Vijay K. Mathur
Published in Standard-Examiner, March 19, 2011, Ogden, Utah
In governments, bribery is when someone pays, in kind or otherwise, for something of value from a politician or public official who willingly accepts or solicits payment (directly or indirectly) for public services and/or political favors. Bribery is mutually beneficial to both the giver and the receiver. Bribery breeds corruption and is a crime under the laws and 38 countries are parties to the Anti-Bribery Convention of OECD (Organization of Economic Cooperation and Development).
According to Wikipedia, Transparency International rated 22 countries in 2008 on the Bribery Payment Index on a scale from 1 to 10, where 1 means that bribery is an accepted norm and 10 means that "bribes are unknown." Even though the U.S. is one of the leaders in spearheading efforts to stamp out bribery and corruption around the world, its own rating on the bribery index is not very encouraging. The index for US was 8.1, and it ranked 9th where eight countries were less bribe-prone than U.S. The Foreign Corrupt Practices Act, enacted in 1977, prohibits businesses from bribing foreign officials to obtain business favors. However, the U.S. Chamber of Commerce is pushing to weaken the law, according to the website The Raw Story. On the annual Corruption Perception Index published by Transparency International, the U.S. is ranked 22 out of 91 countries; it is not an admirable showing.
Bribery is a hidden cost of doing business, and therefore it is passed on to the consumer in the form of higher prices. But it breeds inefficiencies because it directs resources to those who may not be able to compete in open market competition, and hence it adversely affects economic growth. Bribery results in general in the retention and enactment of regulations and laws contrary to the general welfare of most people, in corruption in governance, and it makes corruption contagious.
The question arises, is lobbying for favors from public officials and politicians the equivalent of bribery? Lobbyists are guided by their self-interest, just as in bribery. They represent business groups as well as non-business groups. Businesses lobby to gain contracts, secure market shares, tax breaks, subsidies and favorable regulations and laws. Non-businesses lobby to retain and/or pass laws and regulations, which may benefit only a selected group of people while imposing costs on the majority. But business lobbying dominates the total lobbying dollars. According to the Center for Responsive Politics, the top 20 lobbyists' spending ranged from $107.27 million (Pfizer Inc) to $738.8 million (U.S. Chamber of Commerce) during 1998-2010. In addition to spending on political campaigns, the total spending to lobby Congress and federal officials increased from $1.44 billion in 1998 to $3.49 billion in 2010. In 2010 there were 12,964 registered lobbyists spending on average $267,664 each, whereas the top 20 lobbyists spent an average of $26.23 million each.
Conceptually, lobbyists' spending on politicians and public officials is legally sanctioned bribery protected by increasingly stretched umbrella of the first Amendment of the Constitution; this protection is further stretched by the recent Supreme Court ruling in Citizens United v. Federal Election Commission. An outrageous example of lobbyist's influence is found in Utah where a legislator introduced bill SB231, which would have benefited his big donor at the expense of local zoning laws.
Congress has the power to regulate lobbyists' spending as well as legislators' and public officials' conduct at the receiving end, for example closing the revolving door between governmental services and lobbying. But so far lobbyists have the upper hand. Lobbyists argue that they perform valuable service to politicians and officials by providing issue-information. Even though their role in providing information is laudable, the corrupting influence of lavish spending by lobbyists overshadows their role as conveyers of information. For example the 2009 study by Deniz Igan, Prachi Misra and Thierry Tressel of the International Monetary Fund shows a significant link between spending on lobbying by financial institutions and high-risk lending and securitization practices. Such practices, motivated by financial gains, resulted in the most severe financial crisis and recession in recent memory.
The U.S. credibility in fighting a war on bribery and political corruption around the world is at stake if we do not "clean our own house." Perhaps an incentive system with penalties could focus more attention on receivers than on givers of financial favors; it is cost effective to monitor and discipline receivers. Like bribery, lavish uncontrolled spending by lobbyists to gain favors from politicians in the name of free speech has a corrupting influence on the politics and economics of free markets. It is more acute when there is lack of transparency in governance. Professors Jacob S. Hacker and Paul Pierson appropriately state in their book "Winner-Take-All Politics," "Markets are inevitably shaped and channeled by political forces, dependent on the rules that are created and enforced by those who control the coercive power of the state."
Mathur is former chair of the economics department and professor emeritus of economics, Cleveland State University, Cleveland, Ohio. He writes original blogs for the Standard-Examiner at http://blogs.standard.net/economics-etc/.