Home > Democracy, Law, Taxation > Interest groups and lobbies

Interest groups and lobbies

Special interest groups are a major part of where our money goes and where our laws come from. If you think government is the collective will of the people, and the reason we have all these laws and government programmes is because they are what the people as a whole have decided on, or that they are for the good of the people, you are sorely misguided.

Here is how it works. A politician’s incentives are for votes and money. They have the ability to hand out taxpayer money and laws that benefit the few at the expense of the many. If a group has enough voters or enough money, it has what politicians most want. That means it can get what it wants from politicians. Special interests and government form a symbiotic relationship—you help me get reelected or give a bunch of money when I leave office, and I will give you various benefits at the taxpayers’, or consumers’, or small business owners’, expense.

If I take a dollar from you, and then I do it to a million other people, and I give that million dollars to one guy, what will happen? The one guy is really happy, and he is more powerful now, so he has more influence over me. You, on the other hand, will barely notice your missing dollar. Repeat this process about a million times and you will have some idea where your taxes are going.

These subsidies, or favourable laws, or whatever lobbyists demand in return for guaranteeing the stagnant political status quo, do not just hurt your paycheque. The fishing industry, for instance, gets an estimated $20b in handouts every year. Because the politically powerful (as opposed to the friendly fisherman on the fish sticks package) get the money, they fish longer, in larger quantities and farther away than ever before. These subsidies distort market prices for fish, as the reduced fish stocks should mean higher prices, which would reduce demand and probably let fish stocks return to sustainable levels. But the subsidies encourage overfishing, and as a result, fish stocks are collapsing worldwide. (1)

We all agree that special interest groups have too much power. But why do our democratically-elected-and-thus-accountable-to-us politicians never do anything that puts a meaningful dent in that problem?  Let’s ask the money what it wants.

Official lobbying spending in the US increased from $1.44b in 1998 to $3.5b in 2010. The number of lobbyists (again, officially) employed tops 14,000. (2) Lobbying members of Congress on behalf of the financial sector has sped up since the 2008 crash. (3) Do you think the lobbyists want protection for the existing players in their industry? Do you think that kind of protection will benefit the consumers? After GM received a $50b government bailout, it increased its lobbying efforts. According to the Wall Street Journal, GM “joined other auto makers in urging the White House to back off a proposal that could require auto makers’ vehicle fleets to get an average 62 miles a gallon by 2025, and to instead adopt less ambitious standards.” (4) A month or two later, the WSJ said the US government is likely to lose billions on the sale of GM stock it purchased when GM was having trouble. (5) But then the White House was never very good at market timing. Whenever you want to know why a massive handout, bailout, nationalisation, strange law (or even an innocuous-sounding one) got passed, you can be sure there is a special interest group behind it.

Some US presidents’ farewell addresses seem to present ideas to future generations that achieve the opposite of their intent. George Washington, for instance, warned entangling alliances, and the US has entangled itself with Israel. (I strongly recommend The Israel Lobby and US Foreign Policy by John Mearsheimer and Stephen Walt. Feel free to brush aside the cobwebs that they are “anti-semites”: all their data is well documented.) A century and a half later, Dwight Eisenhower warned against the pernicious effects of the military-industrial complex. Did his speech save American democracy? Millions go from the war industry to electoral candidates. (6) No-bid contracts to rebuild warzones shaken up by a US invasion regularly go to well-connected firms (7). The 2010 election was a particularly generous year for defense corporations, giving twice as much as they did only 8 years earlier. The war in Afghanistan continues to rage; drone strikes on Pakistan have increased (the aerospace sector is the biggest defense donor (8); Boeing is practically the right hand of the US air force (9), and in addition to contracts receives billions in subsidies (10)); and now the US is in an open-ended commitment in Libya. Washington’s addiction to war may have several causes, and a all-too happy dealer is clearly one of them.

But even if we cut all those other handouts, surely we shouldn’t do away with farm subsidies, right? Farmers need that to live! Consumers need that to eat! In the US, $15b a year goes from public coffers to farmers. That, like all government spending figures, does not account for the salaries and pensions of bureaucrats employed to administer that money. The top 10% richest farmers got 74% of the benefits, because they are connected to big, corporate farms with major lobbying power (11); and of course, the more money you get, the more lobbying power you have. (Trace some of the tens of millions spent by agribusiness lobbying the US federal government here.) Moreover, the public generally believes that, without farm subsidies, we would run out of food. Do they not realise if there is a market for something, it will get made? Food and land prices are up and rising, which means that farmers will make more money regardless of subsidies. In fact, subsidies can lead to shortages, as those receiving them no longer need to produce anything. People who realise all this, from left to right, believe that we should end such wasteful subsidies. But the government will not listen to a few pundits. Receiving taxpayer money has nothing to do with need and everything to do with power.

US democracy is not the only place representation is hobbled by lobbyists (European governments fund groups so they can lobby for more funding! (12)): it is in the nature of government to take other people’s money and give it to whomever they, in their unquestioned wisdom, see fit.

So we should end government handouts, right? How? You would not get millions of people to a rally to end some specific subsidy or law, because each person would barely feel the difference (and the government would not give the money back to them anyway: it would give it to other interest groups). You could attempt such a rally to end all subsidies in general, but there are too many people getting rich off them who would stand in your way. Politicians rarely have the spines to stand up to special interests because if they alienate one group, they lose a bloc of voters, get smeared in the press and get no benefit from it. They have little incentive to give you back your money.

Politicians are beholden to special interests. It’s another example of the endless cycle of all democratic politics: socialism for the rich. No amount of reform will change it, because if you give people power over other people’s money, they will use it to gain benefits for themselves. The answer is not to let anybody have that power, and not let anybody take your money, because only you can decide what is right to do with it. As long as government is around, that is not an option.

(1) http://www.bankruptingamerica.org/2011/05/fishing-subsidies-contribute-to-overspending-and-overfishing/

(2) http://www.opensecrets.org/lobby/index.php

(3) http://www.bbc.co.uk/iplayer/console/p00h05sj

(4) http://online.wsj.com/article/SB10001424052748703703304576297180040726512.html

(5) http://online.wsj.com/article/SB10001424052702303745304576359530678869402.html

(6) http://www.opensecrets.org/pacs/sector.php?txt=D01&cycle=2010

(7) http://www.commondreams.org/headlines03/0828-01.htm

http://www.democracynow.org/2004/4/1/blackwater_usa_building_the_largest_private

http://www.alternet.org/world/101012/pentagon_hands_iraq_oil_deal_to_shell/

http://www.newsvine.com/_news/2011/01/22/5897019-promises-promises-scrutiny-of-afghan-no-bid-deal

(8) http://www.opensecrets.org/pacs/industry.php?txt=D01&cycle=2010

(9) http://en.wikipedia.org/wiki/Boeing#Political_contributions.2C_federal_contracts.2C_advocacy

(10) http://articles.latimes.com/2011/mar/31/business/la-fi-wto-boeing-20110331

(11) http://reason.com/archives/2011/04/14/fertilizing-farms-with-tax-dol

http://reason.com/archives/2011/04/19/ending-farm-welfare-as-we-know

(12) http://www.rationaloptimist.com/blog/giving-money-lobbying-money

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