The Myth of Public Interest and the Flourishing of Political Predation

by Will Wilkinson on November 4, 2005

I was listening to “Marketplace” on NPR the other day and my god was I getting annoyed. The story was about some deal that the Department of Labor cut with Wal-Mart, which was perfectly legal, but broke internal labor rules. Anyway, the thing that really struck me was the narrative undercurrent. Wal-Mart was assumed to be an opportunistic, possibly predatory, profit-seeker. The Department of Labor was assumed to be the agent working on behalf of a widely accepted conception of the public interest, which Wal-Mart was assumed to threaten. In this case, Labor, by being lax on Wal-Mart (they were giving Wal-Mart a couple weeks of warning before inspecting the books or something), had disappointed us, the listeners of NPR’s marketplace, by failing to be as vigilant as they should.

Now, I think these two common assumptions of the media, that business is zero-sum and so profit-seeking behavior is predatory and that government is the noble agent of the public interests in fact makes the media deeply complicit in the corruption of both business and government by creating cover for the power-seeking, cronyism, and rent-extraction that is everywhere and always an essential aspect of government power. By cultivating and perpetuating a naive public perception that, other things equal, government is protecting us, the media in fact makes it much easier for the Halliburtons of the world to lock in giant no-bid contracts and for bureaucrats to revolve in and out of lobbying positions for special interests. That is, media that works on the assumption that government in fact serves the public interest makes it much easier for government to serve as an effective cover for transfers from taxpayers to the politically connected wealthy.

Journalism that understood the idea of the public interest would shift focus and report on the way that big government creates incentives that both corrupts business and government, makes it increasingly difficult for government to serve it’s genuinely necessary functions, and wastes productive private resources that would otherwise be involved in cooperative wealth creation, rather than in competitive, zero-sum political predation. As Russ Roberts put it yesterday:

Perhaps the strangest thing of all is that modern day left of center folks think that corporations run America via their influence on the government. If you believe that, why would you want government to be more powerful? If corporations control the political process, why wouldn’t you be on my side, reducing the power of government?

This point, however, seems never to penetrate, and journalists persist in the fantasy that if only the right people had state power, then they could put the world aright. All the while, the people who have a lot to gain personally from political power continue to seek it and get it under the cover of the myth of the noble public servant.

  • Kent Guida
    There you go again--more knee-jerk anti-Halliburton rhetoric. If knee-jerk anti-Walmart rhetoric is something that should be criticized, and I agree it is, knee-jerk anti-Halliburton talk or anti-Halliburton talk as a knee-jerk anti-Bush proxy, is equally unsatisfactory. NPR assumes Walmart's enemies are in the right. Others assume Henry Waxman's attack on Halliburton is just. They are equally crude, thoughtless, casual, and neither should be tolerated.
  • Again, how does this particular story justify your point of view? If you don't even bother checking out whether Wal-mart really is in the wrong in this case, how do you know if NPR is not totally within bounds to characterize the gov. as the 'good guys' in this case?

    In any case, I find your argument that there is a popular conception of the government as universally benevolent and that is what is creating a hotbed for crony capitalism unconvincing. First of all, the American people is plenty cynical about gubmint. The problem is that it is a kind of passive, apathetic cynicism that numbs us to outrage like the no-bid contracts in Iraq. Of course, I'm just speculating here (as are you), but I think it is equally likely that there would be more concern over Halliburton if we had higher expectations of government and what it can achieve.
  • I was more annoyed by the usual naive assumed conception of government as defender of an uncontroversially shared idea of the public interest. Like I said, that's that kind of fog of misrepresentation behind which corruption and crony-capitalism lurks. The anti-business thing is really secondary.
  • This is kind of lame. You criticize media coverage for being anti-business, but you don't even bother to make sure the example you cite has an anti-business angle that is unjustified. This is all well and good if you're preaching to the libertarian choir, but if you want to cogently argue your point of view to those who don't share it, it is not enough to say "NPR is anti-walmart", but demonstrate within the context of this specific story that NPR got it wrong on walmart. Otherwise, you're just blowing so much hot air.
  • "makes it increasingly difficult for government to serve it's genuinely necessary functions..."

    But government has no genuinely necessary functions!
  • BTW, the fact that very few companies are really "hated" implies to me that such stigma must actually be pretty easy to avoid.
  • I'm not sure how precise we can be on this cheating and fairness. It seems to me to be a late-breaking field of study.

    But maybe we can look at it with a little comparative taxonomy ... why is Wal-Mart "bad" and Target "good?"

    If a Nike or a Home Depot successfully manages its social position ... should we blame the people for not liking Wal-Mart, or Wal-Mart for so ineffectively interacting with the people?

    There are probably human/tribal things going on here, in our interactions with corporate players, that we are too immersed in to even see.
  • Cheating implies breaking the rules. Sure, it happens, and sometimes it happens in big, obvious ways. But for the most part, rule-breaking is the purview of fly-by-night operators who look only to make a few bucks before cutting and running.

    Empires like Wal-Mart, like Microsoft, like ExxonMobil -- they usually don't have to break the rules. Instead, they rewrite the rules to better suit them.
  • I think the answer is to understand human nature, and not try to hammer it to fit a favorite economic theory, be that theory from the left or the right.
  • Teller
    odograph:

    Behaviour economics is not a against "conservative" economics. Hayek was a behavioural economist, so was Adam Smith. Issues such as fairness are part of market exchange.

    I don't agree that Wall Mart is cheating, Wall Mart never promissed it's workers something it is not delivering.

    On the other hand people, in a political discussion, are attacking wallmart because they emotionally it is "unfair". This is a great example of political faliure, that harmfull populist ideas effeckt politics.

    Hayek has very good theories why from an evolutionary perspective we humans cannnot understand the market, and consider it "unfair". For one thing mostpeople simply don't have modules to handle corporations, and just analyse them morally as if they were people "can't Wall-Mart give away a little money, he has so much".
  • My missing post hasn't shown up, so I'll do a variation on the same theme (without the links).

    I thought about this while on my hike, and just decided that I can't trust Wal-Mart at this point. It might be a "where there's smoke there's fire thing" but I worry that they might be cheaters.

    If anyone of you have read The Winner's Curse, you know that we are "economic" creatures, but that experiments often uncover "anomalies" of economic life that revolve around issues of fairness, and cheating. Game theory offers insight into why these rules might be advantageous over the long term.

    Books like "The Blank Slate" and "Cheating Monkeys and Citizen Bees" extend this idea a bit in terms of both brain mechanism and evolutionary advantage. There is some interesting work in this area, especially in studies that show we might share ideas of "economic exchange" and "fairness" with other creatures.

    Many of the posts above take this as a right/left split issue. That might be true, but I don't think the extremes really illuminate the issue.

    I guess the classically liberal stance would be that it is all about "fairness" and insuring such. On the other hand, the classically conservative stance would be that it is all about "economic exchange."

    Sorry guys (extremists) human nature includes both.

    Being a conservative-leaning-moderate I'll say that our nature is mostly about advantageous exchange, but that we carry very definite ideas of fairness within ourselves (certainly within the society, if not every individual).

    Companies which sail too close to the rocks, and become identified as "unfair" or "cheaters" suffer. That's just human society.
  • BillKorner
    Marketplace, the show Will was listening to, is produced by American Public Media which apparently has or had some ties with Public Radio International. What ties these organizations have with NPR or the Corporation for Public Broadcasting I do not know. Someone interested in actual facts may be able to enlighten us.
  • BillKorner
    BIRDZILLA et al: In fact the head of the Corporation for Public Broadcasting recently resigned in the face of a Congressional investigation tending to show that he was illegally exerting right-wing influence on programing.

    http://www.npr.org/templates/story/story.php?storyId=4989287

    Of course this does not show that NPR does not have a liberal bias or, for that matter, a liberal bias that is disadvantagous to the left.
  • BIRDZILLA
    No you ever expect anything less from NPR? its a leftist propeganda bunch they could easely use a TOKYO ROSE
  • I'll think about that on my hike, along with the more fundimental human question of whether I'm going to get 'et by a lion.

    I'm remembering now that I read a "my life at wal-mart" essay recently, by some manager that climbed through the ranks. I might have to find that again.
  • No, that's a pretty baseless assertion, if for no other reason than that, in those small handful of states that DO have these sorts of mandates, they don't actually apply to Wal-Mart! The federal Employee Retirement and Income Security Act of 1974 exempts large employers (those with more than 100 employees) from state-level mandates on what benefits they can or must offer.

    The Hawaii law is a special case, in that it was passed before ERISA and is considered grandfathered. But in Vermont, for instance, the law can only be applied in the small group market -- those with less than 100 employees. Thanks to the ballot initiative, California's law never had a chance to implemented. If it were, though, the provisions that sought to dictate rules to the large group plans almost certainly would have been struck down as incompatible with ERISA. There were a number of suits prepared by the Chamber of Commerce to do exactly that if the ballot question failed.

    It's to try to get around these sorts of state level laws that groups like the realtors and independent contractors have been lobbying for association health plans, which would put them on the same footing as the large group ERISA plans.

    But, anyway, I think the part of the issue that is widely misunderstood by the general public -- certainly by the media -- is that health benefits are not something offered IN ADDITION to salary, but rather, they are offered IN LIEU of salary. Because health benefits aren't taxed as income, the same level expenditure on labor can purchase more employee compensation by way of benefits than by way of wages. All else being equal, an employer has a strong incentive to offer health coverage instead of pay increases.

    And until very recently, this worked out quite well for employers, as the 1990s were marked by flat or declining health premiums as managed care grew in popularity. The switch in emphasis has really only come over the past four or five years, when wage inflation has been flat or declining, while health inflation has skyrocketed.
  • I put in a longer comment, with some links, that I think kind of spans the same territory as Will's economics and happiness blogs ... human nature.

    It got caught in the spam filter (because it has three links?). I hope it pops out soon ;-)
  • My question is whether they are gaming the system by overhiring to keep people below thresholds.
  • What you're referring to are state laws in some places that MANDATE that benefits be offered to employees who work over a certain number of hours per week, although even where in place (Vermont and Hawaii come to mind -- California's was repealed) the laws only apply to something approximating full-time work and allow companies reasonable waiting periods (three to six months are typical) before the law kicks in. Wal-Mart has a universal vesting period for benefits for all employees nationwide. It's not an especially generous coverage, but it's typical for retail work, and the fact that it is extended to all part-time employees who pass the threshhold is actually pretty unusual for retailers. Nonetheless, as I said, about half of their employees (including the vast bulk of their part-time employees) do not take them up on the offer.

    By the way, if you read the WaPo article more carefully, you'll the 600,000 figure you quoted is the number of employees who don't have COMPANY insurance. That's a very different thing from having 600,000 uninsured employees, as the bulk of those 600,000 draw their coverage from sources other than Wal-Mart. To be sure, Wal-Mart does have a significant uninsured contingent, but as in society at large, this contingent is heavily weighted toward younger, healthier employees who OPT not to pay premiums -- generally because they don't see health care as a priority and they'd rather pocket the cash.
  • R.J. - I'm a bit of an ameteur at this, but I thought many states and the federal government do have "hour-per-week" thresholds for various health insurance requirements?

    Maybe that's because I'm in California where there are more health rules than some other states?
  • Teller
    Some people say we need to teach liberal economics. I say arithmetics would get us a long way:

    Wall Mart doesn’t ultimately care whether the cost of labor it faces is 2000 in health care or 2000 in wages. So if you made wall mart pay for health care the cost of labor would go up. Either they would offer less wages or hire less people.

    There is really very little dispute over this. That is what is ment by “there is no such thing as a free luch”. There is no such thing as free health care.

    Now if the government decides it want to take my taxes and give it as “free” health care to certain type of workers that is not Wall Marsts fault, it’s the fault of government. Or maybe you like the policy, in which case it is no ones fault.

    But understand this. The core of the problem is that those workers are not very productive. Wallmart cannot magically make 20% of the population worth much more. There is not one once on indication Wall Mart is paying below market wage, so we know that the total compensation (inkl health care) responds to the productivity of the workers. If you make them pay for health care and keep the wages Wall Mart will hire less people.

    “Well, why not take a little of the massive profit Marx told us so much about and give those poor workers health care”

    There are two answers. Firstly profits are very small compared to wages. In the US economy 75% of earnings go towards wages, whereas after tax profits are 10% of Gross National Income. There is not that much you can take, and if you tax it further investments go down further.

    On a moral sence why is Wall Mart responsible to handle public welfare? If Liberals are such Good people why don’t they give the poor workers some of their money? Well I know the answer. They are not good people at all, they are just idiots who want to give away other peoples money. And by ignoring simple facts they impose

    As Will tries to explain, Wall Mart, because of profit by the way, has done more for American workers than all socialists and so called “liberals” combined. Cheaper goods for all and low skilled jobs for many.

    Having said that, I am very disappointed at Wilkinson for the “answer” he gave Kent. If you want the other side to use well reasoned arguments, why are you using an Michel Moore level “argument” against Halliburton?

    And “are you kidding” is no response. Is the underlying logic we all “know” evil men in suits run everything in a big conspiracy, who needs factual basis for accusations?

    I will make it simple. Can you give me evidence the stock price of Halliburton went up the day Bush got elected?
  • WIll Wilkinson
    Bill, I was hazily recalling what I heard on the radio, and I remember them telling me that no laws had been broken. I wasn't commenting on this particular case, which I know nothing about, just the annoying basic assumptions framing the segment.
  • odograph:

    Wal-Mart does not have a per-hour week threshhold to achieve eligibility for health benefits. It has an aggregate hours worked threshhold. When you've worked 1,000 hours -- which works out to about six months for full-time employees and usually about two years for part-time employees -- you are fully eligible benefits.

    In this respect, it offers much more than most big retailers do. And nearly half of those offered the benefits turn them down. I discuss some of the reasons why here:

    http://lehmann.typepad.com/in_lehmanns_terms/2005/10/adverse_selecti.html
  • BillKorner
    Boy, the liberal media are beating up Wal-mart on this!

    Let’s look at Fox News’s report on the Department of Labor’s “perfectly legal” (as Will says) acquiescence:

    “The provisions [of the settlement with Wal-mart] were principally written by Wal-Mart's lawyers, the report said, and were never challenged by the wage and hour division. Nor was the Labor Department's professional legal staff consulted or asked to participate in the negotiations, "despite extensive involvement of Wal-Mart's attorneys."
    …
    In some areas, the changes made by Wal-Mart's attorneys were significant. One version of the agreement, for example, had limited the advance-notice provision to child labor investigations only. Wal-Mart's lawyers "changed the wording of the scope to `any' wage and hour division audit or investigation," the [federal inspector general’s] report said.
    …
    Foot Locker and Sears stores have both received advance notice of investigations... but only under limited conditions and with strict, self-auditing procedures established in conjunction with the provisions.

    The Wal-Mart agreement, however, "was significantly different from other agreements" and "had the most far-reaching restrictions" on the division's authority to conduct investigations, the report said.

    "There is no conceivable way the wage and hour division or the Department of Labor as a whole can enforce the law in every workplace," said Seth Harris, a professor at the New York Law School and a top Labor Department official in the Clinton administration. But he said the Labor Department should have good reason to trust the companies to whom it gives such wide latitude.”

    I guess that Fox News has finally joined the liberal media! At least they point out that their source, the guy saying that Labor needs to be able to trust Wal-mart before they give them special breaks that other companies don’t get, did work for Clinton.

    Now, let’s see what liberal Fox News said about the Wilkenson/Roberts view that giving Labor more funding would just make them seek more rent with Wal-mart:

    “Given the Labor Department's daunting task - it has about 1,500 investigators to enforce labor laws at approximately 7 million U.S. workplaces - agreements that are geared toward encouraging compliance among employers rather than punishing them for violations can sometimes make strategic sense.”

    Hmmm. “Perfectly legal,” Will said. ???
  • anon
    At the end of the day, the Left is rational.

    It uses whatever arguments advance its cause.

    It knows that business corrupts government, but that on average, the knowledge Class is more influential in government than in industry.

    Hence, better a corrupt but malleable government, than a corrupt, but market-constrained industry.

    A Marxist would say that they are furthering their class interests.

    Or as a Russian professor told me, He may have been poorer under communism, but at least he was part of the elite, and there were no crude businessmen around to amass wealth greater than his.

    They believe in the State, because they are gambling that they will have more say in the State

    And judging by PBS, can you blame them?
  • Kent Guida
    No, Will, I am completely serious. Please enlighten me. Is endless repetetiton of a charge by NPR and Henry Waxman sufficient in your book? Is anyone doing business with DoD automatically corrupt? I have looked into the matter. What I see is a combination of the media's anti-business bias, its bias against the military in every form, and especially its desire to inflict damage on Bush. So please show me the evidence of corruption in the letting of Halliburton contracts.
  • BillKorner
    Wal-mart's public relations campaign, by which it portrays itself as acting in the public interest, is a model as these things go. It has its CEO addressing charges against it (as opposed to PR hirlings only). And it is actually collecting data on the complaints against it that (hopefully) will be available for public scrutiny.

    Corporate social responsibility may be a joke or worse, when it amounts to just giving to management's favorite charities. But Wal-mart's manuverings, even if they are targeted to appeal to the conscience of people who can afford Whole Foods, could open up a virtuous Pandora's box.

    (One might think that, at least, if one were optimistic to the point of delusion.)
  • To be honest Wil, you seem at the other extreme, to present it as "assumption" without even admitting the, possibly debatable, evidence.

    I can certainly differentiate between ill-concieved arguments against globalization or even big-box retailing, and the more specific problems with what I call "gaming the system."

    A quick search yields this story:

    http://www.washingtonpost.com/wp-dyn/content/article/2005/06/22/AR2005062202136.html

    Which mentions that WallMart has 600,000 employees without health benefits.

    As I understand it, they achieve that by "over hiring" and then keeping that many people (half a million?) below the hour-per-week thresholds that require insurace.

    In the public interest?
  • Kent, You're kidding me, right?
  • Kent Guida
    Perhaps this is tangential, perhaps not.
    What, exactly, is your basis for believing that Halliburton's work for DoD is somehow the product of corruption and rent-seeking? By throwing this canard into your post, might you not be accepting without question the very bias and prejudice you are pointing to at NPR?
  • Odograph, The recent propaganda war against Wal-Mart is precisely the sort of thing I'm talking about. It's based on flat out ignorance about the economics of labor markets. And the media just laps it up, being quite inclined to believe the worst about any company that makes a lot of money. That's why Wal-Mart is actually a great example of what I'm saying. Wal-Mart, by revolutionizing bulk purchasing, logistics and inventory, and thereby enabling lower prices on a huge array of goods, which pushed everyone else to follow their lead, has probably done more to improve the standard of living for Americans over the last several decade than any other institution. That is to say, Wal-Mart has directly and indirectly contributed to an increase in real wages for almost all consumers. The media is almost totally blind to this fact. All they see is that, yes, it is in fact pretty shitty to work in low-end retailing. They don't understand that Wal-Mart's profits are a consequence of extremely small margins. And so they just assume that there is no conflict between the entire world enjoying the benefits of Wal-Mart's low prices and Wal-Mart paying their employees more. I mean, look at those profits!
  • BTW, I am responding to the statement:

    "Wal-Mart was assumed to be an opportunistic, possibly predatory, profit-seeker."

    One need not "assume," one need only be cautious, after hearing various accusations of "bad practices" in the media.
  • I think the whole thing would fly better with some example other than WalMart. They are rumored, after all, to game the system so that their low level employees are compensated in part by the company, and in part by public assistence.

    People argue about whether that accusation is true .. but it certainly leaves enough of a taste right now to make one suspicious that they might be opposing "the public interest" in some things.
  • brig@ddt.com
    I think it's a kind of misplaced Kantianism. In other words, any sort of self-interest is morally impure, therefore profit seeking is wrong and government service is good, regardless of the actual value of either.
  • You sound like Ralph Nader.
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