There always will be people willing to do favors for public officials. Can these be benign or do they always constitute ‘rent seeking’? That’s the term economists use for the manipulation of government policy for private benefit.
Several prominent public figures, including Sens. Kent Conrad (D-N.D.) and Chris Dodd (D-Conn.), former cabinet members Donna Shalala (Clinton’s Health and Human Services Secretary) and Alphonso Jackson (George W. Bush’s Housing and Urban Development Secretary) received mortgages on favorable terms from Countrywide Financial, the giant (and now troubled) mortgage lender. So did Richard Holbrooke, Clinton’s U.N. ambassador.
More recently, Minnesota Republican Sen. Norm Coleman has been accused of enjoying below-market rent on a bedroom in a Washington, D.C., house owned by a political operative.
Do such “personal favors” or other payments to public officials affect our economy? Do they reduce its efficiency or make it less just? Opinion varies.
Recognize at the outset that overt political corruption is at a low level compared to earlier U.S. history. In the first half of the 1800s, direct vote buying was common. After the Civil War, railroads and other large businesses commonly paid bribes for congressional votes.
Moreover, views on personal gifts to officials change over time. Archer Daniels Midland former chairman and CEO Dwayne Andreas long gave substantial personal gifts to various “friends” in Congress who could influence agricultural policy — and thus affect ADM’s profits. Influential senators like Minnesota Democrat Hubert Humphrey and Kansas Republican Bob Dole enjoyed such personal gifts for years and for the most part, no one batted an eye. It was a different era.
Accused officials commonly argue that the favors received, a few hundred dollars in cheap rent or a few thousand in lower mortgage interest, are so paltry as to have no effect on their official actions.
Critics argue that Dwayne Andreas or former Countrywide CEO Angelo Mozilo would not have laid out the money if they did not expect something in return. Economists generally agree.
Rent seeking can take subtle forms. Conrad and Dodd chair the Senate budget and banking committees, respectively. They obviously might handle legislation affecting mortgage lenders. Former appointed officials like Shalala, Jackson or Holbrooke have no direct political power, but may mingle socially and professionally with people who do.
Nevertheless, it never hurts to have friends in high places. Slight favors can create favorable impressions that, when push comes to shove, motivate at least marginally better treatment. It is hard for decision makers in regulatory agencies to ignore even ostensibly innocuous phone calls from powerful officials.
Can anything be done? Senate rules already prohibit accepting gifts worth more than $100. Dodd, Conrad and Coleman all retort that they are paying market rates and could do as well elsewhere. Ethics committees may probe, but ultimately voters must make their own judgment. Alert journalists benefit society. But the problem will always be with us.
© 2008 Edward Lotterman
Chanarambie Consulting, Inc.