20 March 2016

Bypassing democracy

Jeff Madrick, reviews a book by Lee Drutman about lobbying in the US. Drutman  finds that business spends $34 on lobbying for every dollar spent by likely opponents such as labour unions and other interest groups. Drutman also briefly cites academic research showing that:
  • The stocks of the firms that spent the most on lobbying as a percentage of their assets beat market averages substantially.
  • The more firms lobby, the lower their tax rates. 
  • Lobbying has a positive effect on a firm’s return on equity compared to the market as a whole. 
  • Companies that lobby intensively are less likely to be detected for fraud than other companies. 
  • Companies with politically connected board members have higher stock market returns than others. How the lobbyists win in Washington, Jeff Madrick, 'New York Review of Books', dated 7 April
Big business is the major beneficiary then, of a system that rewards lobbying. On one side we have corporations and their friends in government; on the other, small businesses and ordinary citizens. When policymaking is overly influenced by lobbyists, government is failing in its duty to articulate the wishes of society as a whole. Democracy is undermined and the response from ordinary people, who aren't consulted about issues that drastically affect their lives, could be dangerous indeed. We see portents of such danger in the western world today.

Social Policy Bonds could do much to close the ever-widening gap between lobbyist-influenced government and ordinary citizens. Under the current system policymakers can get away with favouring their lobbyist-paymasters because making policy has become an arcane, legalistic, protracted process to which ordinary people have no access. Discussion is centred around points of law, detailed regulation, and the structures and funding of various bodies. Only people paid to follow the process have the resources to do so. This means lobbyists. A Social Policy Bond regime, however, would focus on outcomes: policy would be expressed in terms that ordinary people can understand. Broad social and environmental goals would be targeted, and the people who help achieve these goals will be rewarded.

Under a bond regime, government would do what it is good at - indeed what only government can do: articulating society's goals and raising the revenue for their achievement. It would have more time and energy for these activities because, by contracting out the achievement of these goals to the private sector, it would spend less time trying to achieve them itself or working out ways to word legislation in ways that favour lobbyists and the corporates that employ them. Big business might lose out. But ordinary citizens would gain. So too would democracy.

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