Monday, September 7, 2009

How influential are corporations

Robin Hanson's recent post on the issue the supreme court is deciding this week of whether corporations have the right to support political candidates, got me thinking about influence. Corporations have been prohibited from contributing to campaigns of federal candidates since 1907. The idea behind preventing corporations from contributing to candidates is that their substantial wealth will give them too much influence upon potential future candidates. This raises the immediate question, if corporations are so influential why did they allow such a law to be pass in the first place? The reason, I think, is because they don't have that much influence.

The reason corporations don't have too much influence is twofold. For one they are beholden to their customers. The hullabaloo over the Wall Street Journal column of John Mackey recently demonstrates that corporations advocate many political positions at the risk of losing customers. Those customers are heterogeneous, and a company will find it far too easy to offend a significant number of them. Secondly, corporations don't have uniform interests themselves. There will be in-fighting between them. Microsoft, Pepsi and News Corp do have similar interests. Sure, they all want to make money, but the ways they go about doing that are so dissimilar, that they will seldom agree on policy. The individual influence of some corporations will be offset by the individual influence of competing corporations.

This isn't to say that corporations don't have heavy influence. Of course they do. But so do many groups. In fact, the problem as I see it is not that there are some--such as big corporations, wealthy individuals, interest groups or wealthy nation--that have inordinate influence, it's that the politician their trying to persuade has sufficient power to attract these groups. If you assume that corporate heads have such unwieldy power, why is it that they go to Washington to get politicians to help them? If you want to eliminate the problem of people corrupting politicians, mitigate the power of federal politicians (smaller government, less taxes, fewer laws, etc) and then groups will find it less worth their while to bother.

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