A racket growing faster than bitcoin

Jean-Claude Juncker © Getty images
Jean-Claude Juncker: a man with expensive tastes

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 exposés 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.

  • FourTuna

    I think you miss the point on chlorinated chicken. I don’t suppose they do threaten health as Americans do not appear to be dying from their consumption. But the practice of using chlorine to make chicken carcasses fit for human consumption is because they have lower animal welfare standards in the US. This also means that their costs are lower so they could undercut our own farmers. This then means they could either reduce their own welfare standards to compete or just lose out. Which do you want?

    • thermalCat

      You & I wouldn’t buy the stuff, I suspect most brits wouldn’t either. Didn’t we have a similar situation with mechanically recovered meat a few years back?

    • FriarStuck

      Price is not the only metric that market participants compete on, and for you to present it as such is the sort of false Hobson’s choice that authoritarians and statists do when making the case for market intervention and central planning, which by the way, invariably make the very things being complained of, exponentially worse (as an example take a look at Soviet era environmental regulations if you don’t believe me)

      If the binary choice you pose was the only consideration, everyone would be eating slurry.

      Taste, texture, health, animal welfare, seller reputation, and freshness are all things, among others, that people deliberate over when purchasing food, and of which producers are well aware, and if a producers says otherwise then they are more than likely lobbying for trade protectionism and government intervention of some sort.

      Provided producers are forced to accurately represent their products i.e. the packaging is clearly labelled to indicate ingredients and other production methods (in this case chlorination), I see no problem with letting consumers make their own choices.

  • Cynic_Rick
  • LG

    I understand the North American lobsters were banned for health reasons because of a parasite their live lobsters carry. There was reasonable concern that the parasite would be carried over to European stocks. It seems an entirely reasonable concern. Isn’t this exactly what regulators should be doing?

  • MonkHabit

    Forget the chicken.
    The bigger picture?
    National lobbyists, unregistered, aka policy advisers, have used other avenues, especially when they masquerade instead as independent planning consultants.
    Local authorities, for example, are simply territory to be exploited.
    http://www.tescopoly.org/sites/default/files/images/Donald%20Henry%20Pages%2021-26.pdf