How the economics of lobbying make democracy about more than votes

Money talks. 401(K) 2012, CC BY-SA

We like to think the essence of a democratic system is “one person, one vote”, with everyone’s ballot equally important. However, this system is under threat, and not just because our archaic political system means those in safe seats have little say, skewing the political debate towards the marginals. More concerning perhaps, and not just in the UK, is another increasing inequality which undermines our system of governance and seems to lead us down the road of one pound, one vote.

At the heart of the question of how powerful interests control influence at the heart of parliament we find the lobbyists. And here lies a simple question of economics. The trouble is that economics struggles to produce any viable answer, ultimately to the detriment of all.

In the UK the state of democracy is such that some feel disenchanted with the whole political system. International comparisons indicate we are one of the most undemocratic countries in Europe. According to the Democratic Audit 2012 report, the public have growing concerns about the level of corruption in politics and government.

Interested parties

This may be because many feel the power and influence which large corporations and wealthy individuals wield in the UK political system is increasing. And it is increasing through a network of industry and special interest lobbyists who seek out ministers and MPs of influence in a bid to bend their ear, and eventually their will.

According to the UK Public Affairs Council:

Lobbying means, in a professional capacity, attempting to influence, or advising those who wish to influence, the UK government, parliament, the devolved legislatures or administrations, regional or local government or other public bodies on any matter within their competence.

This seems pretty innocuous. We might well hope that our government is advised, and perhaps influenced, by experts. However, like everyone, even the most honest politician will tend to listen to the case which is put most loudly and most effectively. It follows that those who can afford the most persuasive lobbyists will have a disproportionate influence on policy. It is also possible not all politicians are scrupulously honest.

Angels with dirty faces? keltikee, CC BY-NC-SA

The size of the lobbying industry in the UK is estimated to be of the order of £2 billion; the finance industry alone spent more than £90m in 2011. It stands to reason; corporations will not invest that amount of money in lobbying if they do not expect to make back even more from the influence this gives them. It is that kind of clear logic that gave weight to David Cameron’s 2010 warning that lobbying held the seeds of the next political scandal.

A coordination conundrum

Classical economic ideology has little to say about lobbying because there simply is no market solution to the problem, as a simple thought exercise shows.

Suppose our friend, Moriarty, will gain £65 million if he influences government policies, but this will cost every UK citizen £2. Moriarty can afford to spend £40 million on lobbying and still pocket a sizable profit.

Now, if everyone wises up to Moriarty and tries to prevent the policy change, we will have to pull together to outbid him. However, it will be almost impossible to coordinate the population to fight the change as each person stands to save only £2.

And here is the essence of the lobbying problem. The lobbyists find it easy to coordinate their efforts, while the rest of us do not, and the costs of our coordinating outweigh the benefits we might realise. Therefore we can expect Moriarty, and all those like him, to exercise more influence through lobbying than we, the public, can ever hope to.

In practice, we often do not know of Moriarty and his plans. Therefore, as the public do not know who is saying what to whom (and for how much), it is almost impossible to counter the influence of lobbying.

Put your hand up. Incase, CC BY

In 2008, the House of Commons Public Administration Select Committee proposed a register of lobbying activity be established. This register, independently managed and enforced, would provide information on: lobbyists and the names of their clients; the past and current links between politicians, lobbying firms and their clients; and a list of those politicians being lobbied.

However, it seems reasonable to suppose that lobbyists are lobbying hard to prevent their activities being curtailed in any way. The recent Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act (2014), for example, has done little to curb lobbyists’ power.

What’s to do?

Perhaps, if classical economics has no solution, we might turn to the theories of political economy. As Daron Acemoglu said, “Economic power begets political power”.

According to Robinson and Acemoglu, such increasing inequality eventually leads to political instability; it is this which forces democracy on the existing power structure. In essence, their theory is that the establishment will concede as little power as possible, and then only when a lack of concession appears likely to erode its elite position.

If it is true that every nation gets the kind of government it deserves, then it follows that our engagement in the democratic process does not begin and end on election day.

As we have seen, the economic realities of lobbying are so compelling that the public will never win an individual battle on this policy or that; it will only be our vocal and sustained objections, through election campaigns and beyond, that might dampen the siren call of the lobbyists’ lucre.