Abstract The current debate about taxing financial transactions is often presented as a brand new one. It is not. At the turn of the 19th century, a similar tax was debated in France and the US Financial actors fought the tax mightily. Those actors were very powerful. Yet, they lost. A tax on stock transfers (STT) was established. Why? Through a comparative analysis of France and the State of New York, this article argues that the tax was adopted because politicians interested in capitalizing on public discontent endeavored to publicize and frame the STT in simple and antagonizing terms. Strong but heterogeneous public hostility against finance got focused on the explicitly politicized issue of the tax. Political salience disrupted the logics of ‘quiet politics’ and momentarily undermined the privileged position of finance. Despite intense lobbying and threats to relocate from financiers, elected officials chose to vote for the STT. 1. Taxing financial transactions in the first golden age of financial capitalism: Political salience, and the limits on the power of finance The debate about the feasibility and desirability of implementing a tax on financial transactions has been re-launched in the aftermath of the 2008 crisis. This debate is often presented as a new one. It is not. In the first golden age of financial capitalism, a tax on stock transfers (STT) was debated. In some cases, it was eventually adopted. Yet, financial actors were united in their opposition to the tax and deployed much energy and resources to fight it. Unraveling why such a tax was adopted, despite the fierce opposition of powerful financial actors, sheds light on a question often neglected by social scientists: when and why the power of finance encounters its limits. In 1893, a tax on stock transfers (STT), ‘un impôt sur les opérations de bourse’, was established in France. The tax was of 5 cents per 1000 Francs of face value on each transaction. In 1905, ‘the tax on transfers of stocks’ was established in the State of New York. The tax was of 2 cents per 100 Dollars of face value on each transaction. In both cases, the tax was levied on both spot and forward transactions and applied to the transfer of all types of securities. The intermediary agent in charge of the transaction was responsible for paying the tax. The innovative (and most controversial) aspect of the STT was indeed that it was aimed at taxing capital transactions, not capital itself. The laws stipulated that failure to pay the tax would be punished by fines and even prison sentences.1 The end of the 19th century and beginning of the 20th century were times of globalizing capital markets and developing technologies (Baldwin and Martin, 1999; Eichengreen and Bordo, 2002). The economic and social role of finance, the growing power of the financial industry and the innovative capacities of speculation were much discussed topics. Large-scaled financial crises and banking scandals occurred too. Both in Europe and the US, public outrage against finance was high. But public outrage alone cannot explain why specific policies are adopted, nor the timing of their adoption. In New York, an STT was adopted in 1905, but a similar proposal was rejected in 1903. In Illinois, an STT was discussed, but rejected in 1901. In Europe, an STT was adopted in France and in Germany at the end of the 19th century, but rejected in Italy (Toniolo et al., 2003). The literature on business power has thrown light upon how key capitalistic actors can influence policymaking. Financiers in particular have important resources available to do so (Korpi, 1985). First, they have structural power. Indeed, governments are structurally dependent on the financial sector because the health of the whole economy depends on the financial sector’s capacity to provide it with capital. The threat (explicit or implicit) of restraining funding is often enough to make politicians bend to the preferences of financiers. Finance thus arguably occupies a ‘privileged position’ in society (Lindblom, 1977). Second, financiers have instrumental and cultural power. Due to networks’ effects and their monopoly on financial expertise, they have better access to lawmakers than the average citizen. Policymakers tend to listen more carefully to those who are sociologically close to them and whom they see as more competent (Kwak, 2013). In the first age of financial capitalism, finance was powerful both in structural and instrumental terms. And yet, finance lost. An STT was adopted. The literature on business power is good at explaining why finance wins, but it is less good at explaining why it sometimes loses. Scholars have recently started paying more attention to the effect of political salience on business power and policymaking (Culpepper, 2010; Woll, 2013; Young, 2013; Bell and Hindmoor, 2015). They argue that business power varies in function of the political salience of the issue at stake. Although powerful business interests tend to get their way regarding issues that don’t interest the public, they tend to lose more often when they get involved in issues on which public attention is high. The first contribution of this article is to test the political salience hypothesis against competing hypotheses stressing states’ need for revenues, structural changes in finance’s power resources and the changing preferences of finance. It does so though an empirically fascinating—and little known—historical episode: the adoption of an STT in France and the State of New York at the turn of the 20th century. When the STT was first brought onto the political agenda, it was promptly rejected. It is only when the tax became politically salient that a majority of officials started endorsing it and, at the end of the day, voted for it—despite the fierce opposition of the financiers to whom they would usually give their attentive ear. The second contribution of this article is to address important gaps in the scholarship on political salience. First, it improves the definition of political salience itself. Scholars tend to equate ‘political salience’ with the high degree of public attention that one specific issue receives. This article shows that political salience is not only about the quantity of attention that an issue receives, but also about the qualitative framing of this issue. More specifically, political salience is about framing complex and ambiguous political issues in simple and Manichean terms. Finally, this article addresses the question of why an issue becomes politically salient. The emergence of political salience is often presented as a bottom-up process: first, public opinion gets spontaneously focused on a specific issue; then, politicians are forced to take action in order to avoid public backlash. By contrast, this article presents the emergence of political salience as a top-down process. The concern of the public opinion for a general problem, such as the misbehaviors of finance, does not explain why public opinion sometimes gets focused on a very specific policy, such as the STT. Identified politicians need to champion a policy before the general public in order for it to become politically salient. Such champions will emerge only when there is the right set of political conditions in terms of power relationships within government and party politics (Kingdon and Thurber, 1984; Cox and McCubbins, 1993; Owens, 2003). My argument is developed through an in-depth comparative study of the State of New York in 1905 and France in 1893, where an STT was rejected in the first place but adopted shortly after. I contrast the case of New York in 1905 to the case of New York in 1903, where an STT was discussed and rejected twice. I use systematic process tracing to explore the factors and mechanisms that led to the adoption or non-adoption of the STT in my three cases. This analysis builds on original archival work in the US and in France, and on historical newspapers and documents available online or in research libraries. In the next section, I develop the argument and contributions of the article. In Section 3, I present competing hypotheses that could potentially explain the adoption of an STT at the turn of the 20th century. Section 4 exposes the research design and the data on which the analysis builds. Section 5 has in-depth case studies providing empirical evidence supporting and refining the argument on political salience. Section 6 is a short empirical examination of alternative hypotheses. Section 7 concludes. 2. Finance’s lost battles and political salience In the 1970s and 1980s, different literatures in the Marxist traditions highlighted the power of business and the capitalist class in modern democracies (see among others Lindblom 1977; Offe and Weisenthal, 1980; Bourdieu, 1986). This scholarship was soon confronted with an objection based on a simple empirical observation: big business sometimes loses. Theoretically, this observation implied that although business may be a powerful actor, it did not hold any specific ‘privileged’ position. The pluralistic theoretical framework of interest groups’ studies was thus sufficient to analyze the power of business (Vogel, 1987, 2003). During the following decades, academic interest in the study of business power significantly declined. Recently, scholars’ interest in the study of business power has been revived and the idea of business’ privileged position has been brought back to their attention. These new students of business power seek to address the shortcomings of their predecessors’ theories.2 In particular, they want to understand why, in capitalist democracies, powerful business actors sometimes lose (Hacker and Pierson, 2002; Trumbull, 2012; Culpepper and Reinke, 2014). The scholarship on political salience brings an answer to this question. ‘Political salience’ is the degree of public attention that one specific issue receives—which is often measured by the occurrence of this issue in the main channels of public opinion such as the media or social networks. This scholarship claims that the more public attention a policy gets, the more probable it is that this policy will be adopted, even when it goes against the interests of powerful business actors. The underlying assumption for this claim is that increased public attention has important implications for voting behavior, and thus for the strategy of policymakers (Jones and Baumgarter, 2005; Woll, 2013). In Quiet Politics and Business Power, Culpepper contrasts the ‘quiet politics’ of corporate governance to the ‘noisy politics’ of executive pay. As long as managerial compensation was an issue of low political salience, business organizations in France and the US were able to maintain their preferred state of rules. Weapons available to business are dreadfully efficient when they are used away from the public spotlight. However as public concern rose, business organizations could no longer count on the deference of politicians. Corporate lobbying activities became stronger and more conspicuous, but also less effective. When voters are paying attention to a specific policy, the potential political cost of not listening to them becomes too high. In the end, executive pays were regulated. Culpepper concludes: ‘politicians will listen to the voters, but only when the volume of debate is dialed up to its loudest level’ (Culpepper, 2010). In coherence with the political salience hypothesis, this article shows that the tax was adopted because strong public hostility against finance at some point got focused on the specific issue of the STT. Well-identified politicians interested in capitalizing on public discontent publicized and framed the issue in simple and Manichean terms. The political salience of the STT disrupted the logics of ‘quiet politics’ and momently undermined the privileged position of finance. Angry constituents started paying attention to the position of their elected representatives. It became politically costly for elected officials to oppose the tax. Despite intense lobbying and the threat to relocate from the financial lobby, elected officials chose to vote for the STT. This article also contributes to improving the scholarship on political salience by addressing important gaps in the theory. First, the notion of ‘political salience’ itself presently suffers from a lack of clear definition. The literature on political salience has been effective in analyzing the effects of political salience, but less so in defining what political salience actually is. Political salience is often described as a quantity: there is more or less political salience. As a matter of fact, Culpepper describes political salience in the form of a volume metaphor. This article shows that political salience is not only about loudness. It is also about framing. More specifically, political salience is about framing complex and ambiguous political issues in a simple and Manichean way. Political issues are complex, in that they may be apprehended from different perspectives and often require substantive or technical knowledge to be fully understood. Consider the issue of taxing financial transactions. This issue is complex because there are different and a priori equally legitimate approaches to implementing an STT: is it about stabilizing volatile financial markets? Enhancing fiscal justice? Shaping the domestic financial industry through penalizing certain types of financial activity? The issue is also ambiguous because it is not straightforward to determine who the losers of the STT are: the brokers or their private clients? The banks buying bonds on the stock exchange or the non-financial corporations benefiting from market finance? Finally, the issue is complicated because its implementation requires detailed knowledge of the workings of security trading. But a policy cannot become politically salient if it is perceived as complex and technical. In those cases where the STT became politically salient and was adopted, the issue was framed in very simple and antagonizing terms: the STT was good because finance ‘had to pay its fair share’.3 Being for the tax was being against finance, and for the little guys. Being against the tax was being for finance, and against the little guys. Second, the literature on political salience doesn’t pay enough attention to the question of why a specific issue becomes politically salient in the first place. A policy is not salient by essence. In 1903, in New York, an STT was proposed but never became politically salient. In 1905, the same tax was proposed and became politically salient. Why? Culpepper (2010) presents the emergence of political salience as a bottom-up process: public opinion spontaneously got focus on the specific issue of executives’ pay; and then politicians were forced to take action. Other authors also tend to see political salience as an exogenous bottom-up phenomenon, to which politicians (Woll, 2013) or financiers (Young, 2013) adapt their strategy. By contrast, this article shows that the emergence of political salience can be a top-down process and a phenomenon that is strategically triggered and fostered by politicians. In circumstances where they perceive an advantage in investing that energy, politicians interested in capitalizing on public discontent can increase the political salience of an issue. Both in the French and New York cases in 1905, where an STT was adopted, and in contrast with NY 1903, where an STT was rejected, well identified politicians made the political work of publicizing and framing the STT. They did so because their party situation at that specific moment made it less risky—even beneficial—to alienate fellow politicians and present themselves as anti-finance champions. Politicians arguably can take the risk of alienating members of their party when they deem that doing so would be beneficial to their political career (Cox and McCubbins, 1993; Owens, 2003). This part of the argument is coherent with Kingdon’s multiple-streams approach. The salience of a general problem acts as a necessary background condition, but it needs to come together with the right set of political conditions in terms of power relationships in the policymaking arena (Kingdon and Thurber, 1984). In our cases, the ‘problem stream’ (financial crises and scandals fostered public anger against finance) coincided with the ‘policy stream’ (political entrepreneurs came up with a proposed solution to that problem: the STT) as well as with the ‘politics stream’ (some policymakers had the motive and opportunity to promote the STT). A typical view holds that finance was completely unfettered during the first golden age of globalization. As a matter of fact, the major financial policies that shaped the more regulated and constrained financial systems in the later period of ‘embedded liberalism’ were for the most part established in the aftermath of the 1929 crisis in the USA and in the post-WW2 years in Europe (Ruggie, 1982). Yet, financial and banking regulation already existed at the turn of the 20th century (White, 2014; Hautcoeur et al., 2010). As underlined by several historical economists and political scientists, state intervention, although quantitatively small, was not alien at the turn of the 20th century.4 This fact only stresses the interest of analyzing a policy implemented in times where finance did sometimes lose, despite the fact that it was generally unrestrained. 3. Alternative explanations This section presents potential alternative explanations of why an STT was established at the turn of the 20th century. 3.1 Functionalist theory and state’s need for revenue Some authors have argued that important fiscal policies are often the result of the relative autonomy of public actors rather than the result of power relations within society (Evans et al., 1985). Part of the process of state building consists in submitting new segments of society to taxation. It is well documented that preparation for war is conducive to establishing new taxes (Bank and Thorndike, 2008). In a context where states faced increasing pressures to find new sources of revenues, it is plausible that STTs were established under the impetus of state officials prioritizing the fight against public deficits over the interests of finance. 3.2 Changes in actors’ level of power resources Scholars have shown that power resources must be conceived as a variable, not constant. This is true for both instrumental and structural resources (Hacker and Pierson, 2002; Culpepper and Reinke, 2014). For example, Hacker and Pierson explain the 1930’s welfare reforms in the USA mainly by the decrease of business’ structural power due to the shift of the US institutional setting to the federal level. Perhaps STTs were established in times and places where the power resources of financial actors were diminishing. 3.3 Changes in powerful actors’ preferences The explanation for the STT may not be found in a change in the power of finance but rather in a change in their preferences. Swenson (2004) argues that 1930’s welfare reforms in the USA were due to a shift in business preferences. A similar argument could be made here. At the end of the 19th century, stock exchanges were bi-cephalous creatures. On one side were the official stock exchanges. On the other side were the unofficial, or free, stock exchanges. An STT, depending on the terms of its implementation, could bring important institutional competitive advantage to one or the other of these rivals. It is thus plausible that financial actors lobbied for a version of a tax that would advantage them: politicians would have actually abided by finance’s rules, despite the appearance of the contrary. 4. Research design and data The methodological approach used is one of qualitative comparative analysis. As Culpepper puts it, ‘th[is] approach take[s] political process seriously as a source of information for adjudicating between various mechanisms of political change’ (Culpepper, 2005). This approach is coherent with what Hall (2006) calls ‘systematic process analysis’: ‘The point is to see if the multiple actions and statements of the actors at each stage of the causal process are consistent with the image of the world implied by each theory.’ The implications of each hypothesis on observables are made explicit, and their existence or non-existence is documented in a systematic and detailed way. This article is based on qualitative data gathered through archival work and analysis of newspapers and documents available online or in libraries. In France, archives consulted are the archives of the French Higher and Lower Chambers as well as the Ministry of Finance’s archives (CAEF), which centralized the private historical documents produced by the French Stock Exchanges. In New York, archives consulted are the records of the New York State Assembly and Senate as well as the archives of the New York Stock Exchange.5 I chose to study two ‘positive cases’ (an STT was established in New York, 1905 and in France, 1893) and one ‘negative case’ (an STT was proposed and rejected in New York, 1903). This allows me to compare the processes that led to the adoption of the STT to the processes that led to the failure of adoption and assess which ‘vision of the world’ they are most supportive of (Mahoney and Goertz, 2004). The case studies selection is based on both theoretical and practical considerations. First, this article asks the question of why an STT was adopted when finance was structurally and instrumentally powerful. So, the analysis needs to focus on political economies where financial markets were developed and economically important. Second, this type of research is time-consuming and data are difficult to reach and gather. France and the State of New York were reasonably pragmatic choices due to considerations of language and geography. Finally, because of the uniquely decentralized organization of American federalism prior to the Great Depression (Robertson, 1989), it is not problematic to have one country and one US state as units of analysis. 5. Case studies In this section, I first briefly synthesize how the empirical material gathered through archival work relates to the theoretical contributions of this article as laid out in Sections 1 and 2. Then, I develop at-length the three in-depth case studies on which the analysis builds (Figure 1). Figure 1. View largeDownload slide Simplified chronologies of the three case studies. Figure 1. View largeDownload slide Simplified chronologies of the three case studies. 5.1 Political salience, framing and emergence The political salience hypothesis prediction is simple: where the STT became politically salient, it was adopted; where it did not become politically salient, the logics of quiet politics prevailed and the STT was not adopted. As Table 1 illustrated, the three cases presented in this article share a number of similar characteristics: public anger against finance was high, financiers were united and active against the STT, and a first proposition of the tax was rejected. Yet, the STT was adopted only in the two cases where the tax became politically salient in the time between the first and the second proposition of the tax. Table 1. Schematic presentation of the factors leading to the adoption/non-adoption of the STT in France, in New York 1903 and New York 1905 First STT proposition Strong anti-finance sentiment among the opinion Finance structural power and active anti-STT lobbying STT becomes a politically salient issue Second STT proposition France 1892 Rejected YES YES YES Adopted New York 1903 Rejected YES YES NO Rejected New York 1905 Rejected YES YES YES Adopted First STT proposition Strong anti-finance sentiment among the opinion Finance structural power and active anti-STT lobbying STT becomes a politically salient issue Second STT proposition France 1892 Rejected YES YES YES Adopted New York 1903 Rejected YES YES NO Rejected New York 1905 Rejected YES YES YES Adopted Table 1. Schematic presentation of the factors leading to the adoption/non-adoption of the STT in France, in New York 1903 and New York 1905 First STT proposition Strong anti-finance sentiment among the opinion Finance structural power and active anti-STT lobbying STT becomes a politically salient issue Second STT proposition France 1892 Rejected YES YES YES Adopted New York 1903 Rejected YES YES NO Rejected New York 1905 Rejected YES YES YES Adopted First STT proposition Strong anti-finance sentiment among the opinion Finance structural power and active anti-STT lobbying STT becomes a politically salient issue Second STT proposition France 1892 Rejected YES YES YES Adopted New York 1903 Rejected YES YES NO Rejected New York 1905 Rejected YES YES YES Adopted In France in 1892 and in the State of New York in 1905, the STT was extensively discussed in the media after its first rejection. Soon after, the tax was receiving ‘great favor and enthusiastic popular support’.6 By contrast, in New York in 1903, the media kept silent about the STT. ‘Secret meetings’7 between financiers and lawmakers characterized the debates around the STT. On the database for historic newspapers in the State of New York,8 the search by keywords ‘Tax AND Stock AND Transfers’ yields only six articles in 1903, for 276 articles in 1905. In the cases where the STT became politically salient, policymakers who were first opposed to the STT, such as Governor Higgins in New York in 1905 or Finance Minister Rouvier in France in 1892, changed their mind and publicly started advocating the STT once it had come under the public spotlight. Interestingly, these late converts modeled their defense of the tax on the defense made by its initial champions, as it was echoed in the press. No policy becomes popular if the generally accepted conclusion about it is that ‘it is complicated’. In the two cases where it was adopted, the STT was presented as a Manichean issue: endorsing it meant standing up for the weak against the powerful. It was also presented as a simple issue: a tax had to be implemented just because ‘finance had to pay its fair share’. At first, the debates about the STT at the assemblies and in the newspapers focused on the technical difficulties and potential unintended consequences of its implementation.9 The defense of the tax also lacked Manicheanism. The French socialist Jourde first presented an anti-capitalist plea against financial speculation. This perspective did not convince those who had other reasons to be hostile to finance. The Catholic right, for example, professed hostility toward finance mostly because of its morals and rejection of cosmopolitanism. In a second time, Jourde started stressing the opposition between the honest workers and the sophisticated profiteers in his defense of the STT. This pleased the Catholic Right more. In New York, the naïve and hardworking farmers were pitted against the witty and slothful city dwellers. Endorsing the tax thus became the same as defending groups and values to which it was difficult for elected officials to oppose publicly. The STT became a politically salient issue because well-identified politicians actively championed the tax in the public and legislative spheres. The socialist MP Jourde in France, Republican Senators Lewis and Raines in the State of New York, proposed the tax, publicized it and framed it in simple and Manichean terms. Why did they choose to do it at that point in time? Capitalizing on public anger may be politically advantageous, but it is also risky. Indeed, most fellow politicians—on which individual careers depend, have no interest in antagonizing financial interests. Party politics largely explains why politicians chose to do the political work that brought the STT under the spotlight. In France in 1893, Jourde wanted to distinguish his rising Socialist party from the previous leftist allies that now stood at its immediate right. In New York in 1903, the majoritarian Republican party was strong and disciplined. By contrast, in New York in 1905, the Republican party was enmeshed in financial scandals. Senators Raines and Lewis, self-proclaimed champions of rural morality, wanted to dissociate themselves from it. Those politicians thus strategically brought the spotlight on the STT at a time when they had the opportunity to gain popular support with no fear of retaliation from their colleagues. 5.2 Political salience in France in 1892: ‘Striking speculation, financial transactions and Stock Exchange brokers’10 In France, in November 1892, the socialist MP Antoine Jourde proposed to establish a tax on stock transfers. The proposition was rejected. A month later, Jourde proposed the STT again. This time, a majority of the Lower Chamber’s members voted in favor of the tax. Between these two dates, the rules of the game had changed. Jourde’s proposition had been publicized and had encountered a huge popular support from the socialist workers to the social Catholics, passing by the urban anti-cosmopolitan and anti-Semitic urban middle class, which all agreed that finance had to pay its share. At the end of 1892, France was in the middle of one of the biggest political-financial scandals in the history of the Third Republic: The Panama scandal. The founder of the company in charge of digging the Panama Canal had tampered with the company’s accounts for years. When the company went bust, thousands of little investors, including many widows and orphans, lost their savings. But Panama was also a scandal of political corruption. Many Republican officials were involved in the swindle. The scandal only strengthened the strong and multifaceted anti-finance opinions that were already expressed in French newspapers. Socialists and working-class newspapers stood against the most oppressing form of capitalism; small businesses and farmers against the greedy speculators that swindled them; social Catholics and anti-Semitic nationalists against the ‘jiggery-pokery’ of a cosmopolitan and Jewish finance.11 For the first time in 1892, socialists had been elected to the Lower Chamber, partly thanks to those voters disillusioned with the Radicals and Radical-Socialists. Newly elected socialist MPs were thus especially willing to distinguish themselves (Ligou, 1962). In November 1892, Jourde disrupted the Lower Chamber by pushing an STT proposition onto the agenda. Jourde stated that the STT should be voted because ‘the tax will weigh on capital, and the least interesting of capital. The speculating capital.’12 Then, the Minister of finance Rouvier, a Republican centrist, spoke out against Jourde’s. Adopting an STT, he said, would hinder the ability of the French state to borrow, push French debt into foreign hands, and chase business out of the country.13 Most Republicans from the center and the right, as well as a fair number of radicals and radical socialists, voted against the tax. But Jourde did not give up on his idea. Along with some of his fellow socialists, he quickly started framing the STT in simpler and more Manichean terms. The tax ‘would be fair and moral, because instead of weighing on labor, it would reach gambling, speculation, triggery-pokery… It would be levied on this atrocious evil-doers, money managers, who make scandalous amount of money through what often looks like swindling.’14 In the newspapers, debates around the STT were squeezed in the successive revelations of the Panama scandal. Unsurprisingly, the working-class and socialist press massively lauded the proposition of ‘our friend Jourde’.15 But the Catholic press also took side for a tax that would ‘protect the national fortune, popular savings and public moral by reaching to ‘agiotage, gambling, and the operations of the stock exchange’.16 Given the framing of the debate and the popularity of the STT, it became difficult for elected officials to oppose it. In December, the journal Le Siècle deplored that the members of the Chamber had become submissive to ‘Mrs Public Opinion’.17 Indeed, in the Chamber, the STT was meeting less and less hostility. Although he had dismissed the tax a month earlier as completely absurd, Finance Minister Rouvier started claiming that he was not opposed to the STT.18 When Jourde presented the STT again to the Lower Chamber, the MP des Rotours, a fervent Catholic from the Union of the Right, publicly rallied him. Despite the opposition of French financiers, the principle of the tax was voted on December 12, 1892 by 230 votes against 217. The left, some at the Center and many among the Catholic Right voted for the tax.19 A similar process can be observed in the State of New York in 1905. This contrasts with what happened in the same state 2 years earlier in 1903. 5.3 New York 1903: A‘storm of resentment and wrath on the part of the business men that no party could afford’20 A taxation bill was introduced to the Senate of the State of New York in January 1903, stipulating that transfers of stocks shall be subject to taxation. As reported by the Wall Street Journal, the bill quickly ‘attract[ed] the attention of Wall Street’.21 Soon after, the Republican majority agreed that there would be ‘a secret meeting of the two committees [on taxation of the Senate and Assembly] to consider changes’.22 A few days later, a new version of the bill was presented: the STT had completely disappeared. This disappearance triggered the taunt of Democrat senators: ‘What has become of the tax on stock certificates provided for in the original bill?’23 A month later, Mister Burnett, Deputy for Senator Raines, reintroduced an amendment taxing stock transfer, but his amendment was rejected too. How can we explain that the tax was rejected twice in 1903, while it was adopted in 1905? The structure of the state’s press was the same and the Republicans were in charge in both years. The most striking difference is that the STT proposition caused a stir in the public opinion in 1905, but went almost unnoticed in 1903. With just a few mentions in the newspapers, the 1903 STT proposition largely remained within the realm of quiet politics, characterized by ‘secret meetings’24 and insider jokes. The Palladium gave a rather pessimistic account of the STT’s likely fate: ‘One amendment provided for taxing stock transfers, to do which would provoke a storm of resentment and wrath on the part of the business men that no party could afford to risk.’25 Finance’s privileged position was not challenged and the early intervention of Wall Street was as discreet as it was effective. The Palladium went on: ‘There are members [of the Republican Party] who feel that if they were to vote against this amendment (…), it would be awkward for them to explain their course to their constituents’.26 But their constituents simply did not pay attention to the amendment. They did not hold their elected officials accountable for it. Most probably, they had not even heard about the STT proposition. Thus, Republicans did not have to explain anything to them, and chose to vote against the STT. Anti-finance sentiments among the populace were yet not less virulent in 1903 than in 1905. Country newspapers were already denouncing the ‘crookedness, gambling, wildcat speculation and betrayal of one’s best friend’ 27 of ‘Wall Streeters’, ‘millionaires’ and ‘manipulators’.28 Just like in 1905, newspapers were full of stories about those Wall-streeters who ripped off the poor, honest and working farmers.29 The potential for noisy politics was already there. Why did the STT become politically salient in 1905 and not in 1903? The main difference between these two cases lies in the political work achieved by the politicians who introduced the STT. In January 1903, Senator Green presented the STT in a general tax bill. He never publicly advocated for the tax. His name never became a flag-tag. This contrasts with 1905, when the tax had its dedicated champions—Senators Lewis and Raines, whose commitment to the passing of the STT ‘deserve[d] the hearty commendation of the people of the state’.30 If Senators Raines and Lewis caused a stir in 1905, why did they not do so in 1903? Between 1903 and 1905, the dynamics of Republican Party politics had changed dramatically. In 1903, Governor Odell was described as a governor who ‘compels obedience’ and ‘the new guiding mind in Republican politics’.31 In these conditions, it was risky to alienate fellow Republicans. In 1905, Republicans were still in power but the Party itself was riddled with scandals. An influential Republican was convicted of using public funds while he was Superintendent of the Poor.32 A judge close to the Party was accused of financial misbehavior.33 In this context, it could prove beneficial to distinguish oneself from the Republican apparatus.34 It is especially true for Senators Raines and Lewis, who advertised themselves as virtuous politicians.35 They may have deemed that, this time, the benefits of happy constituents would outweigh the costs of angry Republican colleagues. 5.4 New York 1905: ‘The City against the Cornfield’36 In January 1905, Senators Raines and Lewis37 introduced the STT to the majority Republican caucus. Their proposition was not well received. Republican representatives from New York City were particularly vindictive, but senators representing rural counties were not enthusiastic either. The press spoke of a ‘clash on the transfer tax in the senate majority’.38 The caucus dismissed the idea of an STT. But this dismissal did not discourage the two rural senators. Countryside newspapers soon published the news that two champions of the rural interest had proposed to tax stock transfers and wanted to make Wall Street pay ‘its fair share’.39 The tax, they said, was aimed at ‘striking’ New York City, ‘where all the wealth is gradually accumulating’,40 while farm value in the state was decreasing: ‘in levying this tax, everybody knows that we are striking at a gambling business’.41 Those who wrote about indignant stories of swindled farmers and those who preached against the immorality of Wall Street had now a more focused point on which waging their war. The STT and the ‘pathetic howls of dismay raised from Wall Street’42 became their favorite angle to attack finance. Financiers’ lobbying was taunted: ‘“We will go to Hoboken’ cry the anguished gamblers. Very well then. On to Hoboken! Let the exodus begin!’43 City newspapers retaliated and denounced the ‘rural legislators’ and their tax: a ‘political blunder’, an ‘extravagance’, a ‘class war’ declaration.44 The STT was thus ‘arousing more controversy than any piece of legislation that has come up in the state of New York in 10 years’45. Very quickly, it became clear to all—and to Republican senators in particular—that ‘the tax was received with great favor and enthusiastic popular support’. 46 Because ‘the sentiment throughout the state in favor of this bill was overwhelming’47 and because the STT was framed as a pro-rural and pro-people tax, it became difficult for elected Republicans to oppose it. Republican support for the tax thus began to grow. Senator Wade, Chairman of the Senate Taxation Committee, claimed: ‘barring the liquor traffic, no branch of business had caused as much misery and filled so much graves as stock speculation’.48 Governor Higgins, who initially firmly opposed the tax, started adopting the same tone: The tax on transfers bill is opposed by those who can afford to hire lawyers. (…). The tax imposes a tax upon those who escape the burden of direct taxation and who clamor for taxes that fall with greatest weigh upon the poorer classes (…). The rich are constantly demanding exemptions and special privileges. Such a system breeds a righteous discontent.49 Yet, lobbying activities from financiers were not fading, as ‘no recent suggestion ha[d] so thoroughly aroused the opposition of Wall Street’.50 As the controversy stirred up, lobbying efforts became more intense and more conspicuous. The opposition to the tax brought together some of the most prominent financiers in Albany.51 The NYSE put together a special committee to fight the STT52 and official brokers launched a petition gathering 1 00 000 signatures against the tax.53 Brokers also repeatedly threatened to move out to New Jersey and publicized their visit to other potential locations.54 Explicit threats were made: Republicans should be worried of ‘evident risk of provoking reprisals’.55 The New York Times reported ‘threats of lack of financial support for the party in future campaigns’.56 Yet, it had become too costly for Republican politicians to stand against the STT. The Republican caucus voted to make the STT a party measure on March 30, 1905. All Republican senators, minus two senators from New York City, eventually voted ‘Ayes’ to the STT bill.57 A last delegation of brokers went to Governor Higgins to convince him not to sign the bill.58 He yet ended up signing it only 6 h before it would become unsigned law. 6. Invalidation of alternative hypotheses 6.1 Was the STT established because the state needed revenues? Intuitively, it makes sense to posit that state’s needs for fresh cash would facilitate the establishment of a new tax. At the turn of the 20th century, state’s expenses and needs for revenues were topics of concern. When discussing the STT, the necessity to increase state revenues was regularly mentioned.59 We know how much the STT yielded after it was adopted. In 1894, the French STT yielded 10 336 500 Francs.60 Between June and October 1905, the New York STT yielded 1 554 842 dollars.61 Those sums are not extremely high. In France, the tax on tobacco alone yielded 74.5 million—seven times more than the STT (Paul, 1899, p. 772). Yet, these sums were not insignificant either. In France, they approximately represented the equivalent of the functioning expenses of the Ministers of Justice, Finance and War for the year 1893.62 Yet, state’s needs for revenues cannot explain the timing of adoption. In 1903, the state of New York was already seeking new sources of revenues but the STT was rejected. Other jurisdictions, such as Illinois or Italy,63 needed revenues, but rejected the STT. More importantly, the need for revenues cannot explain the selection of one tax over another. Yet, in both France and New York, several other taxes failed when the STT passed.64 State’s needs for revenues are clearly not a sufficient condition to explain the adoption of the STT. But is it a necessary condition (Goertz and Mahoney, 2012)? In other words, had the state not needed revenues at that particular point in time, would have the tax been adopted nonetheless? Conclusions here are less straightforward. The general context of state’s need for revenues certainly contributed to make distributive issues more salient. In our cases, the debate was clearly framed in distributive terms: ‘who has to pay their share’ rather than in absolute terms: ‘how much can the STT yield’. The following abstract from a from a Lewis County’s newspaper illustrates this claim: The rural population of New York has paid the expenses of the state, setting without a murmur for schemes put through by and for the City of New York (…). And now these people [the financiers] think: ‘it will be too bad if Wall Street had to pay its share’.65 In France too, the debate was framed in distributive terms: ‘how could you hesitate to establish a tax on the speculators of the stock exchange, when heavy taxes already weigh on the workers?’66 Finally, state’s need for revenues had already become a constant rather than a variable at that time. Except in very special occasions, such as a preparation for war, state’s need for revenues has somewhat lost its explanatory power. 6.2 Was the tax established because of diminishing power resources for finance? Scholars have shown that power resources are a variable, not a constant. Instrumental power of actors may vanish when parliamentary allies are not re-elected. Structural power may fade due to institutional reforms (Hacker and Pierson, 2002). But in the first golden age of financial capitalism, the power resources of finance were not dwindling. Structurally, capital relocation was a real option. Practically, moving the Stock Exchange from New York to the neighboring New Jersey was easy and the threat of doing so was highly credible. Instrumentally, the financial industry had immense resources in terms of money and social capital available for lobbying. In 1892–1893, the Parisian official Stock Exchange spent 1.8 million Francs (45% of its overall expense) on lobbying (Hautcoeur et al., 2010). Financial interests also had very well-positioned advocates. In France, Clausel de Coussergues led a delegation of financiers to protest against the STT before the French Lower Chamber,67 but Coussergues was himself a member of the Lower Chamber! In the archival notes of the New York Stock Exchange, one can often read about ‘the parties who looked after our interests in Congress’.68 Wall Street was also suspected of pouring big money into politics, and even stood accused of trying to ‘prevent the passage of the [STT] bill by use of money’.69 Finance did not lose the battle of the STT because its instrumental or structural power was diminishing. 6.3 Was the tax established because finance itself favored it? Swenson (2004) argued that a switch in business preferences in favor of welfare policies can explain the implementation of such policies. In a context of rivalry between official and free (unofficial) stock exchanges, the tax could be used to get rid of a competitor. For official brokers, being the only one authorized to pay the tax would signify a reassertion of their monopoly on security trading. For free brokers, the authorization to pay the tax would signify a recognition of their business. Did support by financial actors lead to the establishment of the STT? In France, the rivalry between the Parquet and the Coulisse was intense (Hautecoeur et al., 2009). The Parquet was organized by the Compagnie des agents de change (CAC), the semi-private body of official brokers with a legal monopoly on transactions. By contrast, the Coulisse was a loosely organized market, illegal de jure but de facto tolerated. In New York, a similar rivalry between official and unofficial stock exchanges, the bucket shops, also existed.70 Yet, only in France did the financiers at some point claim their support for the STT.71 After the vote in favor of the establishment of an STT in December 1892, both official and unofficial brokers started claiming their support for the tax.72 MP Guyot amusingly recounted: ‘We found ourselves in this bizarre situation: we had before us tax payers who, far from saying that the tax could harm their business, presented themselves as determined advocates of the tax (…)’. He added: ‘It is obvious that the rush of these tax payers to pay provoked some mistrust.’73 The stakes were to determine whether the STT would lead to the de facto recognition of the Coulisse or to the reassertion of the Parquet’s monopoly. Establishing the real preferences of actors is difficult (Vogel, 1999; Hacker and Pierson, 2002). Actors can for example strategically misrepresent their preferences in order to achieve a second-best option when they deemed that their first choice is unlikely to happen.74 The question thus becomes: was there a U-turn in finance preferences because it was now certain that the tax would be adopted (and the second-best option was to use it to overtake their competitor) OR was the tax eventually successfully passed because of the support of the financial community? This question can be answered by tracing the statements of actors’ preferences across time and audiences (Broockman, 2012). An observation coherent with the preferences hypothesis would be to find claims by financiers in support of the tax before the vote on the STT that took place in the Lower Chamber in December 1892. Yet archival material shows that both free and official brokers were conspicuously opposed to the tax before the 1892 vote. Still on January 23, 1893, Parquet’s representatives declared before the Commission of the Budget: ‘We need to remind the Commission, once again, that we fought the principle of the tax every time the question has been raised.’ They added: ‘now that the Chamber has expressed its clear will [concerning the STT], we need to bow before the fait accompli’.75 The surprising support of the STT by financial actors in France should not lead us to inaccurate conclusions. This support was a late strategic misrepresentation of preferences in order to secure what was then seen as a second-best option (Table 2). Table 2. Schematic presentation of the invalidation of alternative hypotheses Finance preferences variation State’s needs for revenues France (1892) Free and official brokers at some point supported a particular version of the tax. But close analysis of preferences’ statement shows that support for the tax was a late second-best option strategy. The state was in need of new sources of revenue. But other proposed taxes were rejected. Debates focused on whether finance must pay its share, NOT on the way to increase state revenues the most efficiently. New York State (1903) Mighty and constant opposition of the financiers against the tax. The state was in need of new sources of revenue. Yet the STT was rejected. New York State (1905) Rivalry between official and unofficial brokers existed. Evidence shows that there was a mighty and constant opposition of the financiers against the tax until the tax was definitely adopted. The state was in need of new sources of revenue. But only the STT was finally adopted. Debates focused on whether finance must pay its share, NOT on the way to increase state revenues the most efficiently. Finance preferences variation State’s needs for revenues France (1892) Free and official brokers at some point supported a particular version of the tax. But close analysis of preferences’ statement shows that support for the tax was a late second-best option strategy. The state was in need of new sources of revenue. But other proposed taxes were rejected. Debates focused on whether finance must pay its share, NOT on the way to increase state revenues the most efficiently. New York State (1903) Mighty and constant opposition of the financiers against the tax. The state was in need of new sources of revenue. Yet the STT was rejected. New York State (1905) Rivalry between official and unofficial brokers existed. Evidence shows that there was a mighty and constant opposition of the financiers against the tax until the tax was definitely adopted. The state was in need of new sources of revenue. But only the STT was finally adopted. Debates focused on whether finance must pay its share, NOT on the way to increase state revenues the most efficiently. Table 2. Schematic presentation of the invalidation of alternative hypotheses Finance preferences variation State’s needs for revenues France (1892) Free and official brokers at some point supported a particular version of the tax. But close analysis of preferences’ statement shows that support for the tax was a late second-best option strategy. The state was in need of new sources of revenue. But other proposed taxes were rejected. Debates focused on whether finance must pay its share, NOT on the way to increase state revenues the most efficiently. New York State (1903) Mighty and constant opposition of the financiers against the tax. The state was in need of new sources of revenue. Yet the STT was rejected. New York State (1905) Rivalry between official and unofficial brokers existed. Evidence shows that there was a mighty and constant opposition of the financiers against the tax until the tax was definitely adopted. The state was in need of new sources of revenue. But only the STT was finally adopted. Debates focused on whether finance must pay its share, NOT on the way to increase state revenues the most efficiently. Finance preferences variation State’s needs for revenues France (1892) Free and official brokers at some point supported a particular version of the tax. But close analysis of preferences’ statement shows that support for the tax was a late second-best option strategy. The state was in need of new sources of revenue. But other proposed taxes were rejected. Debates focused on whether finance must pay its share, NOT on the way to increase state revenues the most efficiently. New York State (1903) Mighty and constant opposition of the financiers against the tax. The state was in need of new sources of revenue. Yet the STT was rejected. New York State (1905) Rivalry between official and unofficial brokers existed. Evidence shows that there was a mighty and constant opposition of the financiers against the tax until the tax was definitely adopted. The state was in need of new sources of revenue. But only the STT was finally adopted. Debates focused on whether finance must pay its share, NOT on the way to increase state revenues the most efficiently. 7. Conclusion Today, the future of the tax on financial transactions is uncertain. Attempts to introduce such a tax in the US have failed. The project of a EU-wide tax was quickly abandoned. In 2011, 11 European countries decided to implement an STT. Since then, its adoption has been constantly delayed. Yet, in the aftermath of the financial crisis, public opinion’s hostility against finance was strong. As this article has shown, the resolute opposition of the financial industry to taxing financial transactions cannot per se explain why such a tax finally failed to be adopted. Rather, we need to wonder why this tax did not become politically salient. The possibility of an STT was certainly intensely debated, but the complex and technical aspects of the tax on financial transactions were never overcome. Technical arguments, some of which honed by the financial industry itself, were used to shove or delay the implementation of the tax, even by policymakers who declared themselves favorable to it. Second, regarding the case of the European Union more specifically, the lack of directly representative institutions may have undermined one major assumption of the political salience hypothesis: voting behavior needs to affect directly policymakers’ political strategy. In the EU at least, there was no incentive for STT champions to emerge. The take-away lesson of this research is that the realm of politics can effectively alter the effects of finance’s privileged position. Yet, its reach is only limited. What happens when political salience fades? At the turn of the 20th century, the revenues yielded by the STT adopted in France and in the State of New York declined in the years following its implementation. This suggests the rapid proliferation of special arrangements and exemptions that policymakers didn’t try to impede, until the definitive suppression of the tax.76 Political salience may have trumped the influence of financiers for a little while, but only until the issue fell out of the public limelight again. Perhaps more fundamentally, noisy politics put a spotlight on policies that are well circumscribed, simply framed and allegedly able to produce clear-cut outcomes. The process of passing such policies is costly in terms of political capital—and public outrage is not an everlasting resource. Politicians cannot play the same agitated game anytime they want to pass a law. Public outrage cannot be repeated anytime a given policy is at stake. The mechanisms highlighted in this paper may, for example, not be very effective in passing the content of the 16 sections of the 848 pages of the Dodd-Frank Act. Although far from being impossible, passing policies that bluntly go against finance’s interests and clearly encounter the opposition of the vast majority of financiers is likely to be the exception rather than the rule. More to the point, the policies selected by politicians because they are susceptible to raise overwhelming public support are not necessarily the most relevant. Inevitably, more complex and sound discussions about the role of finance in advanced political economies seem largely doomed to escape the reach of democratic politics. Supplementary material Supplementary material is available at Socio-Economic Review online. Acknowledgements I would like to thank Paul Pierson, Pepper Culpepper, Jonah Levy and Steve Vogel for their support and comments on the different versions of this article, as well as four anonymous reviewers and the participants to the conference ‘Money, Numbers and Power’ at the University of Columbia. Special thanks are due to the New York Stock Exchange and CAEF archivists for their precious help during archival work. I am also especially grateful to Samuel Denantes and Martine Vandeville for their excellent research assistance. Footnotes 1 See the full texts of the bill in Wall Street Journal, 6 April 1905; and Journal Officiel de la République Française, April 20, 1893. 2 The other shortcomings of the traditional literature on business power that new students of business power have addressed are mainly the assumption of the homogeneity of the ‘capitalist class’ and the lack of clearly stated and falsifiable hypotheses. 3 The Journal and Republican Lowville, March 29, 1905. 4 White (2014) studied banking regulation in the USA before 1914 and Hautcoeur et al., 2010 the regulation of the Parisian stock Exchange before 1929. See also Bloomfield (1959) for a highlight of the role of gold devices in the functioning of the international monetary system; Bazot et al. (2015) for an explanation of how gold devices were used by the Banque de France to tame international capital flows. Many thanks to an anonymous reviewer for bringing this set of literature to my attention. 5 See Online Appendix A for more detailed descriptions of data. 6 New York Time (NYT)s, February 10, 1905. 7 NYT, February 5, 1903. 8 http://nyshistoricnewspapers.org/ 9 Journal des Débats, November 16, 1892; Le Temps November 16, 1892. 10 Le Temps, June 19, 1893. 11 See La Croix, March 22, 1892: ‘The unfortunate and naive innocents who are victim of agiotage and jiggery-pokery’; November 15, 1892 on the ‘Jews who push good people to speculation’; November 17, 1892 on the social injustice caused by speculation. 12 Débats parlementaires, November 15, 1892. 13 Journal des Débats, November 16, 1892; Le Temps November 16, 1892. 14 Journal des Débats, December 10, 1892; La Croix, December 10, 1892. 15 L’Intransigeant, November 17, 1892; Decembre 14, 1892; Le Roubaix Socialiste, November 19,1893 16 La Croix, December 10, 1892. 17 Le Siècle, December 1, 1892. 18 Ibid, December 13, 1892. 19 Le Temps, February 17, 1893. 20 The Palladium, March 5, 1903. 21 Wall Street Journal, January 29, 1903. 22 NYT, February 5, 1903. 23 Senator Grady in NYT, February 19, 1903. 24 NYT, February 5, 1903. 25 The Palladium, March 5, 1903. 26 Ibid. 27 Reverend Talmage Sermon in the Journal and Republican Lowville, June 13, 1901. 28 Quotes of several articles published in Lewis county and Saint Lawrence County’s newspapers between 1900 and 1905. 29 See The Massana Observer, October 27, 1903 telling the story of ‘a lamb fooled by Wall Street’; Courrier and Freeman, August 5, 1903, January 21, 1903. 30 Postdam Courrier Freeman, April 6, 1905. 31 NYT, February 3, 1903, March 14, 1903. 32 Ibid, March 10, 1905. 33 Ibid, January 23, 1905, June 5, 1905. 34 In 1906, The Democratic/Independence League fusion ticket was elected. 35 Senator Lewis’ other fight was for the closure of saloons on Sundays. 36 Republican and Journal, Lewis County, June 9, 1904. 37 Raines represented the 42nd district (Ontario and Waynes). Lewis represented the 43rd district (Rochester, Brighton, Henrietta, Irondequoit, Menden, Penfield and Monroe). 38 NYT, January 24, 1905. 39 The Journal and Republican Lowville, March 29, 1905. 40 Ibid, April 4, 1905. 41 Ibid. 42 Ibid. 43 The Daily Journal, April 3, 1905. 44 NYT, February 10, 1905. 45 Washington Post, April 8, 1905. 46 NYT, February 10, 1905. 47 Postdam Courrier, April 6, 1905. 48 NYT, April 6, 1905. 49 Ibid. 50 Wall Street Journal, February 19, 1905. 51 Washington Post, March 3, 1905; New York Times, March 3, 1905, March 30, 1905. 52 Internal note of the NYSE, February 27, 1905, NYSE archives. 53 Washington Post, March 13, 1905; Wall Street Journal, March 16, 1905. 54 Washington Post, March 13, 1905; Note of the NYSE Tax Committee NYSE archives, April 28, 1905. 55 NYT, March 14, 1905. 56 NYT, April 1, 1905. 57 The Democrats all voted against the STT. 58 NYT, April 6, 1905. 59 NYT, January 27, 1905; Senator Bouge in Le Temps, November 17, 1892; Governor Higgins in the NYT, April 6, 1905. 60 Fonds CAEF. 61 Wall Street Journal, November 4, 1905. 62 Journal Officiel de la République Française, March 1893. 63 An STT was briefly considered, but quickly rejected, in Illinois in 1901. 64 Taxes on alcohol and transportation were discussed and rejected in France in 1893. A tax on mortgages was passed but immediately repealed in New York in 1905. 65 The Journal and Republican, Lowville, March 29, 1905. 66 Bouge, in Journal des Débats Politiques et Littéraires, November 16, 1905 67 Journal des Débats, January 24, 1893. 68 NYSE archives, Note by Mr Keppler, President of the tax Committee, April 10, 1907 69 Wall Street Journal, February 15, 1905. 70 The NYSE brokers signed a petition to have the bucket shops closed in October 1905. 71 One single reference in the NYT suggests that some official brokers may have not been completely opposed to an STT: ‘Some of the biggest houses on Wall Street were inclined to favor the proposed tax, on theory that it would work to the advantage of the big houses as against the bucket shops and curb brokers.’ All other documents show ‘strong and constant opposition to the tax’ (Fetter, 1905, p. 152). 72 La Coulisse (anonymous), ‘Le Marché Libre : 15 Millions pour l’Etat’, January 1893, Fonds CAEF ; Minutes du Sénat, February 25, 1893. 73 Guyot, Chambre des Députés, February 23, 1983. 74 To illustrate that actors do adopt their strategy to the context, see this quote from Mr Keppler, president of NYSE Tax Committee (April 10, 1907): Upon looking over the ground in its entirety, and recognizing that the political sympathy at Albany is distinctly unfavorable to any action (…) your Committee is of the opinion that nothing further should be attempted, if it were for nothing more than the reason that we feel quite certain of failure. 75 Audition des représentants du Parquet, January 23, 1893. 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