Interest Groups and the Rise, or Decline, of the American Nation

Future historians seeking clues to explain either the resurgence or decline of the United States may find a significant one in the outcome of a series of legislative and court battles pitting Tesla Motors against car dealers around the nation. The latter are trying to—and have, to varying degrees, succeeded in— gaming state legislatures to prevent the electric-auto maker from selling directly to consumers. The fate of the republic does not hinge on this battle. But Mancur Olson teaches it does depend on something else: the nation’s ability to adapt and, therefore, to resist the accretion of interest groups who organize to protect gains by inhibiting change.

Olson’s landmark The Rise and Decline of Nations built on his earlier classic The Logic of Collective Action, proffering the thesis that one cause of the relative decline of nations was the accumulation of interest groups that impede adaptation. This helped, he theorized, to explain relative declines ranging from the Roman Empire to the post-war “British disease.”

The United States may be at or at least approaching this stage, of which the Tesla episode is but one of many illustrations. The typical explanation for them is corruption. But a combination of Olson’s insights and the Tesla case suggest that while corruption may be a sufficient explanation for the favors granted to interest groups, it is not a necessary one.

By “corruption,” we typically mean “campaign contributions,” not the briefcase-full-of-cash model that has largely been eradicated from American politics. Yet contributions are only good for purchasing the means of persuasion with an eye toward obtaining votes. In any case, the candidate with the most votes, not the most contributions, still wins. And polling shows that upwards of 80 percent of respondents in states surveyed—north of 90 percent in some cases—believe Tesla should be able to sell directly. Trading a policy with which eight of ten voters disagree in exchange for a limited campaign donation that can only be used to reach a fraction of them is a fool’s bargain. So why do the car dealers prevail?

Olson shows the answer: The car dealers’ interest is intense, while the consumers’ is diffuse. A car dealer will most certainly cast his or her ballot based on a legislator’s position on the Tesla issue; a consumer is likely to be motivated by other issues. And here we come to the root of the problem: It is the multiplicity of those issues, not corruption per se, that establishes the culture in which interest groups flourish.

Another way of putting the point in Tesla’s case is to ask this question: Why are legislatures armed with the coercive power of the state legislating in this area at all? The answer, the dealers claim—this is pure cant, but let us play along—is consumer protection. A better reason is Giovanni Sartori’s “mania for lawmaking,” associated with the myth that the legislator’s job is to legislate rather than to govern. The more laws the legislature passes, the less any single one of them counts at election time; the less any one of them counts to the average voter, the easier it is for interest groups to capture them.

That analysis, in turn, suggests why campaign-finance reform is a political puritans’ mirage.  It is based on a fundamental misdiagnosis of the problem of pressure-group influence.  Campaign contributions could be eliminated from the political system altogether and these nooks and crannies would still be subject to capture so long as legislatures pass laws in bulk volume.

This they will do, in turn, so long as they view their job as “protecting” the people, particularly from the consequences of their own choices, of which buying cars from manufacturers ranks as only one example among many.  They will view their jobs this way, in turn again, so long as people seek “protection” not merely in their capacities as citizens but also in paltrier roles such as consumers in which they are generally capable of making choices of their own.  That is not to say consumer protection laws are unnecessary.  It is to say there is a tradeoff between the volume of them and whether they actually protect consumers, since the more that are passed, the likelier they are to be subject to manipulation by interest groups who hardly have consumers’ wellbeing in mind.

Among Olson’s myriad insights was that the general accretion of these groups can also retard adaptation. Whether Tesla’s electric car is an adaptation the economy ought to make is, of course, an open question. But it is the kind of decision those who suspect concentrated power believe that diffuse markets, not discrete legislatures, ought to make.