Special Interests Hamper Economy

by John Hood

Both the federal and state constitutions protect the right of North Carolinians to petition their government for redress of grievances.

Perhaps you think I’m about to opine on the Moral Mondays protests at the Legislative Building in Raleigh. No, I’ve covered that already. All North Carolinians have a right to assemble, speak, and petition their government for redress of grievances. No group of North Carolinians has a special right to take its assemblies inside a government building if its action would disrupt or obstruct the government's normal operations. Those who do it anyway and refuse to disperse in order to comply with the rules of normal governmental operations should expect to be arrested. If getting arrested is their goal, fine. They should be prosecuted for the offenses and fined accordingly — and if they wish to honor the tradition of civil disobedience, they should accept their prosecution and pay their fines gladly.

My topic today is rather different: the constitutional right to petition government for redress of grievances protects, among other things, the practice of lobbying. Just as with freedom of speech, you don't lose your right just because you choose to exercise it alongside others. When a group gets together and decides to exercise members’ rights collectively by hiring in-house or contract lobbyists to argue their case to legislative or executive officials, their actions are constitutionally protected.

Still, government can impose time, place, and manner restrictions on the exercise of constitutional rights. That’s why Moral Monday protestors can’t be denied the ability to assemble and speak but they can be denied access at certain times to certain public property on which to do so, such as the hallways in front of the House and Senate chambers. Similarly, government can also impose certain rules or restrictions on the professional practice of lobbying. For example, it can require disclosure of clients, as North Carolina and other states already mandate.

Still, the right to argue one’s case to public officials is protected by the First Amendment. That doesn’t mean that one’s case will prevail, of course. It also doesn’t mean that one’s case should prevail. There are many instances in which special-interest lobbyists prevail to the detriment of most citizens. Special interests improperly acquire subsidies, special tax or regulatory treatment, or protections from free and fair competition in the marketplace.

For decades now, a small group of scholars have been studying the economics of special-interest lobbying. Some use case studies to portray how politically connected groups conspire with allies in government against the public interest. In a now-classic 1983 article, Clemson University economist Bruce Yandle coined the phrase “bootleggers and Baptists” to describe such collusion. The case involved Baptists lobbying for restrictions on Sunday alcohol sales, restrictions also supported by bootleggers who stood to make more money because their legal competitors would be excluded from the market.

More recently, however, scholars of “regulatory capture” and other forms of what economists called “rent-seeking behavior” have sought to use econometrics to demonstrate how special-interest lobbying can harm the general public. I’ve written about such research in the past. Just the other day, I came across another study, published last year in the Eastern Economic Review. The author, University of Illinois economist Oguzhan Dincer, constructed an innovative model of the effects of special-interest lobbying in the United States. He used a system developed by other scholars that sorts states into five categories according to the number and political influence of special-interest groups in each state. Dincer then used growth in median income during the 1980s and 1990s as a measure of state economic performance.

It turned out that states with stronger special-interest groups grew more slowly than those with weaker special-interest groups. Specifically, after adjusting for other factors, states with stronger special interests had about 12 percent less economic growth per decade than states with weaker special interests.

The finding doesn’t surprise me at all. States with fewer restrictions on market entry and competition — the kind of restrictions that North Carolina is currently imposing on the online sale of cars, for example — will have healthier economies.

The remedy for the problem is not to attempt to restrict the constitutional rights of special-interest groups. The remedy is to create other institutions to exercise free speech in rebuttal.

John Hood is president of the John Locke Foundation and an NC Spin Panelist