Harvard Business School Professor J. Gunnar Trumbull balks at the ubiquitous idea that the concentrated power of a few billionaires controls public policy and government regulation. Exaggeration of the impact of big business on public policy, he says, comes at a high price, leading to a deep, widespread skepticism for the possibility of fair regulation. The power of big business is limited by the need to work with a range of powerful but diffuse societal groups.
In his new book, Strength in Numbers: The Political Power of Weak Interests, Trumbull argues that diffuse groups—including environmentalists, consumer activists, women's organizations, health-care advocates, and farmers—wield great influence in areas of regulation including trade, product safety, and labor.
Read an excerpt from the book.
"It's important to pay attention to how regulation is made," says Trumbull during a recent interview. "The start of properly regulating the economy is to understand how regulation is made, and this means forgetting what we thought we knew about the weakness of groups."
A consumer policy expert, Trumbull wrote Strength in Numbers after nearly a decade of research into sectors that shaped modern consumer society: agriculture, retail, pharmaceuticals, and the credit industry in post-World War II Germany, France, Britain, and the United States.
In postwar Europe and the United States, the consumer protection idea "emerged out of nowhere, and it ended up being one of the most intensive areas of regulation," he explains. In most cases, new regulations emerged from political coalitions forged between specific industries and groups of activist consumers.
Questioning The Unquestioned View
Trumbull nods in agreement when asked whether his ideas are controversial. That's largely because he is at odds with the theories of economist Mancur Olson, whose 1965 book, The Logic of Collective Action: Public Goods and the Theory of Groups, sparked a generation of political scientists and regulation theorists, including George Stigler, Sam Peltzman, and Russell Hardin.
A University of Maryland professor at the time of his death in 1998, Olson believed that big corporations and industry organizations wielded control over policy. Diffuse groups could not effect policy change because individuals within the group did not have a sufficiently large financial or social stake in the outcome, Olson argued. "It became the dominant, unquestioned view," Trumbull says.
Olson's beliefs have been popular with both liberals and conservatives, he observes. Liberals routinely believe that big banks and corporations control government policy, even if they're not happy about it. Conservatives favor less regulation of business, so they are eager to accept that advocacy groups have little control over public policy. But since the Second World War, Trumbull notes, a pro-business policy approach has given way to a stronger postwar regulatory environment powered by new kinds of groups and coalitions in the United States and Europe.
Within this new scenario, three groups play unique roles: policymakers who identify and use groups for support; companies that understand the interests of diffuse groups and tap them to reap larger profits or break into new markets; and activists who organize around interests to gain more public influence. The keys to success lie in the coalitions that can form between industry and activists, industry and the government, and social activists and the government, Trumbull says.
Proving The Strength Of Diffuse Groups
Take France for example. For years, organizations that formed outside the French government were widely considered "suspect" and not allowed to speak in the public interest. But by the late 1970s, "numerous, dynamic, and increasingly well-funded consumer groups emerged," Trumbull says. By 1980, France had more than a 1,000 local consumer unions taking price surveys, organizing product boycotts, and providing consumer remediation services.
“The start of properly regulating the economy is to understand how regulation is made, and this means forgetting what we thought we knew about the weakness of groups.”
France's consumer groups provided benefits to both members and nonmembers, negotiating advertising and product standards. "French consumer groups cultivated membership not by providing selective benefits, but by emphasizing their public purpose," Trumbull writes.
French consumers also fought for bankruptcy reform and interest rate caps. "These measures were not put in place because of the concentrated lobbying power of France's consumer lending sector," Trumbull says. Instead, French politicians worked closely with industry and family groups to develop regulations that promoted economic and social inclusion.
In the United States, time and again, strong policy narratives (such as the recent Occupy movement's move against "greedy" bankers) and interest group coalitions (such as the Sierra Club's and Greenpeace's environmental causes) have helped groups overcome the organizational challenges inherent to their large size, Trumbull says.
In the United States and France, large groups of farmers have worked with government to promote agricultural interests, says Trumbull, noting that the sector includes both small and large farms on the left and right of the political spectrum, all producing different products. In the book he cites France's National Federation of Farm Worker Unions (FNSEA); in 2006 FNSEA chief Patrick Ferrère said, "When the French Minister for Agriculture, whatever his political affiliation, wants to launch a reform or a new policy, he will meet with FNSEA's leaders and ask them their advice. We have a natural authority."
In retail, Trumbull found more evidence that diffuse groups impact outcome, comparing retail policy in France and Germany. Mom-and-pop stores in both countries have faced the threat of large retail chains that could undercut them on price and convenience. In France, small retailers organized aggressively against the big stores. A coalition emerged as a result of the work between the small retailers and the country's existing consumer associations.
In Germany, small retailers were less organized, but they won the fight, too. The retailers allied with the country's powerful service-sector trade union, which represented many retail employees who were fighting against working evening hours. Coalitions large and small were key to both wins, Trumbull observes.
Trumbull says he hopes the research will open up new areas of study, moving away from "narrow points of access to policy influence" toward "coalitions grounded in the public interest."
There is room for the left and right to work on complex regulatory issues through the filter of government agencies, industry, and user groups, he says. "Coalitions put limits on demands. The moderating effect is really important."