Business and Government Relations in the United States

Corporations, Business Associations & Lobbying
Business and government relations are more extensive and more nebulous than generally understood. Far from being discrete entities, corporations and government contracting authorities are thoroughly entangled by financial obligation and personnel exchange. Government is at the same time patron, policeman, and pal to business.
The legal framework of business is not neutral, inherently favoring vested well capitalized interests. Businesses are completely reliant on government to protect not just the legal fiction of corporate personhood, but also corporate property, and contracts. Our system of courts and police are well designed to adjudicate contract disputes and property rights, and less well designed to protect people or determine where justice lies. Corporations rely on civil order, the police, courts and military to protect their property: and yet they do not pay the full value of its costs.
Time and again our military and intelligence apparatus have been used as the overseas contract enforcers for business. Though overseas investment is legal I see no specified constitutional protections that would require federal military action in defense of overseas capital investment. Though there is much praise for the ideal of “limited” or even no government at all, I note that no corporation at all, has relocated its headquarters to Somalia: though it is without government or law, these fifteen years past.
This complaint of restraint does not keep business from seeking further government aid, possibly in the same breath. The professional corporate manager class is well aware of the need to maximize return on investment (ROI.) Why meet regulations seen as too costly, when it is more cost effective to hire lawyers and lobbyists to overturn or undercut the offending regulations. Moral condemnation has limited utility, business people respond to the real world rules & incentives.
Business association lobbying organizations like NAM, USCofC, NFIB, the Business Roundtable, Quinn & Gillespie, and many other special interests groups exist for the sole purpose of advantaging current business leaders vis a vis labor and business newcomers. Lobbying, the cultivation of key political figures to gain relative advantage, defines the meaning and word corruption.
Business leaders, through various means including business association lobbying arms, and financial marketing outlets constantly decry the cost of taxation and regulation: perpetuating the myth that private enterprise is more successful and innovative than public. We have plenty examples of malfeasance and incompetence in business and government, but let’s remember that, Enron, Global Crossing, Liquidonics, Adelphia, Worldcom and others were private. And the Rural Electrification Authority, Tennessee Valley Authority, and the Manhattan Project were public. Furthermore basic research and invention have often come from public entities, while private entities make money by selling derivative products. Computers, air conditioning,
Yet, at the same time, they ignore the underlying and far reaching dependency that business has on government for its very existence. The laws of incorporation are an enormous boon for those who control capital either thru ownership or management or both. Incorporation protects one’s personal capital, limiting risk and liability to invested capital, and tends to obfuscate responsibility. This is the baldest legal chicanery, whose useful origin was to provide goods and services to the sponsoring government and its populace. Corporations have become nearly free of social obligation costs, regulation and taxation. And turning logic on its head, the corporate manager class find that what little is left of restraint and regulation is intolerable and therefore irrelevant.

Anti-Trust Policy
Anti-trust policy: originally intended as a consumer protection measure, has become cover for consumer rip-offs. Mergers and divestitures are where the gargantuan sums of money are made. The transaction is the thing, value, and production are additive, mergers and divestitures are geometric in their wealth transferring possibilities. The Sherman Act, which outlawed collusion and price fixing; the Clayton Act, which prohibited mergers that would be anti-competitive, are now applied to facilitate both. No real, solid, standard was promulgated and made to stick. And over time, oscillating from consumer protection and reason, to business promotion and unquestioning faith, we have finally settled on the latter. The original threat presented by trusts was briefly slowed by law and yet in this age, the descendant of the trust shelters beneath those same laws.

Industrial Policy
Industrial policy exists in America though we call it that or not. The EX-Im Bank, WTO, World Bank, IMF, Federal Reserve, trade negotiators and the IRS at least, affect and are affected by Industrial Policy. There is no rationality in the idea that relative advantage means it is cheaper to buy steel in Asia and ship it to Pittsburgh, than to make it in Pittsburgh. Incoherent industrial policy, corporate welfare vs. rescue and startup assistance; the government in its role as sole consumer of some goods creates a monopsony in that sector: armaments for example. This has distorting effects on government and business both. Access to government and its decision makers become vital. Scale and capital become vital for surviving unforeseen political issues that can arbitrarily cause contracts to be voided or languish without appropriations.
Businesses also rely on government for currency, a means of exchange that is preferable to barter. Business leaders have expectations of sound currency, sound government policies, at the same time they complain of the cost, though they bear only part, export jobs, and engage in currency speculation.
Business as supplier to the government can lead to dangerous and completely avoidable problems of national security. This doesn’t just mean outsourcing a secret military technology to a foreign sub-contractor, but any goods or services that could constitute a bottleneck or vital link, though it by itself may be cheap and simple technology. For example let us say that we have a hundred million dollar aircraft that needs a specific sort of fuel feed, not made here, for top performance. That can be a very vital yet cheap and easy to outsource components. If the supply is cut off without warning, what magnitude will the time, expense, and risk cost us compared with the initial added expense of ensuring the domestic non market choice, an asset we control, gets the contract.

Privatization
Privatization, of prisons, schools, defense technology, natural resource extraction, government sponsored scientific research, and environmental remediation programs have been of lesser effect largely because the government never owned extensive physical plant. Yet the government owns large swaths of land, and lets private capital exploit, with government underwriting the risk and business taking the profits. Decreased competition that results from laws and regulations that protect vested interest also deform democracy and competition. Privatization takes inherently governmental functions, and puts unelected corporate managers in charge. There is no means of redress except lawsuit. The Freedom of Information Act doesn’t apply to private businesses, even when carrying out contracted governmental functions, on property leased from the government. Privatization allows the government to hide the extent of its employment commitment; if we count direct and indirect federal employment the numbers are huge, yet uncoordinated. Success and performance not related.

Summary
The “market” is thought by some to preempt moral or social norms. For some reason the “market” is held with an almost religious veneration. Acquisitiveness and covetousness have become the highest virtue; a first order value. The plain fact is that we all accept limits upon our theoretical freedoms, financial or otherwise, to live in a settled, civilized society. We have generally agreed that murder, rape, theft, arson, and so forth are unacceptable, so to we have agreed to driving rules, health and sanitation codes, and boundaries of all kinds. Our liberty is certainly limited by laws against those things; we are the better for it. We all accept that there is a line between acceptable and unacceptable actions; though we cannot seem to agree where to draw the line. The placement of the line anywhere has costs. There are always costs, but who pays, when and where is payment collected; that is the rub.
If a river is polluted by industrial or agricultural activity, that is a cost transfer and subsidy from the downstream communities to the industrial or agricultural concern. This legal, foolish, and wasteful approach is viable because costs are not valued properly; law is not related to good sense, or even outcomes. Costs are not valued properly due to the legal framework, the rules & incentives created by man, not God or nature. Wastes of all kind are unharvested resources, derelict cars, boats and buildings have been under funded since disposal and use costs should be part of the cost structure. For example, every vehicle or construction should have a disposal tax, pollution tax, and road use tax applied at manufacture/construction. Properly capitalized costs and liabilities would allow for the rational matching of means to ends.
I suggest that outsourcing has a place. It could be useful for example in creating good service for the citizen/customer. Customer direct services could create a feedback loop, which includes industry standards from the contracting side and popular feedback from the customer/consumer side: professional competence combined with democratic authority.
The pros and cons are debatable, but the gains seem to accrue to vested interests and the risk are deferred, or transferred to the populace at large. The enumerated pros such as: a good standard of living, a pluralist society, and the safeguarding of our liberties are all good things, yet it seems a non sequitur to see business as their cause. The enumerated cons such as: the suppression of diversity, accrual of gains to the few and costs to the many, the corruption of the political process, and simple constitutionalism seem to logically follow and are very weighty to me. To these I would add lack of clear authority and responsibility, lack of reasonable means of redress, unprovable cost savings, and increased risk outside of the control of the contracting authority.

Conclusion
Outsourcing and privatization has been disastrous, leaving risk with the public and reward for the private sector. Business and government personnel obviously collude, to make money, to make easier their own jobs; to the detriment of all. The rules & incentives are all wrong, and to expect anyone to disregard them in their actions and decisions is implausible. The system is incoherent and conflicted, with the populace at large confused, angry somehow unaware that effect follows cause. Outsourcing, privatization, globalization and so on will continue. It will do so because the rules & incentives in place reward that exact behavior, and so far, no means of true review and reform exist. We would need a new government, new constitution, and a legislature willing and able to act. Not bloody likely.

Advertisements

2 Responses to Business and Government Relations in the United States

  1. Ken Larson says:

    I am a 2 tour Vietnam Veteran who recently retired after 36 years of working in the Defense Industrial Complex on many of the weapons systems being used by our forces as we speak.

    We have bought into the Military Industrial Complex (MIC). If you would like to read how this happens please see:

    http://www.vanityfair.com/politics/features/2007/03/spyagency200703

    Through a combination of public apathy and threats by the MIC we have let the SYSTEM get too large. It is now a SYSTEMIC problem and the SYSTEM is out of control. Government and industry are merging and that is very dangerous.

    There is no conspiracy. The SYSTEM has gotten so big that those who make it up and run it day to day in industry and government simply are perpetuating their existance.

    The politicians rely on them for details and recommendations because they cannot possibly grasp the nuances of the environment and the BIG SYSTEM.

    So, the system has to go bust and then be re-scaled, fixed and re-designed to run efficiently and prudently, just like any other big machine that runs poorly or becomes obsolete or dangerous.

    This situation will right itself through trauma. I see a government ENRON on the horizon, with an associated house cleaning.

    The next president will come and go along with his appointees and politicos. The event to watch is the collapse of the MIC.

    For more details see:

    http://rosecoveredglasses.blogspot.com/2006/11/inside-pentagon-procurement-from.html

  2. I agree that there is no conspiracy. A conspiracy requires planning, purpose, diligence, loyalty and honesty, which are typically in short supply in human societies. I agree that we have a systemic problem. I think business and government may already have merged for practical purposes. I’d like to change the system but voting is irrelevant, because there is no important difference between the parties. I suspect the system can go on this way for some time before collapse, and there is no guarantee that the subsequent system will restore constitutionality already lost, or even be better. We shall see. Thanks for your comment, please feel free to do so again.

%d bloggers like this: