There’s no point trying to deny it: General Motors and Chrysler are essentially nationalized industries. They are largely owned, financed and (at the macro level) managed by the federal government. So it comes as no surprise that some people, especially conservatives, are outraged that these government-owned entities are lobbying the same federal government that backs them. That outrage is misplaced. What looks like a vicious circle is actually a virtuous one—and exactly how things should work.
In a mixed economy, lobbying is an essential cost of doing business. Because we do not live in a truly free economy, government can interfere with business decisions at any point. Today your product may be free from government intrusion, the next it can be taxed, the day after it can be heavily regulated and the day after that it could be banned entirely. The government often makes such decisions after being lobbied by people who either don’t like your business or who see it as easy pickings for revenue to support their favored government program.
Therefore, lobbying is a vital defensive tactic aimed at avoiding extra cost. Unfortunately, it is often used as an offensive tactic, aimed at imposing extra costs, regulations and bans on competitors. A great example is the natural gas industry’s lobbying in favor of environmental regulation aimed at decreasing the use of coal, natural gas’s main competitor. Such offensive lobbying is often done in coordination with an advocacy group whose motives can be described as purely in the “public interest”—an alliance which Clemson University economist Bruce Yandle has termed “Bootleggers and Baptists,” after the strange bedfellows who worked together to defend alcohol prohibition.
Offensive lobbying is, well, offensive to the spirit of free enterprise. But, as I said, there is nothing wrong with defensive lobbying. Indeed, it is essential for our mixed economy to function. Lawmakers who might be swayed by offensive lobbying or even “Baptist-only” lobbying by advocacy groups need to hear the other side of each story. The voice of the market must not be shut out of the public square. Imagine what our food laws would look like if only anti-obesity interest groups were allowed to lobby, while restaurants and food manufacturers were legally gagged. A group of celebrity chefs might be the only thing standing between us and government control of our caloric intake!
That is why the voice of industry—even nationalized industry—needs to be heard in the halls of Congress. If more stringent Corporate Average Fuel Economy standards were to create problems for the government’s investment in GM and Chrysler, those companies’ managers need to be able to say so. Congress needs to take all relevant views into account when discussing legislation, and the more open the discussion the better. GM and Chrysler have a right to be heard.
Of course, there is always the possibility that an unscrupulous administration might use its power over a government-owned company to press Congress by compelling managers to lobby for its favored policies, regardless of what is in the best interest of the company. Yet were that to happen, lawmakers could expose such lobbying as detrimental to the public investment. Therefore, even this form of lobbying should be permitted, the better for the people to understand just what such an administration was doing.
While we continue to live in a mixed economy, with government interfering at whim and at all levels, we must continue to accept the reality of lobbying. To those who want to reduce the corrupting effects of business on politics, I say address first the corrupting effects of politics on business. Of course, one of the first steps to take in that direction is to put GM and Chrysler back into private ownership.
Iain Murray is Vice-President for Strategy at the Competitive Enterprise Institute and a contributor to OpenMarket.org.