Lobbying: Legalise it, my lords!

We in India love a scam. Apart from Bollywood and cricket, perhaps the one thing that brings the Indian family around television screens at primetime is a good old scam by the government.

Most such scams are to do with some minister or a government official taking a bribe. The bribe, more often than not, is paid by shadowy professionals who would otherwise be known as lobbyists. Bribery definitely is wrong and illegal, but is the act of lobbying to influence policy changes morally wrong?

There are two ways to answer that question. A Utopian answer would be that lobbying is a legitimate and necessary part of our policy-making process. After all, lobbying doesn’t mean bribery. Secondly, for any government to frame policies, a key requirement is information about certain topics. That is where lobbyists step in, and their key task is to disseminate information to the government.

“No one in this government is an economist. The problem is that economics is a specialised subject. You need to be an economist,” says Subramanian Swamy, a Harvard-educated economist and member of Parliament for the Bharatiya Janata Party (BJP) in a recent interview to Fortune India. In such a situation, the Utopian view of lobbying holds more weight.

The other view, which is a more popular one in India, is that lobbying is akin to bribery, and the success of lobbyists is based on who they know in the government rather than what they know about the subject they are lobbying for or against.

With anything that is illegal, it is easy to believe that it is indeed immoral. However, legalising lobbying does have its benefits. For one, it can lift the veil on this industry that operates in the shadows.

Taking a cue from Western laws, legalising lobbying can go hand-in-hand with detailed disclosures on the amount companies spend on lobbying with the government. Disclosures can also be made mandatory to reveal where and how the lobbyists utilise their resources in the government.

Secondly, data from disclosures if lobbying is legalised can be utilised to empirically study how legislation is formulated. A few years ago, M/s Marianne Bertrand, Matilde Bombardini, and Francesco Trebbi used data on the policy issue that lobbyists were working on, the number of lobbyists in the same sector, and the number of years a lobbyist had worked on a particular issue, to answer the question whether it is more important to know the subject or if it is more important to know the legislators as a lobbyist. Their findings could be accessed in a research paper titledIs It Whom You Know or What You Know? An Empirical Assessment of the Lobbying Process published by the U.S.’ National Bureau of Economic Research in 2011.

The paper uses empirical data to develop a Herfindahl Index that measures how concentrated a lobbyist’s assignments are across all possible issues. The findings suggest that at least in the U.S., knowing the legislators is more important to be a lobbyist rather than knowing the subject. Despite the lack of such data and empirical evidence in India, it is still a largely-held belief that knowing the legislators is more important for lobbyists than knowledge of the subject. To prove such a belief wrong would not be possible as to access such data streams accurately will not be possible without the profession of lobbying being legalised and disclosures made mandatory. Such data would also come in handy for both the defence and the prosecutors in cases such as AirAsia India and the National Stock Exchange, where there are allegations of lobbying leading to impropriety. Empirical data at the end of the day will always make a stronger point that circumstantial evidence.

Finally, legalising lobbying would legitimise what is at the end of the day an important practice associated with lawmaking. It is improbable to expect political leaders to have the necessary acumen to both win elections and have knowledge comparable to those in the academia. At a time when India’s legislators encounter increasingly complex economic issues such as trade wars, opening up industries to foreign investment, subjects related to e-commerce around data, privacy, and taxation of e-commerce, the need for lobbyists by the industry will grow. Perhaps it is time that those in power open up to the idea of legalising lobbying with appropriate disclosures.