Bootleggers & Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics (4 page)

The data show the large reduction in growth that occurred from 1971 to 1980. Some recovery takes place in the 1990s, but severe deterioration in growth occurs in the most recent decade. Clearly, this is not merely a function of the recent recession: the growth rate for 2000 to 2007 is still anemic. Obviously, regulatory expansion is hardly the only factor that affects GDP growth, but the scholarship on the matter leaves no doubt that regulation has taken a toll on the economy.
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Regulating the Regulators

As the newly formed and expanded regulatory agencies followed their congressional mandates and started pumping out new rules, few observers of the political process could believe what they were seeing. According to Eads and Fix (1984, 46–47), President Richard Nixon became so concerned by the unexpected flow of rules from the EPA, an organization his administration had spawned, that he called on OMB director George Shultz to find a way to rein in the regulators. Shultz and the Nixon White House team responded with the Quality of Life Review, located in the OMB, which required agencies to subject regulations to benefit/cost and economic impact analysis—and then to have the newly proposed rules reviewed by OMB officials.

The Quality of Life Review process was the first in a series of presidential initiatives developed to monitor and manage the growth of regulation. Following President Nixon’s move, each subsequent president added new features to the review process that is today managed by the OMB Office of Information and Regulatory Affairs. A recent executive order issued by President Obama added a few important features to the review process, which we will touch on later. But in every case, presidents—who are in charge of all executive branch agencies and hire and fire their leaders—placed the review process within the White House.

Generally speaking, the regulatory review process has one official purpose: to reduce the cost of achieving stated regulatory goals. Put another way, the focus is on economic efficiency, reflecting a desire to serve the public interest. Very few scholars in the early 1970s and 1980s saw federal regulation as a way to serve private interests. Adam Smith’s warning was not heeded. And there was little recognition that rules promulgated in the public interest might also win support by serving far narrower private ends. The theory of Bootleggers and Baptists had not yet seen the light of day.

Four Modes of Bootlegger/Baptist Interaction

Now that we have documented the rise of Bootlegger/Baptist activity in the form of social regulation, let’s revisit the four modes of Bootlegger/Baptist interaction we introduced previously. These modes are listed here in order of complexity: covert, noncooperative, cooperative, and coordinated. We start with covert strategies, where Bootleggers have not quite found their Baptist and thus try to assume the role themselves, albeit “covertly.”

Covert Strategy

Bootleggers aren’t shy about advocating directly for their own interests, as the billions spent each year on professional lobbyists amply demonstrate. Even when Bootleggers push their interests without the help of a Baptist group, adopting Baptist rhetoric is often still to their advantage. Restrictions on trade, for instance, tend to protect domestic producers from foreign competition at the expense of consumers—but saying so overtly is a poor way to win political support for such measures. Unsurprisingly, domestic producers who lobby for higher trade barriers use a covert strategy by claiming to have just the opposite aim: protecting consumers from their foreign competitors!

Thus, we discover Francis Cabot Lowell, founder of the U.S. textile industry in Lowell, Massachusetts, successfully petitioning the U.S. Congress in 1816 to impose an 83.5 percent tariff on Indian cotton and English imports. The items, he said, “[were] made of very inferior materials and are manufactured in a manner calculated to deceive rather than serve the consumer” (Yafa 2005, 107). Again we find a public interest justification for constraining market supply. Lowell successfully agitated for legislation that raised his rivals’ cost in the international market, and then he artfully obtained a tariff exemption for his own firm. This story’s signal element is the two-fold process that raised rivals’ costs: the U.S. industry gained a competitive advantage over India’s producers, and Lowell gained a specialized payoff within the constrained market.

The limits of the covert strategy may be illustrated in a more recent case: the January 2012 debate over a controversial piece of legislation known as SOPA—the Stop Online Piracy Act—whose passage had been deemed a top priority by the music and movie industries, as represented by the Recording Industry Association of America and the Motion Picture Association of America (Schatz 2012). Among other things, the law would have created a streamlined process for designating foreign-based Internet sites as havens for copyright piracy, requiring Internet providers to block them and obligating search engines and certain other domestic websites to refrain from linking them. Eliminating piracy has a nice Baptist ring to it: at least that is what the Bootleggers thought when they built their argument.

Though it was not framed in this way, SOPA can be thought of as a concealed subsidy to copyright owners. Typically, copyright claims are enforced through civil litigation by the holder of the copyright at its own expense. Many online “file lockers” have indeed been sued by content companies; yet often it was the alleged “pirate sites” that proved victorious in court, because website operators are generally not liable for infringing files uploaded by their users unless the operators actively encourage illegal conduct. The blocking process that SOPA would have established was, in essence, a mechanism for offloading the costs of enforcing content-industry copyrights onto technology companies and taxpayers.

As might be expected, many major U.S. tech companies are not enthusiastic about being drafted into the role of copyright police, and given the government’s spotty record of accurately identifying “pirate” sites, tech investors feared that startups enabling users to upload content could too easily be cut off from U.S. users—a potential death sentence for a fledgling firm (Morath and Fowler 2012). These groups lobbied against the proposed legislation as vigorously as the content industries had lobbied for it.

Baptist arguments were to be found on both sides. Supporters of the law condemned overseas file lockers for enriching themselves at the expense of American artists, and content-industry workers and warned that unchecked piracy would impoverish public culture by making the production of new creative works less economically viable. In addition to raising a variety of technical objections, opponents blasted the law’s domain-blocking provisions as a form of censorship without due process and argued that it would symbolically undermine the global push for Internet freedom, emboldening repressive regimes to claim that even the liberty-loving United States did not adhere to its own rhetoric of openness.

While the pro-SOPA arguments were primarily advanced by the studios and labels themselves, covertly attempting to disguise their economic interests as a social benefit, opposition to the law was publicly spearheaded by an array of well-established civil liberties and human rights groups—real Baptists. These included the American Civil Liberties Union, the Electronic Frontier Foundation, Reporters without Borders, Human Rights Watch, the Center for Democracy and Technology, and the American Library Association (Kang 2011).

Internet users preferred the real Baptists to the fake ones. On January 18, 2012, constituents flooded congressional switchboards in such overwhelming numbers that by the end of the day, many of the law’s own cosponsors declared they had seen the light and joined the ranks of the opposition (Kane 2012). Although many factors shaped the public’s response—not least the objective merits of the arguments on each side—it seems plausible that many were predisposed to give greater credence to moral arguments delivered by Baptist groups whose perceived raison d’être was principle rather than profit.

Noncooperative Strategy

Moralized calls for political action may be initiated by Bootleggers deploying Baptist rhetoric, as seen in the case of SOPA and other proposals to crack down on copyright piracy. But often the shifting sands of economic interests bring Bootleggers in as latecomers to long-standing moral crusades, thereby providing Baptists with the decisive boost they need to achieve their aims. Economist Howard Marvel (1977) tells one such story in his account of the implementation of England’s Factory Act of 1833, then known as Althorp’s Factory Act. Marvel’s analysis notes that the law was hailed as a humanitarian move that placed burgeoning textile mill operators under the authority of England’s Home Office, banned the use of child workers under 9 years of age, and restricted hours and work conditions for those under 18.

Prominent members of England’s landed aristocracy had long sought to bring cotton mills under the protective wing of government, without success. But the political balance was changing, along with the textile industry itself. Textile districts had gained seats in Parliament, and developments in cotton-processing technology—which dramatically altered production costs—were generating differential effects across the industry.

The effect of technology on Bootlegger/Baptist interaction is the unique feature of this story. A host of new manufacturing plants was being driven by steam engines rather than by water wheels. The newer steam-driven plants required less labor and were not affected by periods of low water flow, during which the older water-driven plants operated longer hours to catch up on production. The older plants were thus seen as abusive by some, because they employed more children to work the longer days.

Marvel’s review tells us that the factory districts supported the new Factory Act, but the support was not monolithic. His study of the vote led him to conclude that:

[The law] was, instead, drafted at the behest of the leading textile manufacturers who intended it to have a discernible impact on textile industry operations. Its purpose was to increase the cost of production of many of the smaller textile mills, thereby causing them to curtail their output. The legislation was designed to have differential impact on textile production, harming some manufacturers while benefiting others. The group standing to gain was the large urban manufacturers who relied on steam engines to drive their machinery. Such steam-powered mills not only employed relatively fewer very young children, but were less susceptible to production interruptions than were the water-powered mills. The latter were dependent on nature to keep their reservoirs full and often had to cut hours in dry spells while working extended hours when sufficient water was available. (Marvel 1977, 387–88)

Marvel found that industry output fell significantly more for water-driven mills than for steam-driven mills. Changing technology was thus the key to a story featuring Bootleggers (the operators of the steam-driven mills), Baptists (public interest groups that lobbied for improved working conditions), and a regulation that predictably imposed higher costs on a specific subgroup of manufacturers. As in the story of Francis Cabot Lowell, some of the law’s supporters were covert Bootleggers in Baptist clothing—enlightened industrialists who, it would seem, found a profitable way to achieve improved working conditions in England’s burgeoning cotton mill industry. Some might say they did well while doing good.

About 50 years after the passage of the Factory Acts, another Bootlegger/Baptist episode occurred in London, where William Booth’s newly organized Salvation Army was working to improve the lives and save the souls of the city’s downtrodden (Hattersley 1999). This time, instead of Bootleggers and Baptists, Methodists and brewers formed the coalition opposing Booth’s efforts. But in this case, as we explain below, a critical element for success was missing—and the effect of the missing element is what makes this case interesting.

A visit to the Salvation Army website provides a brief history of this Protestant church, founded by Booth in 1852. A Methodist minister, he decided to take his ministry to the streets. According to the website: “Booth abandoned the conventional concept of the church and a pulpit, instead taking his message to the people. His fervor led to disagreement with church leaders in London, who preferred traditional methods” (Salvation Army 2013). The more traditional churches felt threatened by this new competition from Booth and his unconventional methods, whereas the minister’s uncompromising attack on alcohol was too much for the brewers. Yet this seemingly potent coalition of brewers and Methodists ultimately failed.

Booth had been a minister in good standing with the Methodists before stepping out on his own to build his unconventional movement, dedicated to helping the urban poor wherever they might be found. Delivering the movement’s message through uniformed marching bands and preaching in the streets, Booth and his noisy band of disciples began to attract huge followings wherever they traveled. Preaching against any consumption of alcoholic beverages, the Salvation Army called on sinners to repent and change their ways.