How corporations turned into political beasts

Capitol domeJonathan Ernst /ReutersThe US Capitol dome is reflected in the glass roof of its underground visitor center ahead of President Barack Obama’s first address to a joint session of congress, in Washington, February 24, 2009.

Over the past four decades, large corporations have learned to play the Washington game. Companies now devote massive resources to politics, and their large-scale involvement increasingly re-directs and constricts the capacities of the political system.

The consequence is a democracy that is increasingly unable to tackle large-scale problems, and a political economy that too often rewards lobbying over innovation.

Prior to the 1970s, few corporations had their own lobbyists, and the trade associations that did represent business demonstrated nothing close to the scope and sophistication of modern lobbying. In the 1960s and the early 1970s, when Congress passed a series of new social regulations to address a range of environmental and consumer safety concerns, the business community lacked both the political will and the political capacity to stop it.

These new regulations, combined with the declining economy, awoke the sleeping political giant of American business. Hundreds of companies hired lobbyists for the first time in the mid-1970s, and corporate managers began paying attention to politics much more than they ever did before.

When corporations first became politically engaged in the 1970s, their approach to lobbying was largely reactive. They were trying to stop the continued advancement of the regulatory state. They were fighting a proposed consumer protection agency, trying to stop labour law reform, and responding to a general sense that the values of free enterprise had been forgotten and government regulation was going to destroy the economy. They also lobbied as a community.

Facing a common enemy (government and labour), they hung together so they wouldn’t hang separately. But as the labour movement weakened and government became much more pro-industry, companies continued to invest in politics, becoming more comfortable and more aggressive. Rather than seeing government as a threat, they started looking to government as potential source of profits and assistance. As companies devoted more resources to their own lobbying efforts, they increasing sought out their own narrow interests. As corporate lobbying investments have expanded, they have become more particularistic and more proactive. They have also become more pervasive, driven by the growing competitiveness of the process to become more aggressive.

External events may drive initial corporate investments in Washington. But once companies begin lobbying, that lobbying has its own internal momentum. Corporate managers begin to pay more attention to politics, and in so doing they see more reasons why they should be politically active. They develop a comfort and a confidence in being politically engaged. And once a company pays some fixed start-up costs, the marginal costs of additional political activity decline. Lobbyists find new issues, companies get drawn into new battles, and new coalitions and networks emerge. Managers see value in political engagement they did not see before. Lobbying is sticky.

CongressAPMembers Congress climb the steps of the House of Representatives for final votes, at the Capitol in Washington, Thursday, July 31, 2014.

Lobbyists drive this process. They teach companies to see the value in political activity. They also benefit from an information asymmetry that allows them to highlight information, issues, and advocacy strategies that can collectively make the strongest case for continued and expanded political engagement. Because corporate managers depend on lobbyists for both their political information and strategic advice, lobbyists are well-positioned to push companies towards increased lobbying over time.

But what effect has it all had on public policy? Social science research on political influence has found no relationship between political resources and likelihood of success. However, the lack of a direct, statistically significant correlation does not mean that there is no influence. It just means that the influence is unpredictable. The policy process is neither a vending machine nor an auction. Outcomes cannot be had for reliable prices. Policy does not go to the highest bidder. Politics is far messier, and far more interesting than such simplistic models might suggest. And almost certainly, the increased competition for political outcomes has made it even more unpredictable.

Sometimes lobbying can be very influential, but its influence is contingent on so many confounding factors that it does not show up reliably in regression analysis. Yet, the study of influence is a fundamental question of politics. Rather than looking for vote buying or expecting resources to correlate predictability with policy success, we must think bigger.

We must understand the ways in which increases in lobbying activity shape the policymaking environment, and how the changing environment may allow some types of interests to thrive more than others. The current political environment benefits large corporations for several reasons, which I laid in more detail in Chapter 2, but I will provide a recapitulation here.

The first reason is that the increasingly dense and competitive lobbying environment makes any major policy change very difficult. As more actors have more at stake, every attempt to change policy elicits more calls from more voices. In a political system whose many veto points already make change difficult, the proliferation of well-mobilized corporate lobbying interests, all with their own particular positions and asks, means that there are more actors with the capacity to throw more sand into the already creaky machinery of the multistage policy process. In order for any large-scale change to happen, lobbying generally must be one-sided. To the extent that large corporations benefit from the status quo, a hard-to-change status quo benefits large corporations.

But while the crowded political environment may make legislation harder to pass in generally, it also makes the legislation that does pass more complicated (more side bargains). Large companies are more likely to have the resources and know-how to push for technocratic tweaks at the margins, usually out of public view.

This contributes to what Steven Teles calls the “complexity and incoherence of our government.” Teles notes that this complexity and incoherence has a tendency to “make it difficult for us to understand just what that government is doing, and among the practices it most frequently hides from view is the growing tendency of public policy to redistribute resources upward to the wealthy and the organised at the expense of the poorer and less organised.” The more complicated things become, the more of an advantage it is for corporate lobbyists looking to influence the out-of-sight, hard-to-understand, but sometimes highly consequential nooks and crannies of the U.S. code.

Technology Lobbying

The increasing complexity of policy also makes it more difficult for generalist and generally inexperienced government staffers to maintain an informed understanding of the rules and regulations they are in charge of writing and overseeing. They typically have neither the time to specialize nor the experience to draw on.

As a result, staffers must rely more and more on the lobbyists who specialize in particular policy areas. This puts those who can afford to hire the most experienced and policy-literate lobbyists — generally large companies — at the center of the policymaking process.

Increasingly, corporations are not just investing in direct lobbying, but also in think tanks and academic research and op-eds and panel discussions in order to shape the intellectual environment of Washington — to make sure that certain frames and assumptions come to mind immediately and easily when policymakers consider legislation and rules.

Lobbying efforts now tend to come buffeted by footnotes; by white papers and detailed estimates of how a particular member’s constituents will be impacted. It is likely that most material winds up in the “circular file” (a round trash can), and most hosted policy discussions are sparsely attended. But collectively, they take up time and attention and mindspace. Their ceaseless presence shapes the larger intellectual environment of Washington. They are also often a necessary prerequisite for being taken seriously (however aggressive or dubious the number-crunching behind them). And they take time, effort, and — most importantly — money to produce.

A growing lobbying industry also siphons more and more talent from the public sector. The lobbying firms and corporate Washington offices that cluster around K Street generally provide better hours, better working conditions, and most of all, better salaries than government, especially Capitol Hill. Congressional staffers can usually at least double their salaries by “going downtown” (shorthand for becoming a lobbyist, since K Street is downtown).

An increasing share of political and policy expertise increasingly resides in the law, lobbying, and strategic advice firms of Washington, DC, where a growing number of experienced political insiders and experts are available, for a fee, to the (mostly) corporations who can afford to hire them (and by extension, their rolodexes). Few diffuse interests groups, by contrast, can afford their fees.

Of course, nothing in the current Washington policymaking environment guarantees influence for any individual corporation. If anything, these changes probably reduce the expected return on investment to lobbying by raising the costs. On many issues, companies fight other companies to a standstill for years, with only the lobbyists on both sides benefiting.

But this is not a sign that pluralism is alive and well. One also needs to ask: what issues are being left off the agenda? What groups and interests can’t get into the fight without attaching themselves to a cause that large corporations also care about? How much of the policy capacity of the federal government is being used up refereeing parochial industry disputes, as opposed to dealing with other issues?

Nor are these changes generally good for business as a whole. Certainly, individual market leaders may benefit from the current environment, with its strong status quo bias and its rent-seeking possibilities (at least for those who can afford the right — and right number of — lobbyists). But overall, the increasing difficulty of political change reduces the capacity of the federal government to challenge the existing status quo, even when it is anti-innovation and antimarket.

The current U.S. tax code, as former representative Bill Frenzel puts it, “is a hopelessly complex mess, antithetical to growth, and is crammed with conflicting incentives.” Yet comprehensive tax reform has been a political impossibility for a long time. The tax code may be the most compelling example of how the increased particularism of business lobbying undermines the interests of business as a community. Most everyone in the business community realises that the U.S. tax code is, as a whole, bad for the economy. But while there is always talk of a “grand bargain” on taxes, nobody is willing to be the first to put their tax benefits on the table. Hence, the “grand bargain” remains largely talk.

“Individual American corporations have more political power in the early twenty-first century than at any time since the 1920s,” writes Mark Mizruchi. But, “unlike their predecessors in earlier decades, they are either unwilling or unable to mount any systematic approach to addressing even the problems of their own community, let alone those of the larger society.” Consider what happened in 2013, when partisan warfare led to a 16-day government shutdown and threatened to let the United States default on its debt. In the run-up to the government shutdown, Paul Stebbens, the CEO of World Fuel Services who had been active in the “Fix the Debt” campaign, told the Washington Post: “Let’s start with the basic fact that business was part of the problem. In August of 2011, I was meeting with the Business Roundtable in D.C., and most business guys were running around the world being busy running their corporations and not paying a lot of attention in a general way . . . We have a higher duty of care to engage this issue. It is grossly reckless to watch the long-term business trajectory of the U.S. to be at such risk. And we are part of the pathology that got us here. We’ve all had our K Street lobbyists who are part of the problem.”

While the business community was very unhappy about the budget brinksmanship in Washington, this was not the kind of issue that companies had experience lobbying. Instead, corporate lobbying has all gone to educate congressional offices about the particular concerns of specific industries and companies.

As a result, members of Congress have done impressive work on behalf of particular companies and particular industries. However, they have been misled into thinking that the sum total of all their targeted support (essentially, picking winners through public policy) is somehow good for the economy, because each policy they support is promoted individually as good for the economy or good for business.

Even if fellow business leaders did agree with Stebbens that their K Street lobbyists were indeed “part of the problem,” it seems unlikely that they would tell them all to go home. Large companies are unlikely to risk ceding any political advantages to competitors. After all, if they have invested significant resources in politics, they have surely been convinced that engagement is important. Why would they change their minds now? Especially when political engagement still remains cheap relative to what is at stake.

This article is excerpted from Lee Drutman’s recently released book, The Business of America is Lobbying: How Corporations Became Politicized and Politics Became More Corporate, published by Oxford University Press.

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