THE REAL POWER OF LOBBYISM ON THE ECONOMY AND POLITICS International Political Economy Frederic Lübbert Jacobs University Bremen The real power of lobbyism on real life politics and the economy The activity of trying to persuade someone in authority, usually an elected member of a government, to support laws or rules that give your organisation or industry an advantage.
(Cambridge dictionary n.d.) Lobbying is, in the US as well as in other industrialised countries like Germany, a fundamental part of the political landscape. Since the seventies however, the number of lobbyists has skyrocketed to an alarming level with ever growing numbers. Lobbying aids big firms and organizations or even wealthy individuals to increase their influence in politics and even law making. This is achieved through giving monetary incentives to politicians, parties, universities and research just to name a few of the fields lobbyists engage in.
In this essay I will shed light onto the sometimes-hidden figures and groups behind many different ventures and projects which slowly but surely are turning political freedom of the masses into an oligarchy. In this scenario, only a few people or companies would influence and dominate through financing, thus creating political scenarios and dependant politicians, while the vast majority of the population is basically stripped of real choices even though they still live in the same democratic structures as before. How much US-politics only relies on money can be seen on the example of Donald Trump, to whom lobbying has shown to be very useful in the 2016 presidential election and his subsequent political agenda. This also applies to the influence of families like Koch and Mercer as well as big companies like ExxonMobil and Monsanto.
Lobbyism and the economyEven though lobbyism is still as important to big firms as ever, the total numbers of lobbyists have declined over the years after the number peaked in 2007 to around 15.000 (Opensercrets.org 2017). However, many groups, e.g.
the website open secrets, think that only the number of actually registered lobbyists has deteriorated and not the real numbers of part time or so called ‘shadow lobbyists’. These shadow lobbyists do not register and are thus going unseen under the radar through bypassing the official registration and/or doing the job only on a part time basis. Another key issue about the work of lobbyists and lobbyism firms is that they do not have to declare and lay out what their position is on a certain topic, just the topic itself. This is just another loophole the companies take advantage of in their sometimes dubious ventures e.g. against the idea of man-made climate change (Metzger 2014).
Another alarming fact that lawmakers should be considering is, that lobbying actively makes a free market basically impossible through an inherent lack of competition. Big firms want to push for legislation that furthers their economic gain but not that of newcomers or already established competition. A good example of this economy crippling phenomenon is the fight of the US taxi industry against Uber, a car sharing app that has established itself rapidly through direct payment, good customer service and lower prices. The irony in this case is, that after Uber won the fight and could establish itself on a broad market level, it tried to deny direct car sharing competitors like Lyft the entrance into the market they themselves were tried to be hindered to enter in the first place. Competitions is not furthered as it should be in a free market economy, but is hindered by the big firms that try to either fight for their monopoly or to scare competitors out of the way in order for them to not lose profit.
This ongoing notion is not desirable for anybody except the firms themselves, which would ultimately lead (in most of the cases) into better service and lower prices.(Gillens & Page 2014),Influences and preferences of the general publicThis graph out of a research paper from the university of Cambridge (Gillens & Page 2014), clearly states that the preferences of the average citizens basically have no effect on the outcome of the policy change. In both graphs, the X-axis measures the predicted probability of adoption of a new law. The Y-axis measures the percentage of people favouring the proposed policy change.
In the first graph, the line is next to constant which means that no matter if the general public is fully supporting the law or fully against it, does not play a role. In the second graph however, one can clearly see that if the economic elites are against a certain law or bill to be passed in congress, it is most likely to be abolished or not passed. As shown, if the elites are for a certain law to be passed, the percentage or probability of the bill being passed is considerably higher than for the 90% of the population. Those two graphs clearly show the discrepancy and the obvious problems in the system. The few have much more power on real life politics than the majority of the population.
And even if the big companies cannot hinder a law being passed they however can effectively change the law in order for the initial idea of the law being completely undermined. This issue can be seen by the example of the Safe and Accurate Food Labelling Act from 2015 the Telegraph issued an article about. This act was introduced to clearly label genetically modified food for the customers in order for them to know if and when they are buying this modified food. In response to this proposed new law, big food and biotechnology companies such as Monsanto and Dupont stated that the labelling of food was unfair and would stigmatize the food they are producing.
The fight over this labelling of the food lead to a “compromise” as the firms call it. The customers can now find out if their food is genetically modified through a smartphone app which scans a QR-code on sticker on the food itself and tells them if it is, or is not modified. Clearly, this so-called compromise is yet another example of how firms can influence the lawmaking in a way that in real life nothing changes. The customers in a supermarket will hardy scan every item they want to buy before they are actually paying for it. Furthermore, people without a smartphone and proper knowledge of how to use these apps are being left to wonder (Milward 2016).
Another example is underpinning the fact, that out of the eight most aggressively lobbying firms between 2007 and 2009, seven saw their tax rates fall from 2007 to 2010 (Hacker & Loewentheil 2015). This once more shows that big firms can greatly influence what their future will look like only through lobbying and ultimately pumping money into their own pockets. The savings of the aforementioned firms were an estimated 11 Billion dollars, which if only due to lobbyism, would mean a return on the initial investment of 2000% (Hacker & Loewentheil 2015). The Koch brothers and the Hot Air TourThe brothers Charles and David Koch are two of the richest people in the US and the world having an estimated net worth of 96 billion dollars due to their family enterprise Koch Industries. It is the second biggest private company in terms of revenue in the United States and is involved in the chemical and oil industry.
The brothers have been politically active since the eighties and have contributed to more than 34 political clubs, foundations and think tanks, three of which they have founded themselves. The three institutions, namely the Cato Institute, The Heritage foundation and the Americans for Prosperity foundation (AFP) have, through the generous funding of the brothers, grown into the top tier conservative organizations in the US. The Kochs have, through their institutions, backed political figures, built think tanks and have either created or supported chairs in various universities. Through this, they push their agenda aggressively into the many different parts of American politics and subsequently into the economy. Their main, mostly conservative standpoints, are against higher taxation of big firms and the rich, higher environmental standards and financial regulation.
The Hot Air Tour is one of the examples of the Koch brothers almost solely funding a big campaign against “global warming alarmism” (Rutenberg 2014). The nation-wide campaign was held in more than forty cities in the US by the Koch brothers and other speakers which they reached by hot air balloons. The AFP president Tim Phillips stated that, since the idea of cap and trade was being discussed to be introduced in many US cities and even states, the American citizens would be burdened with massive tax increases and that the plans would cripple the economy for decades to come (NFP n.d.).
The cap and trade idea is a system that could effectively reduce greenhouse emissions through setting a limit (cap) for pollution and would give the enterprises engaging in the system the power to trade allowances. Those allowances are thresholds granting companies to emit a certain amount of greenhouse gases. In his speech Phillips stated that if the cap and trade legislation was pushed through it would generate a tax increase of 1.
2 Trillion dollars. This tax increase, as he put it, would be laid on the shoulders of the general public (AFP 2008). Furthermore, the source he used to back the numbers and allegations he named in his speeches, The American Capital Formation Foundation does not even exist.
Another organization however does exist, which is the American Council for Capital Formation (ACCF) and is ideologically surprisingly close to the non-existing source Phillips used. The ACCF has often times hindered and opposed green initiatives, and have received around 1.6 million dollars from ExxonMobil in the timespan of ten years (AFP).
After the Hot air tour noticeably failed, the Koch brothers and their supporters, have invested more money into campaigns against the idea of climate change than any other individuals in the world. Koch influence in the Trump administrationHow far the ties of the Koch brothers go into US politics and what kind of influence they subsequently have on new laws or on quasi vetoing a law can be explained by analysing the current administration under president Trump. Mike Pence, the vice president is closely linked to the Koch´s through their continuous donations. Moreover, the current Director of Legislative affairs under Pence was the director of the donation club Freedom Partners.
Michael Catanzaro, Trumps energy and environmental advisor is a former lobbyist for the Koch´s. The current minister for environmental matters Scott Pruitt, harshly denying man-made climate change, received millions of dollars of funding by the multi-billionaires. To further look into what kind of influence the Koch brothers have on the Trump administration, we can look at the Paris climate agreement Trump recently pulled out of.
Of course, he had to somehow manage to give evidence through numbers and facts, in order to make his arguably controversial choice credible. In his announcement on the climate accord and further speeches concerning the matter he used data to back his claims and the decision to not participate in the treaty. However, the vast majority of his data and numbers came directly out of the Koch brothers think tanks, namely the American Energy Alliance, the Competitive Enterprise Institute and the Heritage Foundation. Next to the aforementioned think tanks, Americans for Prosperity is the most powerful weapon of the Koch´s in order to further their influence. An organisation with presence in over 36 states and over 2.
3 million members (The Heritage Foundation). Additionally, Koch industries was also greatly influencing the election of 2008 where Barack Obama and Mitt Romney were fighting for the presidency. Through observing the top spenders in lobbying in the US in 2012, you can see the oil and chemistry company was on eighth place with roughly 20 million dollars in donations (Center for responsive Politics 2012). It is also evident that the only issues the Koch´s are actively lobbying, either directly or through their foundations and think tanks, in domains solely regarding the energy sector and taxes especially in 2008 (Mayer 2017). This could have been a sign of the Koch´s to influence US politics into a more conservative direction before the election.
The Mercers influence in lobbyismThe next example of highly influencing people in US politics through lobbyism and funding in other branches like think tanks etc., are Rebecca and Robert Mercer. Mercer is a very wealthy hedge fund manager and was, until recently, not involved in politics and never spoke about his political beliefs or standpoints. In a court case against him, a former employee described him as cold as well as that he measures the worth of a person by its personal wealth. Additionally, he supposedly claimed that it was a mistake to grant African Americans full civil rights in the sixties. Other former colleagues of his also stated that he has several conspiracy theories against the establishment, especially against Hillary Clinton (Newyorker 2017).
Since the threshold of money allowed to be donated to political parties and individuals involved in politics the numbers of political funding have skyrocketed. Effectively that means that wealthy individuals can just rapidly and radically buy their way into power even if they do not have the complex foundation and think tank structures and systems of the Koch brothers. The Mercer Family Foundation has directly funded companies and organisations which were directly responsible for some of the, discrediting of Hillary Clinton in the election of 2016 as well as handing out a donation of 10 million dollars to the right-wing news website Breitbart News. The Mercers also invested into the conservative company Cambridge Analytics (Newyorker 2017). This company uses Big Data in order to detect possible future voters and targets them through advertisements and other means to influence them into certain voting patterns.
This tool was also used to directly support the then candidate Trump. Lobbyism and climate changeThe involvement of big oil corporations and firms from other sectors does not stop at campaigns like the Hot Air Tour of the Koch brothers. In the following graph the engagement activity of firms is shown on the y-axis and the support for climate policies on the x-axis. The picture is clear, firms like Exxon Mobile or Shell are highly involved in policymaking although not being a rather big supporter of better climate policies.
An advertisement by Exxonmobil, published in 2000 in among others the New York Times calling evidence of manmade climate change “unsettled science” (Baxter 2000).(influence map n.d.)A study from 2002 claims, that the involvement of Exxonmobil and its partners was one of the main causes that the US did not ratify the Kyoto protocol (Hove et al 2002). Exxon also was one of the founding members of the Global Climate Coalition, which was made up of big corporations against the general notion of reducing carbon emissions (Banerjee et al 2017).
Mother Jones magazine reported that 2000 and 2003 Exxon gave around 8.5 million dollars to forty organisations which tried to disinform the public and political leaders through several campaigns thus leading into false information being regarded as facts (Mooney 2017). After the ratification of the Kyoto protocol only, Exxonmobil has given about 20 million dollars to organisations that support the notion of climate change denial (Farmer & Cook 2013). The European Union’s Problem with lobbyismOf course, lobbyism is not only an American phenomenon even though they still have the most active lobbyists and by far the most money in the pot.
The second biggest density of lobbyists as of right now is located directly in the heart of the European Union, namely Brussels. Around 30.000 lobbyists are currently registered in the EU, growing in numbers in the future. According to estimated numbers, up to 75% of the legislation is being influenced by lobbyism, be it by energy firms, Big Data or the tobacco industry (Traynor 2014).
In midst of the Crimean crisis with Putin’s Russia invading the Crimean Peninsula in 2014 and the Russo-European relationship in turn being difficult, other ways of generating and/or acquiring energy sources had to be looked into. Big energy companies were in turn very eager to use the uncertainty on the side of the EU through the offer to immunise it against blackmailing attempts from Russia. Fracking suddenly became a very attractive idea, at least on an economical basis, as it would have made the dependence of gas from Russia noticeably smaller.
An insider in EU lobbyism spheres stated that “In a nutshell the energy-intensive lobbies say they are not competitive, especially vis-a-vis the US, because of shale and the low prices there,” and “They argue that we’re much too focused on renewables and climate change and that we should be much more open like the US.” (Traynor 2014). Taking the Magritte group as an example, one can see that big corporations like EON, GDF Suez and Iberdrola, when joining forces in a group can apply a great amount of pressure on the European parliament. They spoke out against subsidies for renewable energies like solar panels and wind turbines because of overcapacities in the power supply which is letting too much energy being let out in the system.
The renewably generated energy is being prioritised in the grids and being sold to above-market prices of conventionally generated energy. This in turn is making existing thermal energy supply uneconomical to run and thus not sensible for firms not having invested in renewable energies enough (Euracity 2013). In the past, big firms like the Swedish company Vattenfall decided to quit the group and to work closer with other firms and the European parliament.
This shows that the Magritte group might not be advocates of non-renewable energies, but first and foremost their own economic gain not seeing any of the direct repercussions. ConclusionThrough the previous points, it has been shown hidden power of big companies and individuals on real life politics and decision making. As research has shown, the boundaries in which lobbyists can do business is too broad and thus lets the big companies and firms do too much damage without being held accountable for it. As of right now, companies and rich individuals can have such great influence over decisions and even whole countries, that it should be alarming at the least. In a world, where big tobacco companies sue countries like Uruguay for harsher tobacco labelling laws, where millions of dollars flow directly into climate change denial, and where former lobbyists still clearly advocate their old company’s standpoints e.g.
in the Trump administration, much has to change, and fast. The fact, that whole laws are being passed or not passed, regardless of the topic, as a direct cause of lobbyism is an issue that has to be addressed in the US just as well as in the EU, although the vast majority of examples of the bad side of lobbyism in this essay comes from the US. Even have insinuated that lobbyism altogether is a bad thing altogether is not true. Lobbyism steered in the right directions and adhering to stricter laws could actually lead into a brighter future for the world. With more involvement of big firms that actually want to change the world for the better should be openly advocated and encouraged. Firms like Tesla and IKEA are two of the few examples of big, successful companies that actively engage into fight against climate change.
The overall reality of these times is however, that solely profit-oriented lobbyism will, at least in the foreseeable future, be a big generator of legislation all over the world. Sometimes for the better, but most of the times for worse