A racket growing faster than bitcoin
The best way to allow entrepreneurs to thrive is to slash onerous regulations, says Matthew Lynn.
Even when Jean-Claude Juncker is ordering from the wine list, €1.7bn still buys a lot of lunch. That is the vast sum spent by companies on lobbying the officials and parliamentarians of the EU, the website Politico revealed this month. The number of registered lobbyists has multiplied 35-fold in the last decade it is probably the only business that's growing faster than bitcoin.
Washington is even worse. It is estimated that more than $3bn is now spent every year on lobbying Congress and the White House. Westminster has become very similar, if only on a smaller scale. There are dozens of firms promising access to Parliament and Whitehall, and there have been plenty of exposs of how easily and relatively cheaply MPs can be bought.
That is turning into a problem for the economy. No one would deny that companies have a right to get their views across. But a lot of the lobbying is distinctly more sinister. It is in effect all about deliberately skewing the rules to favour incumbents. Lobbyists are invariably employed by big companies, or else by trade associations dominated by the largest players in a specific industry. No start-up in the history of the universe ever spent money on a lobbyist. They have better things to do with their time and money. The only companies that get listened to are the very biggest ones.
What are they looking for? Rules that will keep upstart entrepreneurs in their place, and prevent foreign competitors muscling into the market place as well. You can see that most dramatically in the EU, mainly because it has very few democratic checks and balances to keep the power of officials and regulators at bay.
It is an easy target for corporate special interests. The result? It is constantly passing regulations that protect big, established companies against new competitors from outright protectionism to thickets of labour and product regulation that only huge companies can comply with.
Deny us not our chlorinated chicken
A couple of recent examples are enough to make the point. Last year, the Swedes complained that their massive lobster industry was being threatened by cheap American crustaceans that were, it was alleged, spreading germs and disease among our more healthy ones. The EU promptly banned them, driving up the cost for European consumers.
American chlorinated chickens look likely to suffer the same fate, even though there is no evidence that they threaten health, and anyone who doesn't like the sound of them can buy an organic alternative instead. From anti-dumping rules, to crazy fines on the US internet giants, to layers of subsidy, the EU has become very skilled at backdoor protectionism. The vast sums of money spent on lobbying in Brussels makes it clear that much of that is being guided by big corporations.
You can see similar forces at work in the US, which now imposes a bizarre range of regulations and tariffs, and is one of the most regulated economies in the world. The result? Entrepreneurship has withered, and net company formation has dropped to zero. The same trends are at work in Britain as well.
We hear arguments made for clamping down on lobbyists on the grounds that they interfere with democracy. Maybe they do, and maybe they don't. But it seems certain that by restricting entrepreneurs and limiting competition they slow down the economy. That is just as serious. Their own industry might be growing, but it is only at the cost of making the rest of us poorer.