Capitalisn't

How Lobbying Led to Crony Capitalism, with Brody Mullins

Episode Summary

As the United States elections draw near, everyone is wondering who will take control of Washington next. In this week’s Capitalisn’t episode, Pulitzer Prize-winning reporter Brody Mullins reveals how the real winner will be neither Democrats nor Republicans. Rather, it will be the lobbyists. Mullins is the co-author (along with his brother Luke, also an investigative reporter) of The Wolves of K Street: The Secret History of How Big Money Took Over Big Government. Brody joins Bethany and Luigi to discuss how corporations ranging from Genentech to Google participate in the invisible but massively influential lobbying industry to bend government policy toward their favor. Together, the three trace the roots and evolution of political lobbying from the 1970s to now and explore how it penetrates and leverages other spheres of society to abet its operations. How are academia and the media complicit in this ecosystem of influence operations? How has lobbying adapted to the changing attitudes of Americans towards Big Business? How might it change under either a Harris or Trump administration and beyond?

Episode Notes

As the United States elections draw near, everyone is wondering who will take control of Washington next. In this week’s Capitalisn’t episode, Pulitzer Prize-winning reporter Brody Mullins reveals how the real winner will be neither Democrats nor Republicans. Rather, it will be the lobbyists.

Mullins is the co-author (along with his brother Luke, also an investigative reporter) of The Wolves of K Street: The Secret History of How Big Money Took Over Big Government. Brody joins Bethany and Luigi to discuss how corporations ranging from Genentech to Google participate in the invisible but massively influential lobbying industry to bend government policy toward their favor. Together, the three trace the roots and evolution of political lobbying from the 1970s to now and explore how it penetrates and leverages other spheres of society to abet its operations. How are academia and the media complicit in this ecosystem of influence operations? How has lobbying adapted to the changing attitudes of Americans towards Big Business? How might it change under either a Harris or Trump administration and beyond?

Episode Notes: Luigi mentions the transformational work of one figure in American politics who fought back against lobbyists’ substantial influence: consumer advocate Ralph Nader. Revisit our prior conversation and episode with Mr. Nader.

Episode Transcription

Brody Mullins: From 2007 to now, there are roughly the same number of registered lobbyists. There were 11,000 or 12,000 back then, and there are 12,000 or 13,000 registered lobbyists now. That’s in part because people are not registering, but it also is that lobbying has changed.

Bethany: I’m Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Luigi: As the elections approach, everybody’s thinking about who is going to govern us next January. We at Capitalisn’t already know the answer.

No, we’re not psychic, but we do know that corporate lobbyists will take over. Democrats or Republicans, the ultimate decisions are not made by the elected representatives, but by the enormous influence machine that operates in Washington.

Bethany: To explain how Washington really works, to guide us in understanding what has become a gigantic and incredibly influential—although all too often invisible—industry, we decided to ask Brody Mullins, an investigative reporter, a Pulitzer Prize-winner, and the co-author with his brother—and, as an aside, writing a book with one’s sibling? Oh, my—of The Wolves of K Street: The Secret History of How Big Money Took Over Big Government.

Luigi: The Mullinses start their analysis in the 1970s, when Washington’s center of power began to shift away from elected officials to a handful of handsomely paid operators. As they write, they follow three lobbying dynasties: one Republican, two Democrat, over the critical period from the 1970s to today, when the modern lobbying industry was created, corporate interests came to power in Washington, and the nature of our economy was fundamentally changed.

Bethany: Under the new rules introduced in 2007, more than 3,200 lobbyists simply stopped reporting any efforts to influence Congress or the administration. No, these influence peddlers hadn’t retired from the profession. They’d simply stopped registering as lobbyists. As it so often turns out, new rules simply created loopholes.

In a telling example that the Mullins brothers highlight, Genentech’s advocacy budget ballooned to $50 million, yet only $5 million was spent on traditional lobbying activities. The remaining $45 million was for public affairs, grassroots, polling, data analytics, and other tactics that fell outside the technical definition of lobbying. On account of the gaps in the regulation of K Street, none of this $45 million shadow lobbying budget had to be disclosed to the public.

Luigi: But the game changed again in 2011, when traditional business sponsored the Stop Online Piracy Act, also known as SOPA, targeting Americans who use the internet to illegally download or share music. That would have been devastating to platforms like Google and Facebook, which would have been accountable for what their users did.

A broad coalition of politically connected corporations, who were losing out due to online piracy, spent an outstanding $90 million into lobbying on behalf of the bills. By the summer of 2011, passage seemed all but assured. But they played the old inside game.

Then Adam Kovacevich, a senior member of Google’s Washington office, figured out how to play the new outside game. Think local seminars helping to create websites for small businesses, which, of course, has also helped Google curry favor with politicians in those areas.

He changed Google’s opposition to the antipiracy legislation from a DC-focused lobbying push into a coast-to-coast political-influence effort that had a simple slogan: “Don’t kill the internet.” It was like a presidential campaign. It was a stunning success, and lobbying started to be done like political campaigns.

Bethany: Then arrived Donald Trump, who arguably was elected in part due to the success of the lobbyists, the Mullinses chronicle, in undermining protections for workers and creating a sense that the corporate elite were out for themselves. Of course, the advent of Donald Trump made lobbying change once again.

But we’re getting ahead of ourselves. We need to bring in our guest. Brody, welcome to the show.

When you begin talking about the history of lobbying, you talk about the Powell Memorandum. You and Luigi are agreed on the importance of the Powell Memorandum. But it struck me, in reading about the Powell Memorandum, that it was ideological. It wasn’t so much cynical. It really was a genuine belief that this was what was in the best interest of the country. How do you think about how lobbying grew up to what it is today as that blend of idealism and cynicism?

Brody Mullins: I do believe that Lewis Powell and companies and corporate executives in the 1970s felt like they were getting their butts kicked, and they were. Companies at the time didn’t feel like Washington and the making of laws and regulations was something that they were supposed to be involved in. They thought that’s something that the government does, and their job is to run their businesses.

Lewis Powell, among others, told people: “You’re getting your butts kicked. You’re losing money. You’re spending too much money on compliance costs. Too much of your money is going to Washington because you are not representing your own cause in Washington, and therefore, you need to, like any business, invest in your problem.” They saw the government and the growth of government as a problem, as something that was impacting their industries.

I think this is interesting, as someone who’s covered lobbying for 20 years. At first, these companies were trying to beat back new regulations or change regulations subtly, so they weren’t as harmful to industry or businesses as they were first intended.

Companies then realized: “Hey, I don’t need to sit back and just battle new regulations that are coming. I can proactively go on offense, hire lobbyists, make friends in Washington, and create rules and regulations that harm my competitors.”

Companies now are increasingly coming to Washington to create rules and regulations to screw their competitors. That, I think, is going over the line. I think any free-market capitalist, any free-market Republican, would say: “That’s a problem. That’s wrong.”

In fact, we’ve seen this increasing populism in the Republican Party. My theory is that it stems from this, that real, conservative, free-market Republicans think the companies should battle it out in the marketplace and let the best product or the best technology win. They don’t think it’s right to spend millions of dollars on lobbying campaign donations to change the rules of the game to get an advantage.

That’s what a lot of companies are doing right now, and that’s why I think we see a lot of Republicans fighting against corporate America and battling even the US Chamber of Commerce, who they see as the epitome of using Washington to gain an unfair advantage in the marketplace.

Bethany: Do you think there are any genuine free-market capitalists left, or has the rise of lobbying completely corrupted that on both sides, such that all we have is crony capitalism? If there are any left, where are they?

Brody Mullins: Yeah, that’s a terrific question. I feel like, unfortunately, in the corporate lobbying world, the way the game is played is to use Washington to gain favor in the marketplace. I can only think of one company that is successful that has not gotten involved in that type of lobbying, and that’s Apple.

What’s so strange to me is that so many companies—Google, Amazon, Facebook, Microsoft in the tech space—spend so much money on lobbying and influence—more than any other industry, by the way. But Apple, the biggest company in the US, the most successful, with all these employees, they have a tiny, tiny operation in Washington, and maybe that’s worth a second book. I don’t know why it is that Apple is able to get away with it when everyone else is.

Anyway, back to the question. Companies feel like in order to be successful in the marketplace, you have to be successful in Washington. We have a couple of chapters in our book on the rise of Google and how Google went from having no lobbying operation in DC to having the most powerful in Washington. Washington is an important part of profits and an important part of business growth.

Bethany: What, out of all the wonderful stories that you chronicle in the book, was the most shocking one to you? Or, after all these years of covering this, is there nothing that shocks you?

Brody Mullins: Yeah, the story I liked the best—or maybe the story I liked the least—is the story of Evan Morris, the lobbyist for Genentech. He was a young, up-and-coming lobbyist. He was in his late 20s. He was running this huge lobbying campaign for Genentech’s predecessor, Roche Pharmaceuticals, the Swiss pharmaceutical company.

This is the mid-2000s, and there were stories in the media about the avian bird flu killing some people overseas. This is before the real pandemic hit the US, and Evan Morris saw an opportunity to make money for his company by promoting fears that the avian bird flu was going to come to the United States and kill thousands or millions of people. He started paying conservative bloggers and conservative media and liberal bloggers to write stories that stoked Americans’ fears about the avian bird flu coming to the US.

We all sort of remember that there were some stories about that back in the media in the mid-2000s. Anyway, it turned out he was behind that. Those stories worried regular Americans, who wrote letters to their members of Congress. In the fall of 2007, I believe—maybe it was 2006—32 Senate Republicans and Democrats wrote a letter to the Bush administration saying: “Hey, this avian bird flu could be a big problem. Let’s create a stockpile of remedies or treatments for the avian bird flu.”

The Bush administration agreed and created a $2 billion stockpile of remedies for the avian bird flu. Then it turned out that Roche, who had funded the whole campaign, were the only makers of a remedy to the avian bird flu. They make Tamiflu, so the government turns around and buys $2 billion worth of Tamiflu, all because Evan Morris, their top lobbyist, promoted this fake pandemic.

What does Evan Morris get out of it? Well, he obviously got a huge bonus and a raise, and he’s driving Porsches around and becomes a big star. But the whole thing was fake.

Bethany: It’s astonishing.

Brody Mullins: Somewhere in Washington, we could go find a closet that’s stuffed with $2 billion worth of Tamiflu.

Luigi: Unfortunately, it did not work for COVID. Otherwise, we could have recycled it.

I heard you criticize the academic literature on lobbying. Now, I’ve not written on lobbying, so you’re not criticizing me. It’s not a personal defense yet. After your book came out, you wrote a series of articles in the Wall Street Journal about Joshua Wright. Can you tell our listeners, if they’re not aware, what is contained in those articles and what you learned about the role of academia in lobbying?

Brody Mullins: One of the leading Google and tech-funded academics is named Joshua Wright. He is a leading proponent in Washington of a less-vigorous enforcement of antitrust laws. He’s a former Federal Trade Commissioner, but he’s really best known as a law professor at George Mason University. He gained favor in Washington over 10 or 15 years as a real champion of getting the Federal Trade Commission and getting the Justice Department to not enforce antitrust laws.

It turned out he was funded by the tech industry, and really by Google, for much of that time. Google would fund some of the academic institutions that he was a part of and that he ran, and they also hired him as an attorney on the side. Some companies would hire him to do academic research, as well as write economic briefs on matters.

Here’s the guy who walked around wearing the hat of, “I’m a professor at George Mason University, and these are my opinions.” As an academic, members of Congress and people at the Federal Trade Commission really valued his opinion. They thought he was a pretty smart guy who brought a good viewpoint to the antitrust policy fights.

But in fact, he was paid by the tech companies to support those positions. He made $400,000 a year working for George Mason University, which I think is a pretty good salary for an academic, but he was making $2 million on top of that from tech companies. At the end of the day, he was really more of a tech advocate than a law professor, but he used his credentials as a law professor to advocate for his corporate clients.

Companies use academia, and the tech industry uses law schools, to shape the intellectual debate on important issues like copyright and online privacy and antitrust. In order to do that, they fund research that amplifies their points of view, which is the same thing that the pharmaceutical industry did years before at medical schools and what the tobacco companies did, funding medical research that supports their point of view. This is just an arm of lobbying.

Bethany: One of the few academic studies you seem to like—correct me if I’m wrong—shows that the most likely opponent of every lobbying effort by business is lobbying by another business.

Brody Mullins: Absolutely.

Bethany: The old Washington saying goes, “If you’re not at the table, you are on the menu.” Does this mean that consumers are always the ones on the menu?

Brody Mullins: Unfortunately, you’re exactly right. Big lobbying fights are not company against environmental group or company against consumer groups, although those happen once in a while. The lobbying fights that I cover are company against company.

Look at Google. Google is not out there operating on its own. There’s a whole handful of companies—big US companies, Microsoft, Oracle—who are using the government to battle Google. Wall Street companies fight each other. It’s the big banks versus the medium-sized banks; the community banks versus the larger banks. In every industry, it’s company against company.

We quote a professor who did his own study where he interviewed, I think it was 70 top corporate lobbyists in DC. He said: “Hey, in your day-to-day life, when you’re out there working for your company, who is your opponent? Who are you fighting against?” Not one of them said, “A labor union,” which is really stunning. Companies are the only people at the table, and consumers are the ones being served.

Luigi: I think that lobbying is a much broader game than we often describe in academia. I always thought that if you look at the numbers that Google reportedly spends in lobbying—what is it, $30 million a year?—in the grand scheme of things for Google, they probably spend more on free food at the cafeteria than on lobbying. It’s a rounding error for Google. But you are saying this is really nothing by comparison to the entire ecosystem of influence activity.

You present this example in which Genentech’s advocacy budget was $50 million, but only $5 million, so one-tenth, was spent on traditional lobbying activities. The remaining $45 million went to public affairs, grassroots, polling, data analytics, all the other stuff that is really, really important to lobbying, but it doesn’t show up in lobbying statistics. How pervasive is this phenomenon? Is it just Genentech, or is it everybody?

Brody Mullins: Great question. You’ve passed the test of whether you read the book or not, if you were able to find that stat. That’s one of my favorite stats because one of the few rules we have is under the Lobbying Disclosure Act that says that if you are a lobbyist, you need to disclose your activities. You need to register as a lobbyist.

The problem is, to be legally considered a lobbyist, you need to spend 20 percent of your time or more actively talking to members of Congress, their staff, or agency officials in order to influence public policy. What has happened, as the term lobbyist gets a bad name, is that lots of people who are lobbyists don’t want to be known as lobbyists. So, they simply don’t register. They say that they’re spending less than 20 percent of their time trying to influence legislation. That’s a pretty easy thing to do because lots of lobbying is preparing letters, sending emails, going to lunch with people, getting new clients, going to fundraising events, lots of things that are not lobbying.

From 2007 to now, there are roughly the same number of registered lobbyists. There were 11,000 or 12,000 back then, and there are 12,000 or 13,000 registered lobbyists now. That’s in part because people are not registering. But it also is that lobbying has changed.

Lots of successful lobbying campaigns are not about talking to a member of Congress and trying to get them to do a favor for you or add some sneaky provision into the law, but rather going out and talking to constituents and talking to business groups and talking to civic organizations and getting regular constituents and voters to support an issue that a company supports.

Members of Congress will do anything they can to get re-elected. That’s where that great Genentech stat comes from. This guy, Evan Morris, the head of Genentech’s Washington office, had a $45 million total budget. Only $5 million of that was spent on what we consider to be lobbying, and $45 million was spent on the other topics that you just mentioned, which were all geared toward getting constituents to put pressure on members of Congress to support legislation backed by Genentech.

Bethany: Speaking of influence, one of the stories you tell in the book—which I, of course, found very jarring—is the role that the Washington Post played with that editorial opining that attempts to limit the amount of sugar Americans could eat—which, of course, in retrospect, especially, was exactly right—was basically the imposition of the nanny state.

How do you think broadly about the role that journalists play in this ecosystem? You sit in an interesting place because you write about the lobbyists themselves, but most of us are the targets of lobbyists. Do we even know that we’re being used when we’re being used? When we’re being used, are we complicit in it and cynical about it?

Brody Mullins: In my day-to-day life, I want to say that at least half of the stories that I get are generated by companies or lobbyists who have an interest in the stories that I’m writing. Now, I have to go and make sure the information they’re giving me is correct. Stories written in the inside-Washington publications, the Politicos and the Roll Calls and The Hill newspapers, Axios . . . I mean, the list goes on. Those publications are read religiously by members of Congress and their staff. And those reporters need to write articles once a day, twice a day, three times a day.

If they know a lobbyist or someone working for a company who’s giving them tips on stories about legislation that’s going to pass or legislation that’s going to fail, or this industry’s up or this industry’s down, those are stories that they’re going to want to write because they can do them pretty quickly.

The media, especially the inside-the-Beltway media, really is used every day by lobbyists to advance their own agenda. That is very rarely written about. We devoted a couple of chapters in our book to try to show that side of it.

It’s not saying that reporters are doing anything wrong. None of the reporters were intentionally trying to write a story that helps a company. But a good story is a good story, and sometimes a good story hurts a company. Oftentimes, what we found is that those stories are generated or produced, kind of planted, by the opponent of those companies.

Bethany: One of the ways I read your book is this: “Every good intention backfires.” Lobbyists are like kudzu. They just spread and grow stronger and grow more powerful, no matter how we try to chop them off.

You show how the post-Watergate reform backfired, and similarly, how the passage of McCain-Feingold in 2002 made lobbyists more, rather than less, important. You quote Tony Podesta saying, “Money will always find a way around.”

Do you think there’s hope, or is there no hope? And if you were king for a day and could do one thing to blunt the impact of lobbyists, what would you do?

Brody Mullins: I think that there’s no way to limit money in politics. Money is protected by the First Amendment now, and speech is protected by the First Amendment. I don’t think you can rein in the influence of companies, but maybe we can figure out a way to make it a fair fight, to give consumer groups more influence.

I think one of the things that regular American consumers need to do is they need to come together and talk to their members of Congress because right now, companies have all the money and they have all the influence, and they’re talking to members of Congress. But at the end of the day, if a member of Congress wants to get re-elected, and therefore needs the support of 51 percent of their constituents, they need to hear from constituents. They will do what a majority of their constituents want, and more regular Americans need to contact their members of Congress.

In the McCain-Feingold 2002 campaign-finance reform, the law was changed to say that companies can’t give unlimited sums of money to political parties. Prior laws under Watergate have limited the amount of money that an individual can give directly to a candidate, and that means that you or I, or anyone listening, can only write a check of a couple of thousand dollars to a member of Congress.

What lobbyists do, though, is that they know hundreds, if not thousands, of business executives who can write those checks for $1,000 or $2,000 or $3,000. What they do is they go to their friends or their colleagues or their clients and say, “Hey, if a hundred people can give me $1,000 each, then I, the lobbyist, can go to a member of Congress with a big check of $100,000 to help that member get re-elected.” You’re exactly right, that gives the lobbyist influence with that member of Congress forever because they’re a major donor to their campaign.

That’s another unintended consequence of the law. I don’t think it would be fair or right to say that individuals can give an unlimited amount of money directly to a candidate. But what we have right now is . . . The system we have now is the political parties, which should be the dominant force in elections, are limited in how much money they can raise from corporate PACs or from labor unions or individuals. But billionaires are not limited in how much money they can give to what are called super PACs or outside campaign groups that run shadow campaigns on behalf of candidates.

Bethany: One of the things that has struck me is that it can be awfully hard to figure out who’s behind certain groups. I wrote about, for instance, the battle to try to ban surprise billing, and one of the big groups that managed for a while to turn back the tide on that was funded by private-equity firms, and it took a lot of investigative reporting to figure out that it was the private-equity firms behind that group. Why is it just not all more transparent? Why are you allowed to even have a code name as a group? Why isn’t there just a law that says, if this is Blackstone lobbying, it has to be Blackstone?

Brody Mullins: There should be a law. The problem is that there isn’t. Our tax laws are set up in a way that anyone can start a 501(c)(3) or 501(c)(4). Those groups don’t need to disclose who their donors are. You can give it a great-sounding name, “Americans for a Better America.” Every big tech company can fund it with donations you’ll never be able to find. That shadow group can go out and spend millions of dollars to elect candidates that they want to.

If we’re saying anyone under the First Amendment is allowed to petition the government, and our lobbying-disclosure law says, “Hey, if you’re going to petition the government, let’s just disclose who you are,” then let’s make these rules fair so that it’s not just people who spend 20 percent of their time talking directly to a member of Congress, but people who spend 20 percent of their time trying to influence legislation or trying to influence an election. It seems like that’s a pretty fair thing to do.

We’re not saying you can’t do it. We’re just saying, “Say who you are, so that Americans can decide whether they want this interest group or that interest group putting their thumb on the scale.” It seems like a pretty fair and American thing to do.

Luigi: In your book, you suggest that with the election of Trump in 2016, things have changed. Can you explain how and why?

Brody Mullins: There’s been a shift in both political parties in the last few years away from support of big companies. More and more Americans, Republicans and Democrats, more and more members of Congress, are saying some of these companies, particularly the tech companies, have gotten too big and too powerful.

This antitrust lawsuit that came out ruling that Google is a monopoly, that’s a case that began in 2009 and ’10, that Google beat back for a long time. But finally, the tide has turned against Google, and we’ll see if other lawsuits come from that.

What’s most fascinating, actually, is that change among Republicans. For my entire life, Republicans were the champions of big business, the champions of industry. They were against government. The government was the problem, and free markets were the answer. That’s just starting to change a little bit.

I had a talk for our book with JD Vance, and JD Vance said, “Concentrated economic power is as bad as or worse than government power.” There really is a sea change going on right now. Now, I still think, to be sure, companies are still the most influential force in Washington, but their influence is definitely on the decline. We’ll see if there’s another force—maybe consumer groups, maybe labor unions—who are going to take their place. That is yet to be determined.

Is this cynical? It could be in that Republicans are against tech because they think tech is against them. Tech billionaires are giving all their money to liberal causes and to Democrats, but it’s also that Republicans say that they feel like their voices are being stifled and blocked and censored by technology platforms.

It’s going to be fascinating to see, in the next five or 10 years, if the Republican Party keeps changing. Does the Republican Party become the party of the poor? Is the Democratic Party becoming the party of the rich? Are the far-right and the far-left going to meet up on economic issues? They could.

The Chamber of Commerce represents big business, represents industry. It has been very closely aligned with Republicans for the last 20, 30, 40 years. Right now, we have a bunch of Republican members of Congress who have been attacking the Chamber of Commerce. Speaker McCarthy is no longer speaker—he’s now out of Congress—but when he was the speaker, he would not let members of the Chamber of Commerce even visit him in his office.

Years ago, when I was covering Capitol Hill, then-Speaker John Boehner had a regular weekly luncheon meeting with the US Chamber of Commerce, with the Business Roundtable, with other top industry lobbyists, where they literally plotted strategy on how to pass probusiness policies. Now, to see Republicans attacking the Chamber of Commerce is incredible.

What we have going on right now is the Republican chairman of the House Ways and Means Committee, the tax-writing committee, has started an investigation into the tax status of the Chamber of Commerce, which is stunning. I mean, it’s something you’d expect Elizabeth Warren to do, not the Republican chief tax writer. But that’s sort of a reflection of what we’ve been talking about, the increasing populist bent of the Republican Party, that they seem to be intent on attacking big businesses and the organization that represents big business, which is the US Chamber of Commerce.

Luigi: President Biden used to say, “If you want to know my values, don’t listen to my words, look at my budget.” If you look at the budgets of companies these days, whom do corporations support in these elections?

Brody Mullins: Companies are wimps. They just want to be with the winner. They don’t care who the winner is. They want certainty. They want to have friends who are in power. One of the most fascinating statistics we came across in looking at corporate campaign contributions is that you would think, in the last 50 years, if companies would benefit by Republicans and conservatives being in power, then companies would give all their money to Republicans and none to Democrats.

But what we found is that when Republicans are in charge, when Republicans have the House, when they control the Senate and they have the presidency, companies give about 60 percent of their money to Republicans, and they give about 40 percent of their money to Democrats. What’s fascinating is that when Democrats are in power, companies give about 60 percent of their money to Democrats and 40 percent of their money to Republicans. They basically just want to give the money to whoever’s in power.

Luigi: The last question. We don’t expect you to predict the result of the election, but we ask you to predict the results conditional on the administration. How do you expect lobbying to be transformed under a Harris administration or under a Trump administration?

Brody Mullins: Lobbying should be very different under either administration. I think under the Harris administration, things would be similar to the way they are now. The lobbying industry would continue to grow, lobbyists would continue to try to influence people outside of Washington and interest groups and regular Americans to get to members of Congress.

Trump changes everything. Trump represents a new way of lobbying in DC because Trump doesn’t act through Congress. He doesn’t even act through his administration. He tries to do things on his own.

He governs by executive order, with the exception of that big 2017 corporate tax cut. When he does them himself, it means that companies don’t need to lobby Congress because Congress is useless, and they don’t need to lobby the EPA because Trump does things by executive order in the White House.

What we’ll see if Trump is elected is a consolidation of the lobbying industry, as in there will be a handful of lobbyists who have personal relationships with Donald Trump, people like Paul Manafort, who will start lobbying operations and advertise their services based on their connections to Trump. Those few people will be incredibly successful and wealthy. If Trump is elected, he will eventually leave office. At that point, I expect the lobbying industry to go back to normal, which is a much more broad-based lobbying operation.

Bethany: I’m not sure whether to feel more optimistic or less optimistic after talking to you, but it was really interesting. Thank you for making the time, and congratulations again on a great book.

Brody Mullins: Thanks so much for having me.

Bethany: Hi, it’s Bethany from Capitalisn’t. Luigi and I have something really exciting coming up. On October 30, we’re sitting down for a live conversation with world-renowned historian Sir Niall Ferguson. It’ll be right before the US election. We’ll talk about the future of global politics and global population declines in the next century.

You can catch it all in an upcoming episode of Capitalisn’t. But if you want to join us for the live recording, be sure to register. Head to our website, Capitalisnt.com, subscribe to Capitalisn’t, and mark your calendars. October 30, 11 a.m. Central, for our live recording with Sir Niall Ferguson. See you there.

I found this a fascinating conversation. I thought it was a fascinating book, and it gets at this very deep and very fundamental corruption that I think is core to what we talk about on Capitalisn’t, because it’s undermining capitalism as we know it. I think a lot of people have a sense that what exists now is crony capitalism, and that’s what these lobbyists have so effectively created. I don’t think I really understood the history and the depth of it until I read this book. How about you?

Luigi: I completely agree. I think that this book is really a fascinating history of the lobbying industry and how much has changed and how it continues changing. They’re very good to add sex, lies, and art and cigars to make it very interesting. To some extent, I would like a stripped-down version of this, without the sex, to be part of the standard education of people in academia because lobbying is an industry like many others, but it is a particularly important one. I think we understand very little of it.

Bethany: Why do you have to remove the sex to make it palatable to academics?

Luigi: Because otherwise they’ll only read the sex.

Bethany: Oh, I thought it might offend their tender sensibilities, and therefore it had to be made G-rated.

Luigi: My biggest problem is: to what extent is this control of Congress by industry a more modern phenomenon or not? There’s no doubt that modern lobbying started in the 1970s, when he starts, and in part as a reaction to the Nader phenomenon and the power that Nader was able to assemble. The fact that a single individual could change regulation in the auto industry was pretty stunning.

My question is, do you think that before, lobbying was taking place in a casual way that you didn’t see it? At the end of the day, remember Secretary of Defense Charles Erwin Wilson, under Eisenhower, who said “The interests of GM and the interests of the country are one and the same.”

When you have people like this, why do you need lobbying? You have perfectly vertical integration of the interests of GM into the interests of Congress, and it’s only when you start to have some opposition with Nader that you have more active lobbyists. But is the outcome much worse than it was in the ’50s or not?

Bethany: The modern lobbying industry might be also a reaction to the world simply getting bigger, and maybe nostalgia for the good old days is misplaced. In other words, when the country was much, much, much smaller, the industrialists were members of Congress, and you didn’t need the middlemen of lobbyists because they could go to Congress and do exactly what they wanted to do.

It was as America became so much bigger and so much less connected that you needed this middle layer, or business felt you needed this middle layer of lobbyists. It’s a really interesting question. Did the good old days exist? The 1970s was clearly the rise of the modern lobbying industry, but were there good old days?

Luigi: I suspect that in the period immediately after World War II, industry was less powerful because at the end of the day, there were two important characteristics. First of all, the politicians had a much higher standing with the population. The combination of the New Deal that was successful and the victory of World War II meant politicians carried much more weight than they carry today, in terms of respect. Also, they had pretty privileged access to a number of means like radio and TV so that it was not that easy for people to fight back. So, that’s number one.

Number two, at the time, the Republican Party was the clearly probusiness party, but the Democratic Party was kind of the antibusiness party. It was really in the hands of unions. As such, I think it was keeping Republicans in check. My conjecture is that this equilibrium broke down, starting in the ’70s, but really reaching the peak in the ’90s, when the Democrats were as part of the lobbying machine as the Republicans. There was no difference between the two.

Bethany: It’s yet another example of how neoliberalism, when embraced by both parties, was . . . Whether you think it was right or not, it was dangerous to have everybody singing the same tune.

Luigi: Yeah, absolutely. But in addition, I think one of the things I learned is that lobbying has become not only more influential but much more pervasive. It has become a global game. In the old days, you would think about lobbying as simply somebody that is peddling something with a congressman.

No, it starts from a business strategy. Very often, you think about, “How can I think about regulation that helps my business strategy and damages my opponent?” Then it goes through political activists to academia to journalists. Everybody is, to some extent, a voluntary or involuntary peon in this gigantic strategic game to influence the direction of public policy.

Bethany: One of the anecdotes that I found the most upsetting was this little story about how Google, in an effort to stop the Stop Online Piracy Act, had figured out that they could throw these local seminars helping to create websites for small businesses, but they were always in a place where Google needed the support of the politician whose home turf that was. It was very, very strategic.

There’s just something about that . . . I think, how do you possibly know what the truth is or why somebody is doing something? Then I suppose you could ask: “Well, why do you care if they’re doing something that’s good in order to help build support for themselves? Do the reasons matter?”

But there’s just something about intent that I would like to understand. Knowing how little in the modern world you can understand about what the true intent of something is, is very disturbing to me.

Luigi: I think it’s very safe to assume that they always do that for a purpose. The most reassuring thing is when they do that for a business purpose. Because if they do it for profit, maybe there is not an ulterior motive. But every time they don’t do something for profit, then you have to worry about the ulterior motive.

Bethany: Maybe there is some sort of tie in the outgrowth of lobbying to Milton Friedman’s famous manifesto about the bottom line mattering. If you make that argument that the bottom line is what you should be focused on, then as the leader of a business, you can make a pretty profound argument that you should do everything possible to curry favor in Washington and to get legislation passed that benefits your business. Suddenly, there’s no moral code barring you from doing that, even if it’s not in the interest of the country or in the interest of your consumers, because it is in the interest of your bottom line.

Luigi: To be fair to Milton Friedman, he has two qualifiers. Every time he says, “The only social responsibility is to maximize profits,” he qualifies that. One time, he qualifies that with, “in the rules of the game, both those imposed by the law and those imposed by social customs,” or something like that. And the second says, “within a framework of fair competition,” and blah, blah, blah.

Bethany: There is a funny omission in the Mullins brothers’ book, and that’s Fannie Mae. Fannie really was the first company to begin using this incredibly powerful form of grassroots lobbying, and it was the brainchild of the former CEO of Fannie Mae, Jim Johnson, who was himself very politically connected and very connected in DC. He recognized that if you used housing policy and Fannie Mae’s largesse to do good things for members of Congress on their home turf and to give members of Congress an opportunity to shine on their home turf, it would be very hard for that member of Congress, then, to do anything that wasn’t in Fannie’s interest. They built this incredibly powerful lobbying machine.

The other interesting question is where, of course, all of this leaves us now. It seems to me, as we concluded our interview with Brody, on the note that it’s not clear whether to be more or less optimistic. President Trump did blow into office promising to famously drain the swamp, but it’s just a different swamp, right? He may have drained the old swamp, but the new one filled up pretty quickly.

I think he seemed pretty clear that if there is another Trump administration, lobbying may work differently, but it’ll just revert to what it was when the Trump administration leaves. It’s not even really clear that what it would be under Trump would be any better.

Luigi: I agree, but I think there is a little bit of hope in the fact that we see some populist pressure to actually change things. If my story that in the ’50s and ’60s, things were different because one party was antibusiness is right, then what we need is, we need a party that is more openly antibusiness, and it doesn’t really matter whether this is the Democrats or Republicans. As long as there is one, it will keep the other in line.

JD Vance seems to push in the direction of a Republican Party that is more anti-business. I think it would be a long way. It’s not like this is going to be the case tomorrow, but I think it would be interesting to see what happens in the future.

Bethany: I’m a little wary of giving Vance too much credit, given that some of his big backers are the technology billionaires. I don’t know how that would play out over the course of time because people have a way of delivering rhetoric that is one thing but then, when it comes to actually offending the people who pay the bills, doing something very different. And it depends, when you’re antibusiness, which business you are anti-. You could argue in some ways that the Democrats became very anti-old-white-guy business, but they became very pro-new, exciting technology business, at the same time.

Luigi: Yeah. I’m not trying to give him credit. I’m trying to say that there is clearly a demand for an antibusiness party. Both the Democrats and the Republicans are flirting with this side, and they both are afraid. I did not do a proper poll, but I suspect that if you go around and say, “Do you support Lina Khan’s action in the FTC?” a vast majority of the American people will be in favor. What is interesting is, in this moment, neither of the two presidential candidates seems to support her.

Bethany: I knew she was controversial in the business world, but I was not aware of the depth of the pushback, particularly among Silicon Valley venture capitalists and private-equity people, both of whom have the ear of a lot of politicians, thanks to the money that they have—back to the theme of our podcast.

Both groups blame Lina Khan for their inability to exit their investments because they say she slowed down the deal machine. And because they can’t sell an investment to another company because they’re worried the FTC will come in, they’re really, really angry because that’s a primary exit for venture capitalists and for private-equity firms. I think that there is this groundswell of anger against Lina Khan that is very much private-equity- and venture-capital-driven.

Luigi: I could see a populist branch that says, “We want tougher antitrust, we want less subsidies, and we want less easy money.”

Bethany: Oh, that would be my party. I think I should be the president of that made-up party, which does not exist and probably will never exist.