Tag: Lobbying

How Enron Captured the Government

The WaPo has the details on an interesting poli-sci study. Two professors looked at over 250,000 e-mails from Enron, the failed energy giant and supposed poster child for campaign finance reform. Enron has often been cited as the fate that await our government in the wake of Citizens United. Enron donated millions to politicians, was a powerful lobby and had friends in high places. Surely that was why they were allowed to get away with so much awfulness for so long, right?

Not so fast:

When we think of lobbying, we typically think of Congress. But Enron devoted substantial effort to lobbying bureaucrats as well. Judging from the content of its e-mails, it was quite concerned with making compelling arguments to regulators. Enron’s employees e-mailed as if the company’s primary advantage in lobbying was its ostensible wealth of information about energy policy, not its campaign contributions.

To be sure, in some instances, Enron executives explicitly connected their campaign contributions with policy goals. In one such e-mail, an Enron executive notes that “Nick Lampson called and asked for a contribution. I committed to one without knowing about his vote on PNTR [Permanent Normal Trade Relations with China]. I will keep my word by making an individual contribution but will also communicate to him that in my capacity as Enron PAC chair i cannot authorize the PAC to make a contribution as a result of that vote.”

Yet even in this case, the contribution is a reaction to a request rather than a proactive attempt to win support. What’s more, the head of Enron’s Political Action Committee committed to a donation without knowing a home-state Member’s vote on one of Enron’s legislative priorities—and wound up making a personal donation anyhow. That’s not much of a quid pro quo.

A study based entirely on e-mails is limited. Doubtless, a huge amount of political influencing is carried out in person or on the phone. So I would be cautious about reading too much into this.

Nevertheless, the study is consistent for what has been found before. Enron made lots of political contributions, yes. But those contributions were the kind of sacrificial offering that all successful businesses have to make to Washington in order to keep regulators and legislators off their backs. We have seen this over and over again: companies that don’t want to play the Washington game — Microsoft, Apple, Paypal, etc. — are bullied until they do play it. They are buying influence. But they are also engaging in self-defense against a government that expects them to play ball once they’ve reached a certain level of success.

When it comes to affecting policy, however, their real efforts are being directed not against legislators but against the bureaucrats who actually write the laws (like the hundreds of regulations left unwritten by Obamacare and Dodd-Frank). This is what we call regulatory capture: powerful businesses making sure that even honest attempts to rein in their industry are blunted … at least for them.

I hate to keep beating a dead horse … actually, that horse ain’t dead at all … I hate to keep beating a live horse but this is what happens when you make government big and powerful and when you makes laws so complex that only a handful of people understand them. From Michael Tanner’s recent must-read:

You can decry the influence of lobbyists and money on politics all you want, but those who are taxed, regulated, paid, hired, or controlled by the government are naturally going to try to influence how they are taxed, regulated, paid, hired, and controlled. Nor should it be a surprise if these interests try to rig the game in their favor by, say, securing special tax treatment for themselves or encouraging greater regulation of their competitors.

You want powerful businesses and lobbyists to stop controlling our government? Stop making it worth their while.

Biting the Apple

It was inevitable. You remember the scene in Godfather II when Don Fannucci jumps on Vito Corleone’s car and demands a share of his business — just enough to “wet my beak”? That’s going on in Washington with Apple in the car and 525 Congressmen on the side board.

Every successful company finds out that it can’t just work on improving its products and serving consumers. Sooner or later, it’s going to have to deal with politicians and regulators sniffing around its business.

Yes, Apple — praised to the skies for being an innovator and job creator by Washington politicians when that narrative serves their interests — has become the latest target of the political class.

According to Politico, the daily newspaper of lobbyists and political consultants, industry giant Apple spent a mere $500,000 in Washington in the first quarter of 2012, compared to more than $7 million Google and Microsoft spent on lobbying and related activities from January through March of this year.

Then Politico lowers the boom: “The company’s attitude toward D.C. — described by critics as ‘don’t bother us’ — has left it without many inside-the-Beltway friends.”

The same things happened to Microsoft, Paypal, Google, Intel and many other tech companies. They started out wanting to just to business. And then Washington said, “I hear you and your friends are selling computers. But you don’t even send a dress to my house. No respect! You should let me wet my beak a little!” Now they play the Washington game.

Companies that don’t pay the protection money will find that there is some law nebulous enough to attack them with. Anti-trust is a common avenue since the definition of a monopoly is deliberately vague. And indeed, the FTC is now seeing if Apple is stifling competition. The Justice Department is looking at their e-book pricing. And the International Trade Commission is looking at their patents. If these don’t work I’m sure they’ll find some rule or law Apple has violated. The advantage of having so many thousands of laws on the books, as Harvey Silverglate noted, is that everyone is guilty of something even they dot every ‘i’ and cross every ‘t’.

This will stop the same it way it stopped with Microsoft and Google — when Apple buys a bunch of lobbyists and makes the customary tribute to Washington. This will stop when they let the 525 Don Fanucci’s wet their beaks in Apple’s success.

Don’t like it? Quit supporting big government. It is only the extent and power of our massive Federal government that gives them both their sense of entitlement and the ability to extort their share. There may never come a time when Washington doesn’t feel entitled to their tribute. But why must we make it so easy for them?