In Conversation with Alisha Holland and Gautam Nair

Interview by Michelle Nicholasen

When business is not part of the solution, it is frequently part of the problem. The chairs of the new Weatherhead Research Cluster on Business and Government hope to provide new insights into how business influence can be a positive force for democracy and development.

Launched in the 2022–2023 academic year and spearheaded by Faculty Associates Alisha Holland and Gautam Nair (along with Jeffry Frieden and Dani Rodrik), the cluster aims to better understand the political economy of business-government relations in the contemporary world. 

Centerpiece sat down with Professors Holland and Nair to discuss cluster goals, research, and plans for the future. 

CENTERPIECE: What was the genesis of the cluster?

NAIR: For me, it was the idea that in every political system, businesses are powerful actors. Businesses and businesspeople have access to financial resources, and they are few in number—so we expect that they can organize themselves more easily compared to citizens and other interest groups. That means that when business is not part of the solution, it’s often part of the problem. The goal of our cluster is to understand how business power operates in politics, and under what conditions business influence is a force that is compatible with inclusive growth and democratic accountability. 

HOLLAND: The initial idea of the cluster was to revisit some classic questions. For instance, how does business exert its influence? To what extent is it through campaign contributions, lobbying directly, or persuasion campaigns? And how do those tactics relate to each other?

Business also has changed tremendously from the industrial corporations of the past. The tech industry today provides a nice moment to consider how contemporary businesses operate differently and how their strategies of influencing government differ too.

The second set of questions we are looking at are responses of business to deindustrialization.
As manufacturing has been on the decline, what do firms in the manufacturing sector do? What do voters start to do in response to those changes?

And the third big question is about government regulation. Many observers have noted, especially in the Biden Administration, a greater interest and willingness to retake the tools of government, like antitrust policy, to regulate business. So it’s a good moment to ask questions like, why do governments regulate business in some moments and not others?  And what types of bureaucratic capacity and technical knowledge do governments need to be effective regulators?

CENTERPIECE: Powerful businesses can skew democratic processes. Are you looking at that effect?

NAIR: The key barrier for democratic accountability and representation in developing countries is often thought to be what's called clientelism. That’s the tendency to distribute scarce resources non-programmatically, informally, through party machines, often along ethnic lines; and that means that voters vote on the basis of these narrowly targeted benefits rather than broad-based policies. 

But as developing countries modernize, the barrier to democratic accountability and representation increasingly becomes the influence of well-organized interest groups, including businesses, rather than election-time vote-buying or patron-client relations. Business influence can operate through many of the mechanisms that Alisha mentioned, including campaign contributions, lobbying, and changing the beliefs and preferences of citizens, politicians, and government officials. The US requires extensive disclosures (though some may feel that these are still inadequate), and because of data availability these strategies have been studied extensively in the US context. Our hope is that we can expand this research to other countries, particularly in the developing world to look at the connection between business and politics.

I should also note that businesses can advance, rather than skew, democratic processes. Acting in their own self-interest they might lobby for stronger property rights or rule of law, or reduced trade barriers, which can have positive spillovers for consumers and citizens. I call this phenomenon “incidental representation” and am working on a couple of projects that demonstrate the idea in the context of trade and social policy.

CENTERPIECE: Who do you hope to attract to work in the cluster?

NAIR: I noticed that there are a number of faculty members across the University—at the Business School, Kennedy School, Law School, and the FAS—that have interest in the relationship between government and business. And we have many talented graduate and professional students who are doing research on these issues. It’s a good time to bring together people across the University that are working and thinking about these topics and we’ve already made some encouraging progress on this front. 

CENTERPIECE: The cluster recently held a “speed dating” event for scholars to pitch their research ideas to win a prize. How did it go?

HOLLAND: I think it was a great success. Especially this first year as a cluster, we have been trying to play around with different events to get people to meet each other.  So the idea was to have very short but personal intros where you pitch your research interests and try to find some commonalities.  

People had a lot of fun with it, in part because it was a different format. Students said they stayed around until ten o’clock talking to each other, so that achieved our goal to foster greater intellectual connections. It was also really nice to see postdocs meeting graduate students with similar interests and finding avenues for collaboration there.

CENTERPIECE: Who won the prize?

HOLLAND: Austin Jordan, a graduate student in the Government Department, and Sam Tabory, a graduate student in Urban Planning, won the prize (a $500 research grant) for their project on the evolution of economic plans in Japan and Mexico.  

In the 1960s and 1970s, many countries were known for national planning bureaucracies that were often in charge of making decisions about which industries to support and overarching development strategies. Japan was a very notable case, and there’s a famous book by Chalmers Johnson on the Ministry of International Trade and Industry (MITI) and its role in developing the development strategy behind Japan’s growth miracle. Mexico is another case where there was a national bureaucracy that decided which industries to prioritize in an attempt to accelerate growth.  

Austin and Sam pitched a project in which they will think about what happened to industrial policy in Japan and Mexico after the governments eliminated state planning.
One of the cool things is that the project showed the benefits of combining different areas of expertise. 

Of the two winners, Austin works on East Asia and Sam has worked on Mexico, so they made a pitch to combine their regional expertise and shared research interests in how industrial policy is made.  

CENTERPIECE: The cluster clearly lends itself to comparative research. Can you give more examples?

NAIR: I can think of at least two or three comparisons I’m interested in. One is the politics of deindustrialization, which is one of the cluster’s emphases. Some countries have been a lot more successful at fostering manufacturing than other countries. For example, manufacturing accounts for about 29 percent of China's GDP but in India, it’s only about 17 percent of GDP; and it's only about 12 percent of employment in India, but about 28 percent in China. So that comparison across countries could be interesting. For example, is there an authoritarian edge in manufacturing?

And then another interesting comparison is of industrial policy and the role of banks and finance, say, between Latin America and Asia, or Asia and Africa. When you think about industrial policy, it would be very interesting to understand which countries have been better at it and why. And what are the political outcomes? There’s a lot of variation across developing countries and the way businesses exert influence, and how business strategies differ depending on regime types and political contexts—those are great avenues for comparative research. 

CENTERPIECE: Can you list a few research projects already underway?

NAIR: Let me mention some of the early-stage research our graduate student affiliates are doing. We have several projects looking at state-business relations in China from a variety of perspectives—including corruption and tax evasion, Chinese state capital’s growing influence in global infrastructure, how business associations form and lobby the Chinese government, and how Chinese firms respond to US sanctions. Other projects are studying how campaign finance laws shape party strength, how lobbying by foreign firms is perceived by voters, and the response of Left parties to deindustrialization. I am very excited to see what we learn from these projects. 

I’m working on a project that looks at how consumer interests get represented in trade policy, focusing particularly on the rise of large retailers like Walmart and Amazon. I’m also working on research on campaign finance, industrial policy, and state banks in India. 

CENTERPIECE: Business influence is not all bad, of course, it can have positive and/or negative impacts on development. How do you approach this duality?

HOLLAND: Let me give you an example of how this cuts both ways, and connects with what I study. I’m interested in the politics of infrastructure in Latin America.

You often hear that infrastructure is critical to development. High-quality roads or ports or broadband internet all can have a transformational impact. And, on the one hand, business can play a key role in defining and prioritizing those projects. For instance, if you are a coffee producer in Colombia, you need a highway and a functional port to export coffee. You have knowledge about the types of transit that would be useful and that could potentially generate substantial exports, jobs, and revenue increases in the country.

On the other hand, you also have construction firms that are often interested in building the most profitable project, which doesn't necessarily mean a socially or economically useful project. A construction firm is happy to build a highway regardless of whether it increases exports or new industries. So, you see a lot of developing countries building infrastructure projects that don’t serve the underlying population or produce economic growth. 

In the cluster, we talk about this dual influence of business: business can provide key inputs and knowledge and resources that generate growth, but also doesn’t necessarily serve the broad public interest. So you need a government with the capacity to take in private-sector information, but nonetheless make a decision that reflects what we might think of as public interest.

CENTERPIECE: What are some of the goals planned for the rest of the year? 

HOLLAND: This spring we have two things we’re working on. The first is helping the graduate students decide on a mini-conference that they would like to run, most likely in the fall. We’re preparing and trying to figure out how to converge on some questions for that mini-conference.

We will continue to have informal conversations structured around different themes, going back to those questions that motivated the cluster. We’ve had an informal discussion on campaign finance across countries. We've had an informal discussion of business power and what it means for business to exert influence, and how we measure that. And we're going to continue conversations in that spirit, bringing together scholars working in different contexts to discuss the open research questions.

Part of what we're hoping will come out of those conversations is a set of shared data and resources, or a collaboration that the cluster could really invest in. We’ve talked about large institutional and enterprise surveys that are done, such as those by the World Bank. Perhaps one thing we can do as a cluster is add a set of political and regulatory questions to those surveys. 

NAIR: Our faculty cochairs Jeff Frieden and Dani Rodrik are among the world’s leading experts on the political economy of globalization. They will be returning from leave and will be a great resource for the cluster. Next year we are also looking forward to bringing more speakers and researchers to Harvard, and to continuing to grow and deepen our community of scholars. 

Images courtesy of Alisha Holland and Gautam Nair