Thursday, January 20, 2011

The Power of Lobbies

It is a common political pastime to disparage so-called “special interests.” Their association with the Big “You Fill in the Blanks” [Business, Insurance, Auto, Pharma, etc.] and their alleged corrupting influences on politics has made them an unremitting target of popular umbrage. Following the Citizens United decision, President Obama distinctively claimed that it was “a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans.” However, a year after this infamous and contentious Supreme Court ruling, there has yet to be considerable, if any, focus on a key aspect of the special interest world.

The overlooked reality is that no lobby or special interest has any power save what is given to it by the government. Merriam-Webster defines a special interest as “a person or group seeking to influence legislative or government policy to further often narrowly defined interests.” Special interests gain clout not through their own power over a specific industry or market, but by influencing legislators or regulators to grant them undue sway. The real power lays with the government officials, who possess the ultimate command of coercion.

Surprisingly, this fact is frequently disregarded when populists want to attack special interests. However, if one takes a look at the industries where powerful lobbies exist there is an eerie correlation with government involvement. Seemingly, special interests would lose much of their influence if the government ceased arbitrarily meddling in private markets.

To be clear, this is not a claim that the problem of every special interest is rooted in government. For instance, simple vote- or seat-buying [Mr. Blagojevich] is often initiated by special interests and is unquestionably and inarguably wrong. There is little controversy that such behavior is unconscionable and must be eradicated. This is, of course, not a flaw in government as an institution but in government officials as corrupt individuals.

Nor is it a claim that government can have no constructive role in the private sector. Certain regulations and oversight are, at times, necessary. For instance, when non-legislatively caused monopolies exist and they are able, through illegal or unjust means, to deter competition (or in other words, cause severe distortions of the market) the government may have a limited role to play in deconstructing the firm’s market power.

Nevertheless, far too many of the problems (and there are many problems) in the private sector are the result of a conferral of power from the government to an undeserving group or individual. Critics miss the point when attacking lobbies, who like any other group or individual, are solely aiming to maximize their self-interest. Instead, the vitriol should be directed towards the regulators and politicians who continue to write laws and regulations that arbitrarily interfere in a world where the government does not belong. [To parallel, who is at fault when a demanding child is given one-too-many sweets– the relenting parent (who ultimately has the power) or the whining kid?]

Our government and our society need to change their outlook in this regard. If industries know that government will stand at arm’s length from the daily hubbub of a market and instead, solely create guiding rules (I.e. enforcement of contracts, prevent of abuse or fraud, etc.), the power of special interests will be severely limited if not eradicated. However, this is unfortunately not the case. Far too often, a tweak in a law can make or break a company’s bottom line. Right or wrong, this necessitates a strong response from an industry.

Republicans have a grand opportunity (and some say a mandate) to make this cultural shift. While so-far largely symbolic, the “repeal and replace” campaign against Obamacare is a prime testing ground. Regardless of whether the “replace” makes it anywhere in the next two years, it should be fundamentally based on the principle of clear, concise rules, that strengthen market forces and avoid noisome government meddling.  Avoiding unwarranted special interest power is as simple as prohibiting unjustifiable government forays into the private sector.

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