Thursday, December 13, 2012

Legalized Corruption

In the late 1970s, about the time I headed to Alaska where roadside billboards are banned in the state constitution, the State of South Dakota tried to billboard the entire state by strip zoning as commercial every inch of their Interstate highways and primary roadways.

Fortunately, back then, businesses that sought fortune by influencing government decisions for private gain (aka rent-seeking) had not yet stripped the backbone out of federal, state and local government agencies to the degree they have today.

In 1966, after having achieved generous concessions that led to the compromise that forged the national Highway Beautification Act, billboard companies and their lobbyists immediately set out at the state and local levels to circumvent the very compromise to which they had agreed.

South Dakota obliged but it ran into Dick Moeller, then a newly-appointed Chief for the Junkyard and Outdoor Advertising Branch of the Federal Highway Administration in Washington D.C.

The Beautification Act banned new billboards nationwide except for areas zoned industrial or commercial.  This was meant to protect the scenic character as well as the environment along roadways in all areas that were not already desecrated.  The act also created the much less obtrusive, but far more effective, logo sign programs for businesses located near highway exits.

While formation of the Beautification act began in 1964 when President Lyndon Johnson challenged US Secretary of Commerce and former North Carolina Governor Luther Hodges to do something to clean up the roadsides and formation of a Task Force and the 1965 White House Conference on Natural Beauty, in the end it was all but gutted by allies of the outdoor billboard industry.

FHWA determined South Dakota’s move wasn’t bona fide under the law and assessed the state a 10% penalty to be withheld from highway funds distributed to states by the federal government.  Pushing and shoving by powerful interests as well as campaign donations had little effect and as a result more enlightened interests were able to prevail in South Dakota.

Oh, how things have changed!  Weaseling favorable treatment from government has now permeated legislative bodies, commissions and even administrators at every level.

Even those officials who might vociferously object to such a characterization are betrayed by how enthusiastically they embrace requests from special interests vs. how slowly they are to respond to popular will or to stand firm when attempts are made to circumvent or hollow out laws and ordinances.

That may not be their intent, but it has been documented in research by Vanderbilt professor Dr. Larry Bartels showing that officials are 50% more likely to react to affluent constituents in the top third of income distribution compared to those in the middle and not at all to the poor.  It is no wonder that they are perceived by the general public to be sycophants to special interests.

Financial executives may have taken the winning of favored treatment from government to a new level over the past three decades, in part, to leapfrog themselves to the head of the 1%.  But it is hardly coincidence that those who colluded a few years ago to hollow out North Carolina’s billboard legislation hail from the nation’s three least trusted professions: car dealers, lawmakers and advertising practitioners.

Americans look down on the explicit corruption such as bribery in other countries, but what has become far more prevalent here is what Daniel Kaufmann, formerly of the World Bank and Brookings Institution and now head of the Revenue Watch Institute, defines and measures as “legal corruption.” 

People (and organizations) who mine government for favorable treatment hate the term rent-seeking.  Even to those who don’t know the meaning of the term, it seems slimy and demeaning, so perpetrators instead hide behind euphemisms such as, “deregulation,” “customer service,” privatization, “streamlining” and more recently, “systemic capture.”

Roadways are where it may be easiest to view the results of “legalized corruption” or “seeking rule changes for personal gain rather than to benefit the general public.”  For instance, down-east as I-40 cuts across the North Carolina coastal plain, residents and visitors alike are suddenly treated to a forest of billboard blight.

Protected by as well as catering to powerful special interests, officials in an extremely rural area along that stretch were successful at doing what South Dakota wasn’t: strip zoning roadsides as commercial areas occupied only by a row of huge billboards.  In cases such as these, billboarders are often caught establishing phony businesses in vacant buildings as a technical hedge.

The billboards pay next to nothing in fees and less than the cost of a steak dinner in taxes and their only value is created by publicly-funded highways.  So the only reason or purpose that can be conceived for this roadway circumvention and desecration must clearly be an effort to grant special favor at the expense of the public interest.

Nothing was done because those seeking these special favors have long since used similar techniques to neutralize or tie the hands of state and federal regulators and any related-commissions who would have levied sanctions had this been the late 1970s.

Billboard companies and their operatives have become expert at neutralizing government administrators by insisting that they remain “objective” whenever a concern is raised, rather than standing up for the public interest which essentially leaves the general public befuddled.

I saw this happen a few years ago in Durham, NC, where I live, when billboard operatives made a proposal to pry open Durham’s wildly popular 1984 ban on outdoor billboards.

Citizens expected city administrators to step up immediately and emphatically make the case for the long-standing ordinance, but they waited in vein.  Lobbyists for the billboarders had already politicized the process by demanding that city officials be “objective” and labeling any comments in defense of the statute as “personal opinion.”

In reality, this meant, “sit on your hands,” while we create as much public confusion as possible in an attempt to win approval.  This included luring non-profits and even some public agencies into voicing support by offering them free space on billboards while failing to mention that the proposal was contrary to current policy which was then, and still is, favored among residents by more than 9 to 1.

A few took the bait and I was complicit when someone with whom I served on a non-profit board surprisingly gave support to changing the ban.  I sat stunned as a committee that included one or more billboard interests recommended support for the change without ever once hearing from city officials on behalf of the existing ordinance.

I was caught off guard when a friend who headed another non-profit that had been approached voiced support and pressed for a board vote with little other discussion and before any presentation of the other side of the issue by city officials.  All the while, a billboarder who was a member of the body at the time failed to recuse himself.

Although refusing to vote, I am as responsible as anyone for not finding my voice in time to vociferously oppose what occurred that day.  I tried to make up for it later but the lesson is that even non-profits can be victims, if not complicit, to the techniques used to leverage what Kaufmann calls legal corruption.

Mystified by why those thought to be paid to enforce and passionately advocate for the current policy sat mute, a grass-roots movement of citizens came to the rescue and the proposal was eventually defeated, leaving the ban in tact. Only at the very end of the process did administrators speak to the issue and even then it was done in guarded terms and flat tones assured to be deemed objective.

There may be a lot of ways for citizens to get clarifications about public policy but special interests have made it all but impossible for those to be officially broadcast.

Failing in Durham, billboard interests set about instead to push a measure through the legislature which made state roads immune from local control as they run through communities and reneging on earlier compromises that had already doubled the area beyond what is needed for them to be viewed.

It is impossible to compromise with billboard interests.

Just this year, I’ve watched as an oversight board for the state agency overseeing billboard control asked to hear from all sides regarding the legislation.  However, only billboard representatives were invited to speak until Scenic North Carolina insisted on having the same opportunity at a subsequent meeting to speak on behalf of North Carolinians who overwhelmingly object to new legislation.

A commission that fronts for the legislature in the rules-making process has worked hand-in-hand with the billboard industry and ordered a state agency to compromise with these special interests, confirming what Kauffman writes about the pervasiveness of legal corruption as a means to seek private gain from government decisions.

It’s all legal.  Legalized corruption.  Capitalism is not to blame, according to Dr. Luigi Zingales at the University of Chicago Booth School of Business, because this type of corruption is the enemy of pro-market, seeking instead to tilt the playing field in one direction or another on behalf of special interests but not to level it.

It is also the story behind the story that is rarely written or told and the question behind the question that is rarely asked at the very bottom of why democratic governments can become marginalized and alienated from the popular will.

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