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What's Wrong With Business Lobbyists

Op-Eds and Articles

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.