition has been rejected by a good chunk of the local “progressive” establishment, as a quick look at the Milwaukee County and Milwaukee school boards makes clear. When it comes to approving charter schools, the ideology of the charter supporters carries more weight than the quality of the proposal or the applicants’ record. (Heaven help a proposal endorsed by Howard Fuller or developed with support from the Walton Family Foundation.) The decision by the county board to legitimize illegal pension payments plays into the hands of those who believe that government cannot do anything right.
Nationally, at least, the data shows that business and the economy has fared much better with a Democrat in the White House than a Republican. So why have Wisconsin Democrats failed so badly at convincing voters they are better trustees of the economy? One reason is an underlying hostility towards business among some in the Democratic base.
Another is the largely successful effort to narrow the Democratic tent by purging those who differ with the base on certain issues. Ironically the effort to get rid of “DINO’s” in the Wisconsin legislature took place at a time when, because of gerrymandering, Democrats needed to win around 55 percent of the vote to win control of the legislature.
In an interview the recently-retired congressman Barney Frank summarized the challenge facing the Democrats:
The critical element we have are middle- and working-class white people, who actually do believe in government as a force for good, and are very bitterly disappointed that the government has done nothing to improve their economic situation. At the same time they see the Democrats and liberals caring about gay people, caring about black people. So we’re now in a vicious cycle. The more disappointed they get in government, the more they vote in people who don’t like the government. The more they vote for people who don’t like the government, the less the government does.
If one believes there are problems that only government can solve, one should be particularly intolerant of bad management of these programs. Too often, however, Democratic supporters of government react hostilely to any proposal to improve the operation of government. To successfully advance an alternative to Walker’s cost-centered economic strategy, Wisconsin Democrats need to become the chief advocates for improved government operations.