© The Financial Times Ltd 2016 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Last updated: March 2, 2012 10:46 pm
This winter, the Occupy Wall Street movement has been a lightning rod for Americans who feel angry about the status quo. But if Paul Volcker, the esteemed former Federal Reserve chairman is correct, it is not just Wall Street that deserves placards. These days, he likes to quip there should also be an “Occupy K Street” camp to protest against the power of the business lobbyists who work in Washington DC, along its (in)famous K Street.
Volcker should know. A couple of years ago, President Barack Obama invited Volcker into his financial reform team, where he launched a crusade to split up the banks’ proprietary trading businesses from deposit taking. This unleashed furious protest from K Street lobbyists hired by banks. As a result, the so-called “Volcker rule” may now be watered down – much to his regret.
But the issues around K Street reach far wider than the banks. Last week, Columbia Business School held a conference on the interface between business and politics, where Sharyn O’Halloran, a Columbia professor, revealed that businesses have recently been spending $3.5bn a year on lobbyists, double the level of a decade ago. As a result, there are now about 15,000 full-time lobbyists in Washington (using a narrow definition of the term), also a sharp increase from before. K Street is one place that has seen job growth, in other words, even as the economy ails.
Why? One reason is that government agencies are now reaching ever-more deeply into areas of business life, prompting companies to fight to “shape” – ie control – those regulations. And since the rules are often technically complex, they require lots of people to draft, understand or demystify them. But another issue is cost. To the outside world, $3.5bn might look a hefty sum; but as far as large global companies are concerned, it is not so expensive to hire lobbyists, or not compared with the costs of hiring top lawyers or investment bankers.
And the returns can sometimes be striking. John Podesta, head of the Centre for American Progress, a liberal think tank, reckons that the energy sector has sometimes enjoyed returns of 3,000 per cent on its lobbying investment in recent years (when you compare the extra profits that energy companies make when an oil sector rule is changed, say, versus the cost of lobbying to get that rule change). And while those cases are extreme, the brutal fact is that spending money on lobbyists often pays off. More important still, the costs of not doing it look scary, particularly when groups, such as trade unions, are also lobbying. It is thus no surprise, then, that the biggest lobbying spend is in finance, health and energy.
This lobbying arms race, of course, appals men such as Volcker. It also horrifies many voters; and doubly so since it comes as wealthy Americans – and business leaders – are finding new ways to shape political races (just look at the debate about the so-called “Super Pacs” in the 2012 race). But even amid this growth of K Street there is a paradox: if you talk to academics and business leaders – including those at Columbia last week – you will also hear voices complaining that there is still far too little corporate involvement in politics – not too much.
More specifically, although companies are spending to lobby on particular narrow issues that affect them, they are not generally getting involved in the truly big policy debates. Erskine Bowles, who has championed the cause of fiscal reform, and is a co-chairman of Obama’s Commission on Fiscal Responsibility and Reform, has recently appealed to corporate leaders to support bipartisan initiatives to tackle America’s vast debt. But, thus far, relatively few corporate leaders have been eager to stick their heads above the parapet, either because they are scared of attracting criticism, or too darn busy running their own affairs – or, in some cases, too “global” to feel that they really have enough skin in the game in America, to make it worth their while.
Thus, while those 15,000 lobbyists are hyperactive in defending micro issues, companies are sitting on their hands on the macro stuff. And that schizophrenia, many observers say, is a tragedy; after all the American political scene is beset by debilitating gridlock and weak leadership – and thus may benefit from business brains.
Is there any solution to this? The Columbia event tossed some interesting ideas in the air. Some company leaders, such as Lewis Kaden, vice chairman of Citigroup, said that they are trying to reorientate their internal “government relations” departments to embrace big policy issues. Glenn Hubbard, dean of Columbia Business School, called for universities to act as a “neutral” meeting point for business and politicians to talk. Some speakers also called – quite sensibly – for more transparency. Companies could disclose their lobbying activities to shareholders, and politicians reveal their key corporate backers. But don’t expect to see that happen soon; least of all in an election year. On the contrary, as more money enters politics, the consensus is that K Street will continue to expand; albeit beyond the gaze of voters. And (hitherto) those Occupy tents.
Copyright The Financial Times Limited 2016. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.