Regulatory Capture, Ancient and Modern

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Regulatory capture’s antecedents in political thought—which date back to ancient Greece—inform the modern concept.

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Until recently, the term regulatory capture seemed stale, a mid-20th century academic construct incapable of describing the latest manifestations of special interest influence. At the opportune time, new empirical work by academics, featured in Daniel Carpenter’s and David Moss’s book Preventing Regulatory Capture, refines the concept to discern and measure capture more accurately, and, in that matter, engender plausible, contextual solutions. Many of the novel forms capture now takes and the projected remedies, are covered in the essays in this The Regulatory Review series. At this point, a brief history of the concept of capture, in particular its antecedents in political thought, may inform, if not entertain.

It is possible to find the provenance of regulatory capture in classical republican thought. Slinking alongside the self-sacrificing virtue needed to sustain the political community was the concept of corruption. Corruption, of course, is a vague pejorative encompassing everything from graft to moral depravity. There is, however, a particular historical use of the term that contains the key element of capture, specifically the concern that private interests are intruding in the public sphere—a boundary has been crossed. In earliest incarnations, we find it in the classical anxiety over the tyrant, who swallows government entirely, depriving citizens of access to the public realm and the chance to participate in political affairs. For Plato, this confinement to the private sphere of the domestic was the most baleful and dehumanizing effect of tyrannical government. By way of a gloss, Aristotle added that the tyrant reduces to his own personal self-interest the common good, which rightly is the product of shared deliberation in assemblies.

The Roman Constitution, which was unwritten, devised a solution for tyranny into which the Greek republics invariably descended. As described by the Greek historian Polybius, mixed government combined the rule of the one (monarchy), the few (aristocracy), and the many (democracy), by providing each caste with its own governmental institutions, which zealously guarded their prerogatives. Patricians composed the senate and the consulate, while the plebians had the tribunate and the assemblies. Delayed rather than defeated, tyranny reappeared, but its path charted a more sophisticated course as chronicled by Cicero and Sallust. The late Roman republicans honed in on a specific type of corruption: as Rome expanded, the private financial interests of the patrician class became parasitic on the government, through acquiring, at cutthroat prices, land conquered by Roman legions that should have been distributed to plebians. The civil wars ensued and ensured the rise of Caesar.

The next phase in the evolution of capture came in the precocious city-states of Renaissance Italy. In Venice, Milan, and especially Florence, many of the recognizable accoutrements of the modern state appeared: centralized administrative bureaucracies and complex commercial economies. The Florentine Republic, in particular, struggled to be both broadly participatory, by standards of the time, and effective. Over the course of the 15th century, governmental decision-making, though ostensibly open to all citizens selected to take part in various government councils through sortition (rapid rotation in office prevented any one citizen from accumulating too much power), was increasingly confined to a small elite of great merchants and bankers. Foremost among them were the Medici, the bankers who, according to Italian diplomat and political philosopher Niccolò Machiavelli, acquired outsized political power via private means—essentially through an extensive network of loans and private favors—to win partisans, who would in turn serve in public office so that the Medici need never serve. So successful was this subversion of state that Lorenzo de Medici, while a private citizen, was given free rein to negotiate treaties with foreign powers. More relevant to our purposes, Lorenzo was granted special tax concessions in 1482 “to preserve the public interest by preserving Lorenzo,” the official documents intoned.

Solutions were offered. Machiavelli was an early proponent of transparency. Francesco Guicciardini, a historian and statesman, suggested shoving the grandi into a powerful senate, in the faint hope that blatant oligarchy might rise to aristocracy given the chance. States, as we all know, can go backwards rather than forwards. What was a dynamic, prosperous city-state, weakened by incessant war, became a patrimonial state, the inheritance of the Medici, who suborned the machinery of state to serve their family interests and those of their courtiers. Banking and the wool industry withered. Patrimonialism may well be the culmination of capture.

Early modern France pioneered another historical variant of capture in the staffing of its administrative state. The Bourbon monarchs ingeniously extended their power by hiring, or more accurately selling, judicial and financial offices. The new cadre of officials drawn from the bourgeoise (the luckiest would catapult to noblesse de robe), fanning across the realm, held proprietary rights to their offices, which could be inherited as well as sold, thus forming a source of wealth for succeeding generations. Serving the state was a commercial enterprise, but that, in itself, is not where capture figures in the story. Because the vast majority of officials were middle class, historians have argued that venal, hereditary office holding represented an embourgeoisement of the monarchy, ironically restraining absolutism rather than enhancing it. Chosen to fulfill the ambitions of absolute monarchs who were anxious to eliminate aristocratic feudal privileges, middle-class officials captured the monarchy.

18th century Britain was a monarchy (or a republic masquerading as a monarchy, according to the French political philosopher Montesquieu), but that did not immunize it from criticisms of corruption leveled in language heavy with hints of capture. In the early 18th century, “country” (in contrast to court) politicians spearheaded by Viscount Bolingbroke complained that through the prerogative of bestowing honors and offices, the crown was able to sway elections and exert pressure on members of Parliament. This castigation of corruption focused on a violation of separation of powers, but it was part and parcel of a broader critique—enduring through the 18th century—of the Whig ascendancy, premised as it was on commerce and empire. At bottom was the fear that private interests, finance and “stock jobbers,” were benefitting through opaque government arrangements. James Madison, in his condemnation of the British system of administration and finance, framed it as a manifestation of capture:

substituting the motive of private interest in place of public duty; converting its pecuniary dispensations into bounties to favorites or bribes to opponents; accommodating its measures to the avidity of a part of the nation instead of the benefit of the whole: In a word, enlisting an army of interested partisans, whose tongues, whose pens, whose intrigues, and whose acute combinations, by supplying the [place of] the terror of the sword, may support a real domination of the few under an apparent liberty of the many.

In reply to John Adams’s praise for the British constitution, which sought to purge the government of corruption, Alexander Hamilton outraged Jefferson and Madison by observing that its corruption was precisely what made the British government so perfect. His words should not be over interpreted, but it is appropriate to mention that capture has always had its defenders.

Factions, or what today we might term special interests, were poisonous for republics, fomenting disorder or capture by stealth. The pluralistic extended republic, celebrated in Federalist No.10, was the solution to the problem of faction, as U.S. Senator Mike Lee aptly describes in his remarks in this series. Though the new republic was immunized from the most toxic effects of faction, all was not tranquil. Jeffersonians, ever faithful to a vision of agrarian virtue, remained darkly suspicious of the Hamiltonian project, but their aspersions of “corruption” were cast indiscriminately against most commercial activity. Concern with private profit-seeking via public channels, though often voiced in terms of corruption, is the narrower thread we have sought to isolate. We find it in the Jacksonian-era censures of the exclusive privileges and immunities certain corporations enjoyed by virtue of special charters from the state legislatures. Such charters were not easy to obtain.

In 1890 the Western frontier officially closed. Simultaneously, the nascent administrative state opened a new frontier, rife with opportunities for collusive capitalism. As former U.S. Attorney General and Secretary of State Richard Olney observed of the new Interstate Commerce Commission, “The part of wisdom is not to destroy the Commission, but to utilize it.” Although antebellum America was replete with state and local regulations, two key components of modern regulatory capture were present, or nearly present in 1890—an industrial, capitalist economy and a national bureaucratic apparatus characterized by Weberian rationalism and staffed by a cadre of experts rather than impecunious nephews and party hacks.

The concept of regulatory capture as we know it today is a mid-century modern icon of behavioralism in political science: over time, and for a variety of reasons, independent commissions start to acquire the views of regulated entities. The Chicago School took up capture, purged the politics, and offered the elegant theory that the agency supplies the relevant industry with regulations to stifle competition and block market entry. With that, skepticism turned to cynicism, and the regulatory state seemed beyond redemption.

This essay has attempted to find a provenance for the contemporary concept of capture in past debates and practices. The various permutations of capture may etiolate the concept beyond recognition, or indicate that remedies must be reinvented each generation. The various essays in this series are premised on the latter hope and represent the latest thought on a venerable conundrum.

This essay is part of The Regulatory Review’s sixteen-part series, Rooting Out Regulatory Capture.

Alissa Ardito

Alissa Ardito is an Attorney Advisor at the Administrative Conference of the United States. The opinions expressed in this blog post are solely those of the author and do not represent the views of the Administrative Conference.