Along comes a series of scholarly studies in The New York Times: "Get What You Pay for? Not Always". They report on studies that through 2008 show that S&P companies that spent more on politicking performed worse than those that spent less. They also point out that the flexionic firm with 3 chief executives at Treasury or Governor spent unwisely this time as they moved from the party that can never lose again to the other side. They point to a study from 1981 to 2004 that showed that companies that contributed to political action groups grew slower than those that did not. Furthermore it didn't matter if they picked the winner or loser. And then the proverbial Harvard professor Coates is quoted that the jump in spending led to a deterioration in market performance. Anecdotal examples are given pointing out that banks are big political contributors but they performed badly. Jamie Dimon says, "he's hardly a democrat any more". And finally they show how AT&T tried to get their merger with T Mobile approved with letters from 76 democrats and 56 million in contributions over the preceding years, and yet it wasn't approved and they paid a 5 billion break up fee.

Well, all these studies are of the kind "your own man". Political contributions are necessary these days as the % of workers and their suppliers and G expenditures as a % of GNP goes up. Also, one would posit that the companies that made the greatest contributions were most in need of it, and would have done much worse had they not greased the wheels of G. Also, one would hypothesize that the relation has changed since 2008 as the idea that has the world in its grip has become more prevalent.

Indeed, some good questions arise. With the increased need of having the forces of the weather gauge at your back with government aiding and abetting you, one would think that the companies that give the most to politics are those that have the most government business. And they would seem to be the ones that the best chances of prospering in this environment. So one would hypothesize that a proper study of political spending controlling for whether it was necessary because your company was in the radar, would be very a propos these days and would show a conclusion that is opposite from the picture that summarizes the article with Jamie Dimon shaking the Presidents hand who "was once one of the Presidents favorites" but is no longer the fair haired boy despite their enormous political contributions.

Jim Sogi writes:

The question whether payola for government contracts or regulatory
largess is or is not beneficial to the specific company making the payola, or to the economy in general is related to the broken window
syndrome.  Government spending, especially with Sandy, is repairing
broken windows.  There is no real benefit to productivity overall, thus no real benefit to the companies seeking this type of work or
largess. This might help explain Chair's hypothesis.


WordPress database error: [Table './dailyspeculations_com_@002d_dailywordpress/wp_comments' is marked as crashed and last (automatic?) repair failed]
SELECT * FROM wp_comments WHERE comment_post_ID = '7833' AND comment_approved = '1' ORDER BY comment_date




Speak your mind


Resources & Links