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What's Wrong With Business Lobbyists

Op-Eds & Articles

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What's Wrong With Business Lobbyists

Fred Smith Op-Ed in the Wall Street Journal, January 16, 1986

Something is rotten with the state of business lobbying.
Firms and industry trade groups spend ever-greater sums
successfully purchasing "access" and "influence" in
Washington, but still manage to lose ground over the long
run.

Despite some notable gains in deregulating a few markets,
the competitive economy on which business prosperity
ultimately rests is gradually being eroded. It is being
replaced by a system of "managed capitalism," with its
permits, penalties, subsidies and displacement of control
from stockholders and their proxies to bureaucrats and
lawyers. This change is occurring not in spite of, but all
too often because of, the lobbying and other
"government-affairs" efforts of business.

How this trend has developed can be seen by observing a
familiar Washington scenario. A business group is threatened
by some new rule or piece of legislation. However, rather
than fighting the measure in a principled strategic fashion,
the group proceeds to adopt without consideration the tactics
of compromise and accommodation. The group accepts the
handicap, asking only that the measure be assigned uniformly
to all its competitors. A "level playing field" rather than
economic freedom becomes its rallying cry.

Given the major economic role of the federal government,
business must seek to understand and influence political
decisions. But it still falls all too readily into the trap
of seeking short-term relief at the cost of undermining its
long-range interests. Why? First, corporations have
traditionally recruited Washington representatives from a
population ignorant of, if not hostile to, the
entrepreneurial values of the market. Second, business has
largely failed to address this recruitment bias.

And, finally, businesses have yet to come to terms with
the fact that they are no longer the most credible advocates
for a competitive economy.

The basis of the first problem, the recruitment bias, is
understandable. The Washington political world is complex.
Learning its ground rules and acquiring the needed contacts,
influence and access can require years of apprenticeship
within the Beltway power structure. Nevertheless, the
tendency of business to recruit its lobbyists from among
bureaucrats and congressional staffers, rather than from the
business community, creates unavoidable tensions. The
Washington reps' ignorance of how markets serve to advance,
while government often retards, consumer welfare makes it
hard for them to offer any principled defense of corporate
policies. Indeed, to many business lobbyists a principled
defense of corporate actions would seem ideological, as
indeed it is. Ideas, however, do matter, and it is important
that business realize this.

In fact, many business reps are very ideological. After
all, many spent their formative professional years being
nurtured by the redistributionist philosophy of Washington,
and thus implicitly accept its premise that wealth creation
is an irrelevant if not suspect activity. Too often they
adopt an apologetic or defensive stance whenever their
industry is attacked, and are willing to "plea-bargain" early
on. For them, compromise is always preferable to resistance.
The Washington rep often focuses on what "improvements" and
"perfecting" amendments can be made to bills whose sole
intent is to further shackle business, rather than on seeking
to defeat such measures. Such tactics, of course, ensure
continued losses. Having learned their lessons when business
was in constant retreat, they seem unprepared to take
advantage of a world in which government, not the market, is
under indictment.

Still another cost of the recruitment bias is the growing
acceptance by American business of the myopic time
perspective of politics. In the business world, firms balance
long- and short-run interests and mesh long- and short-run
plans accordingly. In contrast, the Washington horizon is
focused on today's headlines, tomorrow's hearing schedule.
Business acceptance of this Washington time scale locks it
into a short-term perspective, and makes impossible any
strategic plan to gain greater competitive freedom.

However, even were the Washington rep conversant with the
strategic needs of his firm and well educated on the virtues
of the market, there would remain the problem of maintaining
that loyalty in the face of the dominant philosophy of his
fellow lobbyists. Too often, in fact, competent but
politically naive individuals are assigned to Washington and
find themselves coopted without ever realizing that a choice
existed. But such problems are not unique to business and
Washington. Consider, for example, the way the Forest Service
manages its field operations. Knowing its rangers will
educate their children in local schools, worship at local
churches and socialize in local homes, the Forest Service
makes it easier for them to resist local pressures and
prejudices -- to extend the hunting season unofficially, for
example. The ranger is made to feel he or she is part of a
special team; promotion policies emphasize broad geographic
exposure and thus place local concerns in perspective; and
the service promotes a strong ideology based on conservation
and ecological balance. While the comparable arrangements
appropriate to a firm would obviously differ, the failure
even to recognize this problem has been costly.

It is not easy for even the best business rep to argue
that the policies that benefit his firm also advance the
public interest. If business is to defend its long-run
interests successfully, it must ensure an adequate defense of
the free market. It should adopt the approach pioneered by
liberal public-interest groups: Find areas where a difference
can be made, create rather than respond to an agenda, marshal
intellectual and political forces and seize the moral high
ground.

Business is ill-equipped to play this strategic
free-market advocacy role alone. The tendency of too many
business groups over too many years to use free-market
rhetoric to mask special-interest appeals has rendered their
views suspect. Indeed, as more power is concentrated in
Washington, the extent to which short-run business interests
are consistent with the public interest has declined. An
intuitive recognition of this accounts for the deep distrust
most Americans have of "business lobbyists." Although
long-range business interests remain largely consistent with
those of most consumers, that fact can no longer be credibly
asserted by those with a short-run profit stake in the issue
at hand and is now best made by an independent group.

In part that argument is being made by a growing number of
independent think tanks such as the American Enterprise
Institute, the Heritage Foundation, the Cato Institute, the
Manhattan Institute and the Reason Foundation. Such groups
have earned their credibility by adopting principled
ideological positions, often at some financial sacrifice.
More strategically motivated firms respect this independence
and have provided the financial support that has made
possible the new intellectual respect for the market economy.
But the late philosopher Richard Weaver's dictum, that "ideas
have consequences," is true only when those ideas find
champions in the political arena as well.

The approach outlined here is not novel. The limited
free-enterprise successes of the past decade largely
reflected exactly this approach. Airline deregulation, for
example, was spearheaded by a number of public-interest
groups supported by sympathetic business lobbies.

The recent successful effort to defeat the Rural
Electrification Administration's bailout request provides a
more recent example. That effort was led by such
public-interest groups as the National Taxpayers Union, the
Environmental Policy Institute and the Competitive Enterprise
Institute and supported by such business groups as the
Chamber of Commerce and the U.S. Business and Industry
Council. The REA's populist image made it important that the
effort not be led by business groups -- all of which would
have been castigated as seeking the destruction of the small
farmer. A number of similar efforts are now under way to form
ad hoc coalitions of business and public-interest groups in
such areas as antitrust reform, environmental policy,
privatization and international trade.

It is this kind of strategic redirection of business
lobbying that has paid great dividends in the past. In the
1840s, two English businessmen, Richard Cobden and John
Bright, used just such a coalition strategy. Their Anti-Corn
Law League reversed almost a century of mercantilist
policies, led within a decade to the repeal of almost all
British tariffs, and ushered in an era of prosperity and
freedom.

Such forthright and aggressive efforts by businessmen and
their allies still offer the most effective path to
protecting business's long-term interests. Certainly it would
provide a sharp contrast to the current Washington situation.
At a recent meeting, a business lobbyist announced, "Let's
make it clear that nobody mistakes us for an ideological
group." At another meeting, a like-minded colleague asserted,
"We never oppose anything; we think it creates too negative
an image for our company." Such defensive tactics may win a
skirmish here or there, but they stand no chance of winning a
strategic policy war.