Thursday, August 29, 2013

Too much collusion between business and politics

The Economist had a few issues ago a revealing piece on the excessive influence of business people into politics. Starting with the takeover of Italian politics by Berlusconi (and its disastrous effects), it goes on to survey the many ways in which large corporations influence the political arena. The conclusion of a pro-free market magazine as The Economist is clear: there is too much influence of large business on politics. Big firms are obviously necessary in a developed economy, especially when they perform in competitive and well regulated markets. However, their excessive influence in the political process is a corruption of democracy. One way they try to do so is by appointing former politicians, to try to gain access to policy decisions that impact their bottom line. Of course, former politicians have a right to be hired by large corporations, but these appointments should be subject to strict codes of conduct that are nowadays absent. However, some former politicians (such as two former prime ministers and several former economics ministers in Spain, who are in the boards of energy firms which they used to regulate) should reflect about the embarrassment they inflict in their political parties and former voters. And some companies should think twice about some of the low quality politicians they appoint. Although firms not always succeed to influence policy fully in the direction they desire, it is obviously not surprising that it is difficult from local media to follow the responsibilities that business people have of many bad social and economic outcomes, and it is not surprising that in many developed economies large firms pay a very low effective corporation tax. Large corporations are one of the great institutions of modern economies, but societies at large should reflect more about what is their role in bringing about good societal outcomes. If a business friendly magazine as The Economist says that business has too much influence on politics, the truth is probably even more serious.

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