Corruption, American style

Con men, swindlers and cheaters pay bribes. Sophisticates hire lobbyists because lobbyists get better, more lasting results while only rarely landing in the slammer. We know intuitively that bribery and lobbying are related, and there are reams of academic papers that try to draw the line between legitimate issue advocacy and corruption.

President Barack Obama isn't buying it. As he swore in his new staff, he banned them from future employment lobbying the White House, "for as long as I'm president."

Economists and sociologists don't tend to spend a lot of time arguing in favor of illegal activities like bribing bureaucrats, so their efforts tend to come down in defense of the K Street bandits. The common argument is that bribery happens in developing economies where the rule of law is questionable, while lobbying is a more civilized activity that brings economic benefits.

Bard Harstad of the Kellogg School of Management and Jakob Svensson of Stockholm University have approached the problem as one between developing and developed economies. But let's set aside the debate over third- and first-world corruption. Narco states, oligarchies, religious and secular dictatorships are ruled by graft because power and influence are traded in secret.

What's telling about the Harstad and Svensson paper is that in an open society like the US, our brightest minds are unable to draw meaningful distinctions between handing someone an envelope full of cash and flooding a senator's campaign war chest, except to point out that lobbying is far more effective. A briber wants a to circumvent the law. A lobbyist wants to change it.

The fact that laws affect everyone supposedly makes lobbying more legitimate, since the lobbyist isn't typically asking for special treatment the way a briber does. But maybe that's the problem. Someone who pays a bribe might be rich, powerful and dangerous, but they're also uniquely vulnerable. They open themselves to extortion by the corrupt official they're using, for example.

Harstad and Svensson write: "Promises by individual bureaucrats not to ask (or extort) bribes in the future are not credible, since such contracts cannot be written when corruption is illegal and because firms deal with different officials over time."

The lobbyist takes no such risk. The lobbyist's goal is to make the government official depend on them for financing and support in elections. A bribe works once. Cajoling or inducing a congressional representative to help get a law changed is the gift that keeps on giving.

In his book Knowledge and Decisions, economist Thomas Sowell defends lobbyists as people who have acquired a great deal of technical knowledge so that they're better informed than the general public about whatever issue they care about most. They then become, as Sowell describes, a powerful force in government because "reform through democratic legislation requires either 'public consensus or a powerful minority lobby.'"

Sowell defends this influence since it comes from knowledge fairly gained and deployed. But the power of the lobbyist is far greater than the power of the briber. A powerful lobbyist can get laws changed even if there's no public consensus to do so, and yet those laws still apply to everyone.

Former Secretary of Labor Robert Reich, now a professor at the University of California at Berkeley, doesn't make a distinction between the two activities. When asked by e-mail, "What's the real difference between me bribing a customs agent so that I can bring a banned substance into the country or me contributing money to a senator and then cajoling him into making the substance legal for import?" Reich answered, "Frankly, I don't see much difference. A bribe is a bribe. People authorized only to act in the public interest may not use their office for private gain. Period."

In the recently published Creative Capitalism, a discussion of corporate philanthropy and social responsibility, Reich argues that the only thing corporations can do to make life better for the people around them is to "refrain from flooding Washington and any other seat of government with so many lobbyists and campaign contributions so as to stymie democracy."

Bribery is easily regulated because we all know it's a crime. Somebody is trying to break a rule. Getting rules changed, on the other hand, is part of the democratic system and our feelings about lobbyists depends on who they're lobbying for. The novel Thank You For Smoking is a funny book because it's about the misadventures of an unlikable tobacco lobbyist. Make the main character a lobbyist for furry little baby seals and it's somehow less amusing.

When Obama first entered politics, he took money from lobbyists. He gradually changed his mind and when he ran in both the primary and general elections in 2008 he said he wouldn't take money from lobbyists. But he meant only federally registered lobbyists.

He had certainly taken money from interest groups that operated at the state level and he had taken money from people who lobbied for only one company, trade or interest group (such people are, in the Byzantine regulatory world of registered lobbyists, not technically lobbyists).

Obama's recent declaration that nobody on the White House staff is allowed to work on regulations or contracts that touch on areas where they had previously worked as lobbyists caused a minor kerfuffle because, of course, a couple of his staff picks do have some lobbying experience and, of course, they're best qualified to work in the areas where they worked as lobbyists. William J. Lynn III, who Obama wants to have working at the Pentagon, had been a lobbyist for Raytheon. William Corr, who Obama wants at Health and Human Services, had lobbied for Tobacco Free Kids.

The only way to remove lobbyists and their corruptive influence is for companies and interest groups to voluntarily disarm and work on building a public consensus in support of their causes or to elect and appoint people who are entirely incorruptible.

Obviously these will never happen. But perhaps those living in rich, Westernized nations should be grateful that political corruption occurs in the twilight world of lobbyists, where they can at least catch a glimpse of the action, rather than the midnight black deals struck daily in the poorer sections of the world.