When corporations capture the state: corporate lobbying and democracy

26 May 2010

Washington-style practices of corporate lobbying have crept up on New Delhi politics, subverting the policy-making process to meet the profit imperatives of private corporations. The new trend of corporate lobbying in India presents a real and serious threat to democracy.

Several recent developments, including the release of intercepts of a telephone conversation between corporate lobbyist Niira Radia and a Dravida Munnetra Kazhagam MP; a Parliament uproar over the underselling of telecommunications spectrum; and media stories on the growing power of the lobbyist–politician–policymaker nexus, have highlighted a major affliction of the Indian polity which should concern all conscientious citizens.

Lobbyists have come to acquire enormous clout, to the point of influencing the choice of Cabinet minister, nominating key bureaucrats, and formulating economic and industrial policies at the nuts-and-bolts level.

Indeed, the tapped telephone conversation shows that Ms Radia played a pivotal role in ensuring that the telecommunications portfolio would go to the DMK’s A Raja in the second government formed by the United Progressive Alliance, and that he would be elevated to Cabinet rank. Also discussed was the power struggle within the DMK, which saw Mr M Karunanidhi’s immediate family loyalists outmanoeuvre their cousins, in particular Mr Dayanidhi Maran, who was moved from the communications portfolio he held in UPA-1 to textiles. There are other instances too of lobbyists intrusively interfering with policymaking processes, political party affairs and parliamentary dynamics in ways which would have been unthinkable only years ago.

Crony capitalism in New Delhi

Corporate lobbyists have become important mediators — and sometimes active players — in business-government relations in a number of areas, including the infrastructure (highways, ports and huge projects under the Jawaharlal Nehru National Urban Renewal Mission in 63 cities), energy (including gas, oil and energy), telecom (where the 3G auction bids show that the earlier 2G-spectrum were sold at a fraction of the market price), and mining (where global conglomerates have developed stakes running into billions of dollars in India's tribal heartland). Not to be ignored is the clout that lobbyists wield in military contracts, agribusiness, seeds, civil aviation, and opening up retail trade to organised business, including multinational hypermarket chains like Metro, Carrefour and Wal-Mart.

Corporate lobbying has become the highest embodiment of crony capitalism in India. It has developed into a formidable industry, with at least 30 major firms based in New Delhi alone. Each of them appoints dozens of "facilitators", "account executives", point-persons and lawyers, all dedicated to securing sweetheart deals and licences for their clients, and just as importantly, ensuring that their clients' rivals don't get them.

Some of these companies, such as Integral PR, Perfect Relations and Genesis PR, started as straightforward public relations firms, but have diversified into corporate advocacy and lobbying. Others, like Niira Radia's Vaishnavi, Neucon and Noesis, Suhel Seth's Counselage, or Deepak Talwar's DTA Associates, were launched with corporate lobbying as their core business.

Unlike advertising agencies, which offer certain services to whoever is willing to pay, lobbying companies are intimately allied in what may be called political ways with specific business groups. Since they have access to business secrets, including knowledge of malpractices, their loyalty to individual industry magnates is all-important. In addition, there are individual entrepreneur-lobbyists like MPs Amar Singh and NK Singh, who work for different clients.

Unsubtle practices and media manipulation

Common to them are all the slick techniques and skills that successful, if unscrupulous, lobbying requires, including ability to cherry-pick facts that suit/favour the client; make attractive PowerPoint presentations that suggest familiarity with the subject, if not mastery of it; determination not to be fazed by hostile interactions; knowledge of which keywords to use and which buttons to press.

What matters above all is the ability to do social networking, spend lavishly, throw dazzling parties and please industrial magnates, politicians and key bureaucrats by finding out their strengths and weaknesses and shamelessly exploiting them to the point of blackmail. The lobbyists aren't "the hidden persuaders" of the advertising world. They are typically flamboyant people, high-profile, even exhibitionist.

In some cases, e.g. Mr Talwar's, success in swinging spectacular deals for his clients like Coca-Cola depends on personal proximity to key bureaucrats, such as former principal secretary to the Prime Minister AN Varma during the 1990s. (Mr Talwar has recently cultivated civil aviation minister Praful Patel, allegedly to promote his own interests in duty-free shopping at airports.)

In many cases, it's the sheer number of people on their payroll which give lobbyists the enormous reach and influence they wield—ranging from business journalists to TV anchors, from personal assistants to middle-level bureaucrats all the way to top-ranking ministers, and from law firms (who can deliver subtle threats) to key officials in the income-tax department, who can be used to coerce and cajole decision-makers. Some TV anchors were implicated in lobbying for high berths in UPA-2 for certain MPs. Corporate lobbyists assiduously cultivate the media, which duly returns the favour.

As many journalists well know, the second mode of operation is typical of some of India's biggest corporate conglomerates, who plant their loyalists in every major media outlet and agency. Their key personnel get to know — typically in advance of the news editor — just which stories are set to appear in all the relevant papers which might affect their interests or their rivals'. They work in a mafia-style manner to kill the story if it's inconvenient or "hostile", and to have it played up if it favours them. This doesn't have to be done at the state, divisional or district level. Controlling the top papers and channels at their headquarters and influencing other key agencies is effective enough. If all else fails, what always works is the threat of withdrawing advertising support.

From Washington to New Delhi: a worrying new trend in Indian politics

The reach, political influence and financial power of the corporate lobbyists, as well as the fervour of their activity, has acquired wholly new and menacing dimensions in the past decade or so. It's not that there were no lobbyists earlier. There were — from individual influence-peddlers like SK Patil and Rajni Patel in the 1960s and 1970s, to the organised "liaison agents" of the 1980s who hung around Udyog Bhavan and Raksha Bhavan, the headquarters of the industry and defence ministries. But the business didn't have an organised character, a sharp enough focus, concentration of high-level manpower, and even one-hundredth of the ability to secure shady deals.

Precisely because India is furiously globalising and energetically pursuing neoliberal policies, Big Business today has an incomparably bigger stake than in the past in securing windfall contracts for highway, airport and flyover construction and special economic zones; in privatising natural resources and obtaining leases on land, water, minerals and forests; in rigging the capital markets; in opening up foreign air travel routes to private airlines; in helping multinational corporations to penetrate retail trade; in taking over city bus transportation at assured super-profits; and in invading the public sphere so that foodgrains can be diverted to alcohol production, and pricey, artificially flavoured biscuits can displace wholesome, nutritious, freshly cooked food in mid-day meal schemes for school children. So much for the much-vaunted "free market"!

Such blatant manipulation of the entire policy-making apparatus makes old-style "licence-permit Raj"—always exaggerated for its supposedly debilitating impact on the economy, and forever deftly manipulated by business groups—pale in comparison. Then, the bureaucrat had to be influenced and induced to open up a partially-closed system. Now, the bureaucrat is an already-willing ally of Big Business. The contest is over who will secure the favour first to keep the rival out.

Secondly, lobbying is about recruiting as many retired top-ranking public servants as possible so they can influence their former colleagues and juniors on their clients' behalf. Thus, private oil, gas and electricity companies, steel producers, telecom corporations and airlines have all recruited retired bureaucrats or public sector executives. This pernicious practice should be banned and punished. No retiree should be allowed to accept any position in a related company for 10 years.

Another characteristic of the new-generation corporate lobbyists is their strong global connections. They work closely with organisations like the US-India Business Council and with major Western lobbying firms like Patton Boggs and Burson-Marsteller, which are big players in Washington. The US capital is said to be crawling with 17,000 registered lobbyists. It won't be an exaggeration to say that the US-India nuclear deal would probably not have gone through the US Congress without the efforts of the USIBC, Patton Boggs and the American-Israeli Political Action Council.

Corporate lobbying is far more insidious and commercially collusive than the politician-criminal nexus. It's also much more damaging at the national level. Lobbyists exert the most pernicious conceivable influence on policy-making and corrupt the process of democracy. They introduce irrational and extraneous elements in decision-making and subvert the public interest. They add uniquely to sleaze, venality, cynicism and corruption in the entire polity.

Way back in the 1980s, the Indian political class acknowledged the corrosive role of lobbyists in military contracts and altogether banned middlemen from defence purchase negotiations. But now it has succumbed to that very influence on a gigantically greater scale — not just in military contracts, but in every sphere. Unless this toxic influence is removed, and lobbying is outlawed and punished, it will undermine and hollow out Indian democracy, our most precious possession. Democracy must be defended against business manipulation and predatory corporate lobbying.