Mirko Draca examines the value of lobbyists’ political connections
The Revolving door
Our work examines the so-called revolving door of politics – that is, the movement of people from government service into lobbying positions. The issue is of growing concern, as lobbyists play an increasingly important role in political life.
In the United States, for example, the amount of money spent on lobbying at the Federal level doubled over the past decade. The influence of lobbyists – perceived or actual – has undermined the public’s confidence in political institutions, perpetuating beliefs that government is run by a group of tightly knit elite.
Our research sheds light on the way lobbyists can and do trade on their ability to provide access to power in Washington, where recent laws have sought to constrain their activities and to increase transparency of the way they operate. In particular, it offers potential policy insights for the UK, where existing laws and proposed reforms to address lobbying concerns stop well short of provisions used in a number of other developed countries, including Australia, Canada, and the US.
The research investigated how the revenues of lobbyists who had previously worked in the offices of a member of US Congress were affected when their former employers left office. This allowed us to look at the value of “what” and “who” because we evaluated situations in which knowledge did not change, but connections did.
We discovered that a lobbyist’s revenue falls by 24 per cent when his or her former employer leaves office. The effect is immediate and long lasting. The relative pay of congressional staffers-turned lobbyists depends on the seniority and committee assignments of the congressional politicians for whom they have worked in the past.
The better and more senior the connections, the higher the revenue premium. This is clear evidence that part of a lobbyist’s value is who the lobbyist knows – not just the what. Our study provides what we believe to be the first direct econometric evidence of the extent to which previous officials are able to convert political contacts into lobbying revenue. Our work quantifies the value of personal connections to elected officials for lobbyists in Washington, rather than relying on anecdotal evidence.
While we provide no direct evidence on the existence of a “payback” for lobbying clients, we believe that it is unlikely that the rents extracted by ex-staffers are politically neutral. The fact that corporate or interest group clients are eager to hire the services of individuals with a past history of working for powerful politicians suggests that they must believe that they are getting a return in terms of favorable legislative outcomes.
These high returns to lobbying also have implications in terms of staffers’ career incentives. The finding that a large portion of what makes revolving door lobbyists particularly attractive is perishable implies that staffers may have relatively short careers. once a connection to a powerful Senator has been established, a staffer may want to move into lobbying and cash in on this unique asset while it is still valuable – that is, while the Senator is still in office.
The findings have implications for the selection of public servants, who are well aware of potential post-government employment. our findings suggest that it may be a particular type of individual who may be attracted to public service: not necessarily somebody particularly able or ideology-minded, but somebody adept at the creation and maintenance of good relations that can be later converted into revenue. The research was possible because of progressive US laws to constrain the activities of lobbyists and increase transparency about the way in which they operate, aided by two public directories of government staffers, government salaries, lobbyists and lobbyists’ revenues.
Similar laws are in place in other developed countries, notably Canada and Australia. By comparison, the UK still does not have compulsory disclosure of lobbying activity and proposed reforms are much weaker than those enacted in the US. Importantly, in recent consultation by the Cabinet office, disclosure of lobbying revenues was not included in the proposals, while in the US the legislation requiring financial disclosure was enacted in 1995.
These proposals are being considered against a backdrop of scandals concerning the perceived, inappropriate relationships between lobbyists and government. In recent weeks, the president of the Royal British Legion resigned after boasting about his influence to arms contractors.
Last year, UK defence secretary Liam Fox resigned in the wake of controversy over influence peddling by his friend, Adam Werritty. Similar controversies also erupt in the US. The situation is perhaps unavoidable, given that money spent on lobbying federal officials has doubled in a decade. There, at least, these financial relationships are the stuff of public record. Here, by contrast, these relationships stay in the back wings of the political theatre. Except, that is, when controversy thrusts them onto centre stage.
About the authors
Mirko Draca is an assistant professor in the Department of Economics at the University of Warwick.
Jordi Blanes i Vidal is an assistant professor at the London School of Economics.
Christian Fons-Rosen is an assistant Professor at Universitat Pompeu Fabra.
This article summarizes “Revolving Door Lobbyists,” by Jordi Blanes Vidal, mirko Draca and Christian Fons-Rosen, forthcoming in the December edition of the American Economic Review. A draft of article is available here.