When Does Politics Pay? The Spoils System and Wealth Accumulation Among U.S. Office Holders

• In Event: Macro Determinants of Inequality: The Role of Politics, Policies, and Institutions (Co-sponsored by Inequality, Poverty, and Mobility Section)

Abstract

A spoils system redistributes money, jobs, and other resources between elected officials, their appointees, and the voters or businesses who support them. The material benefits of rent-seeking in spoils systems are often paradoxical, with office holders drawing small gains from political positions that offer substantial benefits to outside interests. This study examines a novel explanation for the paradox and the conditions under which political office holding yields opportunities for wealth accumulation. Using social exchange theory, the explanation posits that office holders operate as intermediaries in a network of political patronage between voters and political machines, on the one hand, and business interests, on the other. Office holders derive wealth from patronage when they (a) can deliver administrative action or legislation that favors stakeholders at a local level; (b) are positioned to benefit from lobbying or kickbacks; and (c) are entrenched in large public bureaucracies that produce jobs or services for voters. Analyzing a longitudinal panel of 24,337 U.S. office holders, alongside average residents, the study estimates how these conditions influenced the accumulation of personal wealth and real estate between 1850 and 1870. It concludes that office holding generated few economic payoffs, even at the height of the American spoils system.

Author

• Martin Ruef, Duke University