University of Warwick economists say they can calculate the true value of political lobbyists in American politics - quantifying the 'it is not what you know, but who you know' adage.
Lots of former politicians and staffers go into lobbying - it makes sense, they already know people and have relationships, the same reason a sales organization hires people experienced in their field, rather than just any salesperson.
What did they find? In the case of lobbyists who worked as a staffer in politics, the revenue of the lobbyist falls by 24% when their former employer leaves government office. The relative pay of lobbyists depends on the seniority and committee assignments of the congressional politicians they have worked for in the past, they say.
The economists used two public directories of government staffers, government salaries, lobbyists and lobbyists' revenues. They noted the analysis was only possible because of U.S. laws that make lobbying transparent. By comparison, they note, the U.K. keeps its politicians and lobbyists more insulated and does not have compulsory disclosure of lobbying activity. Proposed reforms are much weaker than in America.
Mirko Draca, from the University of Warwick's Department of Economics, said, "We 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."
The paper concluded that the relative pay of lobbyists depends on the seniority and committee assignments of the congressional politicians they have worked for in the past.
"Our work quantifies, I believe for the first time, the value of personal connections to elected officials for lobbyists in Washington, rather than relying on anecdotal evidence," Draca said. "It seems in the UK lobbying is only considered when a possible scandal pushes the topic into the limelight. Last year UK Defence Secretary Liam Fox resigned in the wake of controversy over the dealings of his friend Adam Werritty.
"These financial relationships need to be a matter of public record here in the UK, as they are now in the US, rather than leaving them in the back wings of the political theatre."
Published in the American Economic Review