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In the News

Greed is good?: Corporate lobbying and US society

Jim Riley

6th January 2010

Useful US pressure groups example

Questions about the corrosive effects of big business in the US has tended to focus on the political damage they cause. But a new study by the IMF (of all groups!) strongly suggests that the sector of the financial industry that spends the biggest bucks on lobbying is also the most underpeforming and therefore is costing the American public. Thus there is a strong argument to suggest that they are damaging to US society as well.

This new study does not prove beyond reasonable doubt that there is a direct causation, i.e. that donating large sums of money means that lawmakers have turned a blind eye to massive risk taking by the banking sector, for it could be that the biggest risk takers in the markets also like to take a risk with what their money could achieve in the political marketplace!

But according to the Guardian, this is what the paper found:

“Powerful American banks spending lavishly on lobbying are more likely to engage in high-risk lending and their shares have performed less well than others, a groundbreaking study by the International Monetary Fund has found.

The study established that US business spends $4.2bn (£2.6bn) over the four-year election cycle on “targeted political activity”, with Fire firms accounting for 15% of that total – equivalent to $479,500 a firm in 2006. The “lobbying intensity” of the Fire sector also “increased at a much faster pace relative to the average lobbying intensity over 1999-2006”.

The IMF claims such a study is the first of its kind. It uses complicated algebraic equations to assess the effect of lobbying on policy makers, loan defaults and the overall financial performance of banks.

The in-depth research will prompt calls for a wholesale clean-up of Capitol Hill by the Obama administration. Lobbying by the finance, insurance and real estate (Fire) sector outstrips any other in the US economy.”

Jim Riley

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

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