Two news items from recent days are reminders about the dangers
of mixing business and government. In 2017 Google outdid itself (and all other companies) in its
efforts to influence Washington, spending more on lobbying than any
other company that year. Meanwhile in Brazil, the largest-ever
corruption investigation in Latin America’s history has spread to
14 countries, due to bribes paid by Odebrecht, a Brazilian construction
firm, in efforts to secure government contracts. What’s already
known is that Odebrecht paid $29 million to Peruvian officials in
return for $12.5 billion in contracts.

These stories are very different. The United States is not Latin
America, and Google is not Odebrecht. Nevertheless, they do have
something in common. When a government has a lot of money and
power, individuals, businesses and interest groups will expend
their money and effort to get a piece of it — or simply to be
left in peace.

Such aims couldn’t be more different. Notably, much if not all
of Google’s lobbying is defensive. It wants to be
left alone to innovate and serve consumers. It seeks to resist
restrictions on immigration, excessive taxation, antitrust suits
and regulation of its advertising. Odebrecht, on the other hand,
seeks to get billion dollar government construction contracts,
sometimes by bribing high-ranking officials.

But both firms may simply see these expenditures as the cost of
doing business. Business people know that you have to invest to
make money. Businesses invest in factories, labor, research and
development, marketing and all the other processes that bring goods
to consumers and, they hope, lead to profits. But businesses can
also invest in political processes that may yield profits. If more
money can be made by investing in Washington — or Brasilia or
Lima — than by developing a new app or drilling another oil
well, money will be spent there.

Money spent by politicians in Washington, as with most national
capitals, is taken from the people who produced it all over
America. Washington produces little real value on its own. National
defense and courts are essential to our freedom and prosperity, but
that’s a small part of what the federal government does these days.
Most federal activity involves taking money from
some people, giving it to others and keeping a big chunk as a
transaction fee.

Every business and interest group in society has an office in
Washington devoted to getting some of the $4 trillion dollar federal budget for itself:
senior citizens, farmers, veterans, teachers, social workers, oil
companies, construction companies, labor unions, the
military-industrial complex — you name it. The massive
spending increases of the Bush-Obama years have
created a lot of well-off people in Washington. Consulting and
contracting exploded after 9/11. New regulatory burdens, notably
from Obamacare, the Dodd-Frank financial regulation bill, are
generating jobs in the lobbying and regulatory compliance
business.

But both firms may simply see these expenditures as the cost of
doing business. Business people know that you have to invest to
make money. Businesses invest in factories, labor, research and
development, marketing and all the other processes that bring goods
to consumers and, they hope, lead to profits. But businesses can
also invest in political processes that may yield profits. If more
money can be made by investing in Washington — or Brasilia or
Lima — than by developing a new app or drilling another oil
well, money will be spent there.

Money spent by politicians in Washington, as with most national
capitals, is taken from the people who produced it all over
America. Washington produces little real value on its own. National
defense and courts are essential to our freedom and prosperity, but
that’s a small part of what the federal government does these
days. Most federal activity involves taking money from
some people, giving it to others and keeping a big chunk as a
transaction fee.

Every business and interest group in society has an office in
Washington devoted to getting some of the $4 trillion dollar federal budget for itself:
senior citizens, farmers, veterans, teachers, social workers, oil
companies, construction companies, labor unions, the
military-industrial complex — you name it. The massive
spending increases of the Bush-Obama years have
created a lot of well-off people in Washington. Consulting and
contracting exploded after 9/11. New regulatory burdens, notably
from Obamacare, the Dodd-Frank financial regulation bill, are
generating jobs in the lobbying and regulatory compliance
business.

Walk down K Street, the heart of Washington’s lobbying
industry, and look at the directories in the office buildings.
They’re full of lobbyists and associations that are in
Washington for one reason: because, as Willie Sutton said about why
he robbed banks, “That’s where the money is.”

President George W. Bush increased annual federal spending by a trillion
dollars, so it’s no wonder that more money was spent on
lobbying in 2008 than in any previous year. And then even more was
spent in 2009, when President Obama pushed for a nearly trillion
dollar “stimulus” bill and a health care overhaul. With a
complicated tax reform bill, along with health care and threats to
global trade, lobbying surged again in President Trump’s
first year.

Government contracts for construction, IT services, health care
delivery, and the like are a particular target for lobbyists. I
once got a pitch for a newsletter described as “Your bible for
infrastructure spending—where the money is going and how to
get your share.”

And as the Odebrecht example illustrates, that’s especially true
in countries where government is an even bigger share of the
economy. That’s why Odebrecht had a whole department, the
Structured Operations Division, dedicated to bribing politicians in
Latin America.
They spent $788 million on bribes. That was a good investment.
According to a court filing, it generated $3.3 billion in profits.
Cheap at twice the price!

But at what cost? Some companies benefit by manipulating the
levers of power. By definition, that means other companies lose. If
Odebrecht has to bribe politicians to get contracts, that suggests
that other construction companies might deliver better service for
less money, and Odebrecht needed to get an unfair advantage.

And even if a company such as Google starts out lobbying
defensively, it can get sucked into Washington’s parasite economy
and start using its new lobbyists to game tax laws, tariffs,
regulations and subsidies to get an edge on its competitors. And
that’s a real problem because the most important factor in
America’s economic future – in raising everyone’s standard of
living – is not land, money or computers; it’s human talent. And
when that talent is spent negotiating with the government for
protection or for special favors, that’s a loss for the people such
talent really should serve: consumers.