In this four-part series, we investigate preferential lobbying – what it is, why it matters, how and why it happens and how to stop it. Preferential lobbying is primarily wealth appropriation and rarely wealth creation. Every time a decision goes in favour of the wealthy it is to the cost of the less well off, which means preferential lobbying is a driver of inequality.
Preferential lobbying is where a large organisation secures its interests preferentially; that is, without concern for other interests and usually at their expense. This form has become ubiquitous – from Canberra to Washington, Brussels to Lagos – so much so that it appears as simply the way things are done, integral to the governing process.
But it was never thus. What we do here is to lay out the effects of preferential lobbying, why it matters, its means, and how to stop it. All large organisations with sufficient funding and political weight can do it – trade unions, national charities, public sector bodies such as the police, professional organisations. But it is business and industry that have by far the biggest impact on our lives and futures.
Preferential lobbying either starts or stops something. It could be a law, regulation, tax change, policy or other ministerial decision. Imagine you are running a utility where the regulator sets the prices that consumers have to pay for electricity. Your interest is in securing the highest price – the consumer’s interest is paying the lowest. You hire lobbyists who advise that an economic assessment would be persuasive.
Those consultants make the best case from the data – for example, a high price is necessary to fund vital investment in the grid. Without this investment, in X years’ time supply will be regularly disrupted. This is called the ‘credible threat’. It’s sufficiently daunting and has sufficient credibility to grab the attention of decision-makers. The regulator would look pretty dumb if and when the lights went out.
The lobbyists will then take this case to influencers – politicians and others who are always seeking a cause to champion. They fan the flames of the credible threat and then lobby the government internally. Minsters will either then lean on the regulator internally or via the media.
Some see all of this in terms of good and bad people. So business leaders may be deemed as ‘bad’ because they lobby. This is a mistake. They do what they do because that’s their job and because the systems of governing allow and, often, enable lobbying. Because business has become more and more powerful under the prevailing neoliberal economic system, so more and more have lobbied. They would be criticized by those to whom they are accountable if they did not.
Why it matters
How much does preferential lobbying matter? Rather a lot. Not every lobbied decision is wrong or not in citizens’ interests, but mostly they are.
One study found that for every dollar spent lobbying for targeted tax breaks, the return on investment was between $6 and $20. Leaving aside whether the term ‘investment’ is appropriate for what is near corruption, who pays? The public does.
It may be in higher prices, extra charges from the financial services industry, extra taxes for many and lower taxes for the very wealthy, genuinely unsafe products and services on the market with us all bearing the costs such as a fire for example, lower house building standards – you’ll pay more for heating, taxpayers money spent on industry subsidies serving no or negative social purpose, degradation in employment protections and pensions, and so on.
Preferential lobbying is a zero sum game, in that someone pays for someone else’s benefit. It is wealth appropriation and rarely wealth creation. Even in conventional economic terms, it is manifestly inefficient.
Next comes environmental degradation. As many are now understanding, treating the environment as a dumping ground and as an infinite resource comes at a very high price: indeed so high that we may not sustain the planet as our life-support system. The roll-call of polluting industries that refuse to pay the full cost of their short-term self-interest is lengthy – coal, oil, gas, mining, agriculture, fishing, air transport, shipping.
All of this adds up to preferential lobbying being a driver of inequality. Every time a decision goes in favour of the wealthy it is to the cost of the less wealthy. Ideology-driven policies, such as mass outsourcing, reduce the wages and conditions of workers. Their income is transferred to management and shareholders. When the pharmaceutical industry gets traditional medicines banned, income is transferred from small firms to big pharma.
Asymmetric information – when one party has more information than the other – in retail investment, for example, penalises the small investor and ensures the banking sector reaps higher profits. The company that is likely to build a project, regardless of whether there are more worthy public projects, often lobbies for specific infrastructure.
Where ‘quantitative easing’ (QE) after the 2008 crash went to the banks to distribute, the outcome was to increase share and house prices by about 25% in the UK according to the Bank Of England. Great, if your assets include shares and houses, bad luck if not. Commenting on the latest QE by the Reserve Bank of Australia, the chief economist at the accounting firm KPMG said one risk was the soaring price of houses and other assets, which ‘will further exacerbate the difference between the haves and have-nots in society’.
Preferential lobbying can be thought of as capital’s carriage. Money is creamed off, on average the rich get richer, the poor get poorer, wealth is retained in the same hands, acquiring it becomes next to impossible.
The same is true of power. The disappearance of democracy between elections is no coincidence as preferential lobbying has steadily built its hold over several decades.
For most decisions, you and I are not at the table. We are literally powerless. Token gestures to the public interest may be made, but the excluding decision pertains, unless a huge outcry or riot occurs. In these situations, it can be no surprise that ‘populism’ and populist parties have flourished. Where else can a disadvantaged citizen go for a slice of the cake? Not to an establishment well enmeshed in preferential lobbying or to established parties of government.
Day-to-day democracy has withered. Preferential lobbying is a scourge and the perfect bedfellow for neoliberalism. Indeed without it neoliberal economics would not have the hold it does.
Part 2 tomorrow: Money talks … loudly. How and why preferential lobbying happens.
The Hidden Power of Systems Thinking: Governance in a Climate Emergency (routledge.com)
Ed Straw is a visiting fellow at the OU’s Applied Systems’ Thinking in Practice group. He was chair of think tank Demos and relationship agency Relate and has been a specialist on government task forces. He was a consultant on both the Conservative and Labour UK government’s public sector reforms and a partner at PwC and Coopers & Lybrand. His research field is the design of systems of governing and constitutions founded on Systems Thinking.
Ray Ison is Professor of Systems at the Open University (UK), an Adjunct Professor in the Institute for Sustainable Futures at UTS, Sydney and a Fellow of the Centre for Policy Development. His book The Hidden Power of Systems Thinking. Governance in a Climate Emergency, co-authored with Ed Straw, was recently published by Routledge.
Comments
11 responses to “Preferential lobbying: the rich get richer, the poor get poorer (Part 1 of 4)”
But isn’t PwC just another bunch of oligarchs qualified to doctor the books of the banks and other members of the corporate oligarchy?
My experience of knocking the messenger comments, Stephen, is that you don’t like the message. Why? Are you a lobbyist?
Praying is asking God for a blessing and not necessary money or wealth but more on health and happiness; and asking more for others than yourself. Lobbying is asking a lesser God for the same thing, but the difference is when the lobyying is accompanying by an incentive (like political donation) to the lesser Gods and asking mainly for yourself. When the ordinary folks do not know where the next meal is coming from or the next job etc. be prepare for a revolution no matter what political systems the country is under!
A very welcome discussion. But what is the fine line between lobbying and corruption and has lobbying increased since the 1980s? Are these writers prepared to take on the influence of the church lobbyists in the education question and the resulting inequalities with which we are now confronted, not to mention the entanglement of religion with the State?
Lobbying definitely increased from business/industry since 80s.
But church lobbyists/influence had – i think – far greater sway then.
Our article is about all forms of preferential and therefore unequal lobbying/power, including the church, trade unions, the police etc etc.
Thanks. Excellent post. Look forward to more. Though I do have trouble understanding what is meant, and added, by the increasingly ubiquitous term ‘neo-liberal’. Regards
Neoliberalism
Neoliberalism or neo-liberalism is the 20th-century resurgence of 19th-century ideas associated with economic liberalism and free-market capitalism. It is generally associated with policies of economic liberalization, including privatization, deregulation, globalization, free trade, austerity and reductions in government spending in order to increase the role of the private sector in the economy and society; however, the defining features of neoliberalism in both thought and practice have been the subject of substantial scholarly debate. In policymaking, neoliberalism was part of a paradigm shift away from the prevailing Keynesian economic consensus that existed prior to the persistent stagflation of the 1970s.
Albert: thanks.
To me this looks a slippery mix of macro and micro boogeymen. e.g Keynesian v. austerity (macro).
Some readings of some of the micro ideas put their primary aim to be improving democracy/reducing corruption by increasing transparency of public decision making e.g the Government Trading/Business Enterprise ‘reform’ programs.
The misapplication of those ideas in policy – to make money like monopoly road tollways, or to add to bureaucratic power via change to ‘shareholder’ Ministers – is a problem recognised by sensible commentators. Its the road to hell being paved with good intentions.
Other ideas in the list are just plain greed dressed up in a snappy slogan.
Given the range, and taxonomy I am not any clearer about neo-liberal antagonists are commenting on/objecting to. I’d prefer to read about e.g. a trashing of ‘deregulation’ – which may lead to a discussion about appropriate objectives and means of regulation of particular activities.
Nor was I ever clear about the 70s-80s attempt to introduce a rigid microeconomic basis for macroeconomics.
As they say: ‘my bad’.
Thanks again.
Thanks Petal. For a reasonably detailed response to the connection/ symbiosis between preferential lobbying and neoliberal economics, our book is the place to go – sorry for the plug. One does feed the other – the two together (and more) have got us to the state we are in. Neoliberal economics are real – eg see Nancy Maclean, Democracy in Chains. I’m unsure where you are coming from: are you an apologist/beneficiary of prevailing economic system?
Mr Straw: thanks.
I’ll get onto the book a bit later.
I don’t profess to be an apologist for much. But do financially etc. benefit from the current economic system, as do many, when compared with some alternatives.
My response to Albert below may indicate my current ‘bads’, probably the worst of which is that the ‘economic system’ is not an end in itself. Open to change though.
In part they came from the bit of of my background of involvement in (and mitigation of) ‘attempts’ to treat Sydney’s urban railway as just a business – a modified UK model – and ‘regulation’ of urban transport.
In which ‘stakeholders’ used pleasing phraseology to acquire political and bureaucratic power.
What troubles me is: I dont understand what is being objected to in the use of ‘neo-liberal’ as a perjorative. Is it the current external governance framework (which i take to be the law for ownership, financing, regulation and accounting), the relativities and balance of elements, application/setting of particular elements, or application of define-measure-report-reward?
It seems a multitude of sins is placed under some umbrellas. And potentially some good too.
My recent interest has been in the potential abuse of (national) emergency powers. The emergency powers can up-end – in fact if not at law – present systems of governance. Much like changes to the relationship government-railway, supposedly aimed at betterment, were used for something quite different, hidden behind a cloak of terminology.
Regards
All true. Looking forward to their suggestions.