Jaewon Lee: Lobbying vs. Bribery

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Link to Jaewon Lee’s Facebook page

I am pleased to host this guest post by Jaewon Lee, a student in my “Monetary and Financial Theory” class. This is the 15th student guest post this semester. You can see the rest here. Jaewon’s thesis is this: 

Lobbying is an effective tool to reduce corruption and expand public involvement across economic and political sectors.

I found his contrast between the US and South Korea especially interesting. This post also reminds me of Matt Stambaugh’s very interesting proposal to restrict lobbying by having every meeting with a government official videotaped and posted on YouTube. Although at the end of the day, I felt this hampered free speech too much, it could be just right for convincing South Koreans to allow lobbying at all. 

Here is Jaewon:

In the United States, there are many complaints about the influence of lobbyists. Lobbying is defined as a legalized activity in which special interest groups hire professional advocates to argue for specific legislation in decision-making bodies (Wikipedia). Lobbying activity is controversial. Lobbying is often perceived to be a symptomatic problem that has corrupting influence. The concern is that only wealthy companies and interest group will be able to influence lawmakers and government officials. However, the proponents of lobbying argue that the process of lobbying provides legislators and other government officials with necessary information to convey the viewpoints of constituents.

In South Korea, lobbying is illegal. On March 3, 2015, South Korea’s legislative approved a new anti-corruption law that reinforces stricter regulations and restrictions on lobbying. The bill punishes government officials and lawmakers for accepting any form of funding from private interests even without conditions attached. It will be the a very restrictive set of regulations for blocking any form of lobbying or favor in the political area. Moreover, the legislation “sets a maximum penalty of up to three years in prison as well as 30 million won ($27,300) in fines for bribery involving public officials.” The public believes that corruption in business and government remains a major problem. So when I came to the U.S. from South Korea and found out that lobbying was legal, I was surprised. The very different perspectives on lobbying in the United States and South Korea raise the question of whether lobbying is an effective tool to reduce corruption.

Is it a good idea to make lobbying illegal? If lobbying were banned, bribery might take its place. According to Giovannoni’s academic article on “Lobbying, corruption and political influence,”lobbying and corruption are substitutes and lobbying is a more effective instrument for political influence than corruption, even in poorer, less developed countries. Lobbying often occurs in a system that enjoys high levels of political stability. Because lobbying and corruption are substitutes, eliminating lobbying to fix the unequal influence of money is not an optimal choice. What eliminating lobbying does is to drive efforts to influence the government underground. In countries where lobbying activity is illegal, legalizing lobbying might be seen as legalizing corruption. However, it is not right to equate lobbying with bribery. A responsive government needs to hear various viewpoints to inform the legislative process. In the absence of lobbying, the public would lose an importance channel to influence policies. As for concerns about the influence of wealth on politics, if lobbying is made illegal, policies might favor wealthier individuals even more because rich and powerful people can afford to spend money on even more costly bribery activities. As I have wrote in my previous blog post about big Korean conglomerates (the chaebols), these conglomerates that dominate the wide spectrum of Korean society are expanding to the point where they are too big to fail. A failure to democratize the business environment and an effort to ban lobbying minimizes the access and contribution of the public to the debate about what to do with these conglomerates.

Of course, lobbying has its own flaws it is unrestricted. Unlimited contributions from lobbyists, along with the preferential access that leads to may disrupt access by others to political influence and can tilt things toward wealthy groups even if not so badly as out-and-out bribery. To the extent democracy is defined by equal participation and influence by individuals, unregulated lobbying will not meet such goals. According to Mullin’s article in the Wall Street Journal, Comcast Corps engaged in massive lobbying activities when they heard that President Obama was preparing to call for tough new Internet regulation. The sight of companies exerting that kind of influence through lobbying is why most Koreans oppose lobbying. But strong enough restrictions may alleviate such concerns. If Korea legalized lobbying, it could address this issue by granting making lobbying easier for non-profit organizations than for profit-making corporations. For instance, by disallowing lobbying as a business expense in the tax code, the government can make it more expensive for for-profit firms to lobby. Moreover, transparency in the flow of money used in lobbying can minimize negative consequences. The rules could also require lobbyists to report all meetings with government officials.

Lobbying activities, under the right restrictions can improve the participation of the people in influencing government policy. Money previously spent on bribery can come into the light of lobbying reporting requirements. And in Korea, properly managed lobbying might provide a countervailing influence for the power of the big conglomerates–the chaebols.