The Political Influence of Business in the European Union

BOOK MANUSCRIPT (DRAFT)

Andreas Dür University of Salzburg David Marshall University of Reading Patrick Bernhagen University of Stuttgart

Word count: 64,746 Version: 7 November 2016

Contents

List of Figures

2

List of Tables

4

Preface

OMITTED

1

Introduction

5

2

The Structure of Policy Conflict in the European Union

25

3

Conceptualizing and Measuring Business Political Influence and Success

48

4

Business Success in the EU

69

5

Technical Policy Information and Business Success

96

6

Business Interests and the EU’s Legislative Institutions

7

Lobbying and Business Success in Different Policy Areas: REACH, MiFID II

124

and Trade Policy

156

Conclusion

193

Appendix A: The Sample

203

Appendix B: The Questionnaire

208

Bibliography

214

8

1

List of Figures

2-1: Directorates General with primary responsibility 2-2: The number of actors per issue 2-3: Spatial mapping of actor positions on a policy issue (tyre rolling noise reduction for passenger cars) 2-4: Median positions of actors, reversion points, and outcomes 2-5: The composition of sides 3-1: Behaviour of the improvement-to-reversion-point and relative-improvement spatial measures in simulated combinations of outcome, reversion point and actor position 3-2: Distribution of the success measures 3-3: Distribution of positions 3-4: Comparison of mean success 4-1: Analysing business success (coefficient plot) 4-2: Business success under conditions of conflict (coefficient plot) 4-3: Business success and interest group conflict 4-4: Business success and the European Parliament (coefficient plot) 4-5: Business success and legislative procedure 4-6: Controlling for the positions of the EU’s legislative institutions (coefficient plot) 5-1: The direct effect of IG Knowledge (coefficient plot) 5-2: The conditional effect of IG Knowledge (coefficient plot) 5-3: Business and citizen group success with different levels of policy information 5-4: The demand for information (coefficient plot) 5-5: The interaction between IG knowledge and Demand 5-6: The interaction between IG knowledge and Demand (business only)

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5-7: The supply of information (coefficient plot) 5-8: The interaction between IG knowledge and Supply 5-9: The interaction between IG knowledge and Supply (business only) 6-1: Distribution of policy positions for Commission, Parliament and Council 6-2: Distribution of the three dependent variables 6-3: Explaining positional proximity with the EU institutions (coefficient plot) 6-4: The conditional effect of information (coefficient plot) 6-5: The interaction between Business and IG knowledge 6-6: The number of policy proposals per Directorate General, committee of the European Parliament and Council configuration 6-7: The conditional effect of friendly policymakers (coefficient plot) 6-8: Policy communities, information and distance to the EU’s institutions (coefficient plot) 6-9: The interaction between Business-friendly DG and IG knowledge (just business actors)

3

List of Tables

2-1: Constellations of conflict 3-1: Combinations of scale and source type in the measurement of lobbying success 3-2: Comparison of the success measures (Pearson’s r) 4-1: Mean success of business and citizen groups. 4-2: Descriptive statistics 4-3: Mean success of business and citizen groups, by degree of conflict. 4-4: Mean success of business and citizen groups, by type of legislative procedure 5-1: Most important sources of information, by actor type (in percent) 6-1: Mean distance to the EU’s institutions 7-1: Co-determinants of business success in the three case studies

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Chapter 1: Introduction

The political influence of business has become a hotly debated topic among citizens, politicians and political activists. Key events that have stoked discussions are the global financial crisis of 2008 and its aftermath, and high-profile investigations into the conduct of financial firms and car manufacturers. There has also been growing public unease over the environmental impact of business activity, particularly climate change. The possibility that the economic power of the owners and managers of private enterprise enables them to control decision-making in the public sphere has also long occupied economists, sociologists and political scientists. In the middle of the nineteenth century, Marx and Engels warned that “[t]he executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie” (Marx and Engels 2002 [1848]: 223). Over a century later, Lindblom expressed concern about the political power of firms, concluding that “[t]he large private corporation fits oddly into democratic theory and vision. Indeed, it does not fit” (Lindblom 1977: 356). And Dahl was concerned that, if capitalists wield disproportionate power over political outcomes, then political equality and democratic accountability are greatly undermined (Dahl 1989: 324-8).

In recent years, additional concern has been voiced that the political privileges of capitalists’ have been further strengthened because of increasing global financial and commercial integration. Many suspect that the globalization of the economy further limits the range of policy choices available to democratically elected leaders (Cerny 1995; Strange 1996; Genschel 2002). The need for political systems to create profitable environments for investors, which have the option to move their investments to other countries, may induce them to forgo necessary but costly policies. The expected result is a ‘race to the bottom’ of environmental and labour standards between countries. The fear of these authors is that tax 5

competition would eventually lead to the replacement of the welfare state by a ‘competition state’ (Cerny 1995). International agreements and treaties, rather than alleviating the democratic costs of globalization, only seem to further exacerbate the problems, as the controversies around new trade agreements between the European Union (EU) and the United States and Canada, respectively (the Transatlantic Trade and Investment Partnership - TTIP, and the Comprehensive Economic and Trade Agreement - CETA) have highlighted.

These concerns are of particular relevance for the EU, for two reasons. On the one hand, the EU is sufficiently important to attract lobbying from a large number of business interests. Its institutions legislate on the terms under which goods and services can be produced and traded in what, if considered a single unit, is the largest economy in the world. Brussels is now comparable to Washington DC in its economic and political importance to large firms. As a result, “since the start of the single market project Brussels has become more like Washington DC than most national European capitals in terms of the volume and intensity of private lobbying of the political process” (Hix 2005: 222). To illustrate, in late 2012 and early 2013, the EU institutions were the target of a massive lobbying campaign by Internet companies, including Facebook and Google, asking for changes to a proposed data protection regulation. More than 3,000 proposals for amendments were forwarded to the European Parliament alone. In 2013 and early 2014, major tobacco companies such as Philip Morris International and Japan Tobacco fought for a weakening of the EU’s Tobacco Directive. These are just two among a considerable number of EU decisions that attract much business lobbying.

On the other hand, the EU’s particular institutional set-up has been suspected of ensuring that business interests are particularly powerful in this polity. Many observers complain about what they see as the EU’s democratic deficit. Much power is vested in the European Commission, an actor that possesses only very indirect democratic legitimation via the 6

European Parliament and national governments. The fear is that this limited democratic oversight allows business interests to have disproportionate influence in EU politics (Burley et al. 2010). And there seems to be empirical support for this expectation: several studies indeed find that business actors are particularly successful in the EU (Schneider and Baltz 2003; Dür and De Bièvre 2007; Bunea 2013; Hermansson 2016). Just as in the United States (U.S.) (Schlozman and Tierney 1986), moreover, research has showed that business representation accounts for the largest share of all interest representation in the EU (Hix 2005, 212; Greenwood 2011). Business interests have also been shown to enjoy better access than other societal interests at least to some EU decision-makers (Beyers 2002; Rasmussen and Carroll 2014; Dür and Mateo 2016).

However, beside business there are many other interest groups active in the EU with the aim to influence its policy decisions.1 Therefore, neither the lobbying effort alone nor the access to decision-makers that a given interest groups might gain should be equated with influence, i.e. with the ability to obtain policies that are more closely in line with the preferences of an actor than they would have been in the absence of the actor. Lobbying frequently takes place in contested environments, so that not all lobbyists can expect to be equally successful. In fact, lobbying around public policy is frequently a constant sum affair, so that one interest group’s gain is another group’s loss. If we want to gauge how influential business is in EU politics it is therefore helpful to focus on lobbying success. By lobbying success, we mean the closeness between the policies that result from a legislative process around which an actor has lobbied

1

Following Lindblom (1980), Berry (1999) and Gray and Lowery (1992) by interest group we understand all

actors with a minimum level of organization that try to shape public policies without seeking office. This encompasses not only associations with a membership, but also organizations that do not have members, such as firms or think tanks. Beyers, Eising and Maloney (2008) use the term interest organizations to refer to what we call interest groups.

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and the preferences of that actor. In other words, our concept of lobbying success captures how close the output of a political decision-making process is to what an actor wants. Moreover, even if there are some cases of business success in the EU, this does not mean that business is successful most of the time, let alone all of the time. In fact, two recent studies on EU lobbying conclude that group type does not matter for success (Mahoney 2008; Klüver 2013) – in other words, that business actors are neither more nor less successful than nonbusiness groups. Still other research even saw the EU as favouring citizen groups (Mazey and Richardson 1993; Marks and McAdam 1996; Mazey 1998; Pollack 1997b; Geddes 2000; Pollack and Hafner-Burton 2000; Fairbrass and Jordan 2001). Thus, there are conflicting findings in the literature, so that the question is still out: How successful are business actors in getting what they want in the EU? Or, formulated differently, when and why does business win or lose in the European policy struggle?

In this book, we argue that business interests are not more influential than other interests in shaping contemporary EU policies. Contrary to what is widely expected, on a large number of issues we see a shift away from a low-regulation status quo favoured by business interests towards a high-regulation outcome favoured by citizen groups. By citizen group, we mean a group advancing interests that are not directly related to the vocations or professions of its members or supporters (Berry 1999). For example, for many years telecommunications companies opposed the European Commission’s plans to gradually phase out mobile phone roaming charges in the EU. Although they received support from some member states, the EU implemented policies that first gradually decreased roaming charges. In the end, the EU passed legislation that will abolish roaming charges in 2017. Another example is the data protection regulation mentioned above: despite the intense lobbying activity surrounding this piece of legislation, the text agreed upon at the end of 2015 contains many provisions that run counter to business preferences. 8

We could quote many more examples illustrating the difficulties business actors face when pursuing their political interests in the contemporary EU, and we will do so in subsequent parts of the book. But for now, it is important to stress that on hardly any of these pieces of legislation do business interests suffer all out defeat. They often manage to dilute aspects that they are particularly opposed to, or are able to secure specific concessions. On many issues, they are able to dilute the legislative instruments (e.g. in the case of CO2 emission standards). On others business interests are ultimately unable to prevent or even to alleviate the force of the regulation but through lobbying they manage to delay the process for some time during which they benefit from the prolonged regulatory status quo - an example of this is again the roaming regulations: while unable to halt these altogether, the delays resulting from lobbying enables the telecommunications firms to cash in on excess profits for many more months and years than they wold have been able to in the absence of their lobbying. On some issues, they even manage to shape the EU’s agenda as well as resulting legislation. But we will also show in the book that there is considerable evidence of business interests losing important political battles. This finding means that there is no clear business dominance in the EU. Given the considerable resources business actors can bring to the policy process, how can we expect and explain modest to weak success of business lobbyists? And under which conditions can business actors be expected to be more or less successful in contemporary EU politics?

The examples cited above are just that: examples. Many counter examples illustrating business political success in the EU can be cited but in the absence of a coherent theoretical framework and scientific standards of empirical analysis and inference there is no telling which examples are more appropriate and which less and just how many examples would be sufficient to prove or disprove this or that argument about business success. Therefore to move beyond mere illustration we need, firstly, a theory and secondly, rigorous tests of the theory using scientific methods on appropriate data. To develop such a theoretical argument, 9

we bring the state back into the study of interest group influence. In the 1980s, a collection of essays by Skocpol (1985, 6) made a strong point of rejecting the view of the state as “a mere arena in which social groups make demands and engage in political struggles or compromises”. We share this position and argue that the EU and its institutions ought to similarly be considered “as actors and as institutional structures with effects in politics” (1985, 27).

Furthermore, we argue that the process of European integration entered a new phase in the aftermath of the Single European Act. Since then, the EU has moved from an agenda of creating common markets for labour, goods and services to regulating these markets beyond the regulation required to establish them in the first place. With the single market largely completed, much of the EU’s legislative activity is about regulating the European market. Like in national political systems, with development and maturity comes an increase in the demands that organized societal interests - business and non-business alike - place on the political system (Olson 1982). In the earlier, market creating phase of European integration leading up to the Single European Act, EU policy making to a great extent was driven by the demands from European business elites to expand and unify European markets for their products and reduce transaction costs. In the mature European polity since the Single European Act, the legislative agenda is dominated by proposals that aim to protect consumers or the environment. Citizen groups, the European Commission and the European Parliament all tend to support these proposals. Citizen groups tend to favour increased regulation with respect to the environment, health, consumer protection and so on. The European Commission also has a substantive interest in many of these policies. What is more, it has a strategic incentive to bring the proposals to fruition, as doing so provides the opportunity to strengthen its position within the institutional architecture of the EU. The European Parliament, in turn, is driven to support increased regulation because of the electoral appeal of these policies. By 10

contrast, business actors – often unanimously – defend a low regulation status quo. Facing coalitions of citizen groups, the European Commission and the European Parliament, business actors frequently take on a defensive role in the policy struggle.

Based on this account of how the EU institutions shape the political fortunes of organized interests, we develop several more specific arguments about the factors that make business actors more or less successful in EU politics. Firstly, we argue that business interests are more successful when the role of the European Parliament in a specific policy debate is limited. Secondly, in the absence of a sufficiently powerful and motivated institutional ally not even business actors’ superior policy expertise on many issues helps them in their efforts to protect the regulatory status quo. And thirdly, the ability of business actors to decrease the gap between their position and the position of the policymaker is limited.

To evaluate our argument empirically, we use data on a random sample of 70 legislative proposals put forward by the European Commission between 2008 and 2010. The data were collected through interviews with officials at the European Commission in the framework of the INTEREURO project (for more on this project, see Beyers et al. 2014b). They contain the positions of 1,043 non-state advocates – including 426 business associations and 224 firms – lobbying on 112 conflictive issues contained in these proposals. Our dataset also includes the positions of the Commission, the Council of Ministers and the European Parliament, as well as the locations of the status quo and the outcome of the decision-making process on these issues. These data allow us to measure lobbying success in different ways. Lobbying success is not the same as influence (Dür 2008c). Influence presupposes a causal relationship between the lobbying activities of groups and the outcome of a policy debate, whereas success only captures actors’ utility gains or losses, without attributing causality to their political activities. Nevertheless, given the large number of cases that we look at, it is unlikely that our findings 11

are driven by chance alone. Lobbying success then is not identical with, but should reflect, the influence that interest groups exert.

We complement these quantitative data with qualitative evidence and three in-depth case studies. These case studies enable us, firstly, to illustrate the causal mechanisms that underlie the empirical patterns we detect in our quantitative analysis: Jointly, they show how interinstitutional power relations and the ability of organized interests to bring technical information to the policy process interact to produce policy output that overrides the political preferences of business actors. This happens even though business interests are numerically superior to other interests. Secondly, the case studies help us to identify the domain boundaries of our theoretical argument: Our argument about the limits to business political power and the institutional determinants of lobbying success pertain to many important political debates and policy struggles but not to all. The case studies clarify where our argument applies and where it doesn’t.

In the remainder of this chapter, we situate our main theoretical argument in the context of the wider literature on business and politics. Following this, we outline the plan of our book.

Business influence and the importance of institutional allies Two opposing views characterize the debate on the political influence of business: Some authors see business interests in a particularly privileged role, while others stress the limits to business power. For one, a large literature argues that business interests are the most powerful non-state actors in capitalist democratic systems (see, for example, Olson 1965; Schlozman and Tierney 1986; McFarland 1991). This should be no different in the case of the EU. Indeed, a considerable number of observers suggest that business interests are more influential than other types of actors in the EU (Dür and De Bièvre 2007; Schneider and Baltz 2003; 12

Streeck and Schmitter 1991). Business interests have been portrayed as a major influence on the Single European Act (Cowles 1995). They also find it easy to approach EU decisionmakers, especially the European Commission and the Council of Ministers (Beyers 2002; Rasmussen and Carroll 2014; Dür and Mateo 2016). For example, AmCham EU, the representation of American firms in the EU, is widely considered one of the most successful lobbyists in Brussels (Wilson 2006, 38). As Hayes-Renshaw (2009, 82) points out, AmCham EU is one of a small number of non-state actors that has access to the European Council, the institution that brings together the heads of state or government of the EU member countries.

Business political power has been said to stem from a variety of sources. For one, business leaders and politicians may collude with each other because they form part of a “power elite” (Mills 1956). These elites may share a common world view because they received the same education or because they are part of the same networks. Even if there is not just one power elite, business interests may share interests with part of the political elite, especially rightwing parties. If right-wing parties come to power, then, business influence may be particularly large (Hibbs 1987; Hicks 1988; Quinn and Shapiro 1991).

Business interests may also be able to exert influence because they can convert their economic power into resources that are valuable in political struggles. Key among these resources is policy expertise. How important this policy expertise is may depend on the type of issue on the political agenda, with business actors’ expertise possibly most valuable on issues directly related to business regulation (Binderkrantz , Christiansen and Pedersen 2014). Moreover, the complexity of the issue and the expertise that policy-makers possess themselves likely matter for the impact of business expertise. Whereas policy complexity has increased over time, policy-makers’ capacity to produce relevant expertise themselves has failed to catch up. As a result, business may have become more powerful over time (Drutman 13

2015). The value of business expertise may also depend on the type of policy-maker that is being lobbied. Bureaucracies, for example, may be more dependent on business expertise than parliaments (for business influence on bureaucratic decision-making, see e.g. Yackee and Yackee 2006).

The arguments just presented, of course, rest on the assumption that business is actually a cohesive actor. If part of the business community pulls in one direction and part of the business community in the opposite direction, firms’ endowment with resources will not help them to achieve influence. The lobbying efforts of the two sides would just offset each other. Bauer, de Sola Pool and Dexter (1963) highlighted early on that business is not a unitary actor. Different firms can take opposite stances: the interests of small firms may differ from those of large firms; those of competitive firms from those of non-competitive firms; those of firms in sectors exposed to international trade from those of firms in sectors largely shielded from trade and so on. In the 2012 debate on the Stop Online Piracy Act in the U.S., for example, 246 lobbyists working on behalf of Internet companies such as Google confronted 241 lobbyists representing the interests of the television, music and movie industries (Drutman 2015, 44). Mizruchi (2013) argues that this “fracturing” of the corporate elite in the U.S. has led to political gridlock, in which individual companies may still be able to win on specific issues, but business interests can no longer address issues that are of concern to business as a whole. Several authors, however, have concluded that, at least under certain conditions, business actors indeed defend the same interests (Useem 1986; Mizruchi 1992; Paster 2013; Young and Pagliari 2015). Business unity may not encompass all firms, but at least an “inner circle” of business leaders that defend the interests of large companies may be pulling in the same direction (Useem 1986).

In some cases, however, a lack of cooperation among firms may make them powerful. Woll 14

(2014) argues that in the wake of the 2008 financial crisis, banks were most successful in shifting bailout costs to the state in countries that lacked coordination among banks. In these countries, banks could refer to other banks’ unwillingness to contribute, in the end converting their weakness into a strength. Similarly, Smith (2000) has found that business unity may be a burden rather than a benefit in politics: Thus, the U.S. Chamber of Commerce is frequently unable to get what it wants due to the nature of the issues on which it lobbies. With its diverse membership including large and small businesses involved in a large variety of industrial sectors, the issues on which the Chamber could take a strong position without alienating large segments of its own membership were business-wide issues, such as healthcare costs, labour relations and wage bargaining, or workplace safety. Issues like these that unite the entire U.S. business community likely also unite countervailing actors such as consumer and environmental groups or labour unions. These issues are highly salient and visibly conflictual, and lobbying around them tends to have strong ideological and partisan connotations. When political disputes erupt on such broadly mobilizing issues, being able to bring resources to bear on the policy struggle is important. However, even the substantial lobbying resources of a group like the U.S. Chamber of Commerce (which spent $136 million purely on lobbying in 2012, see Opensecrets 2015) cannot guarantee results if an issue mobilizes large numbers of other, well-endowed organizations engaging in countervailing lobbying.

Thus, a crucial factor for the ability of countervailing groups to curtail the political influence of business is the degree of public visibility of the political conflict. Business power then may be conditional on the salience of public policies: the more publicly salient an issue is, the less influence business interests can exert (Schattschneider 1960; Culpepper 2011; Dür and Mateo 2014; Rasmussen 2015). The increasing politicization of at least some aspects of EU politics, which leads to greater public attention to EU policies, may then impose increasing limits on business influence (Dür and Mateo 2014). The public salience of an issue, of course, is not 15

fully exogenous to lobbying. Citizen groups, in particular, may be a potent opponent to business interests because of their ability to shape public opinion or increase the salience of selected issues via the media (Berry 1999). However, business actors too can and do try to shape public opinion on policy issues.

As a result, the public may be more or less sympathetic to business demands. This has been argued by Vogel, who claims that, when citizens perceive the economy as doing well, they may be more willing to demand policies that are costly to business (Vogel 1989). By contrast, when the public perceives the economy as losing its economic edge, it becomes more sympathetic to business complaints about high taxes or other obstacles to business activity. This may explain the “fluctuating fortunes” of business over time (Vogel 1989). Finally, business interests have been found to wield structural – and not only instrumental – power because of their capacity to decide when and where they make investments (Lindblom 1977; Offe 1984; Przeworski and Wallerstein 1988). Governments’ ability to remain in office depends on the economic performance of a country. The more income to be taxed, the easier it is for governments to pursue policies that ensure the loyalty of key constituencies. Moreover, in general the better the economic performance of a country, the more likely it is that citizens are satisfied with a government. Since Key’s (1968) study, The Responsible Electorate, a wealth of comparative research has shown that the economy tends to weigh more heavily than other factors in the vote decision (e.g., Alvarez, Nagler and Willette 2000; Lewis-Beck and Stegmaier 2000; Duch and Stevenson 2006). There is also evidence that policymakers anticipate the effects of economic voting in their policy decisions and strategic behaviour (Kiewiet 2000; Palmer and Whitten 2000). As a special case of Friedrich’s (1963) ‘law of anticipated reactions’, economic voting is the mechanism through which the structural power of business unfolds. Governments then may be cautious to pursue policies that make firms delay or cancel investments. They may even provide benefits to firms without them 16

having to actively lobby. As put by Dahl and Lindblom (1992, xl), business interests thus play a role in capitalist societies that is “much more powerful than an interest-group role.”

Structural power, of course, is not a constant (Hacker and Pierson 2002). For one, the fear of disinvestment varies across countries and sectors and over time. Global capital mobility in the contemporary era, for example, may have strengthened the structural power of business by facilitating firms’ movement of their investments abroad. Moreover, while political decision makers may generally be well aware of the fact that their interests are linked to the well-being of business (‘it’s the economy, Stupid!’), they will often be less clear about what exactly it is that business needs in a given situation and with respect to a particular policy area. In Mitchell’s (1997, 69) words, “[t]he needs of business are not self-evident to government officials. They require articulating – by the governor of the Bank of England, the Business Roundtable, or the CEO of RJR Nabisco.” In other words, even if structurally privileged, business actors have to engage in political action to try and attain their goals. Given the resources that business actors possess, however, this should not pose a problem to them. In fact, there is much evidence that business interests are overrepresented in the interest group system (Lowery, Gray and Fellowes 2005; Schlozman, Verba and Brady 2012).

Even in view of all these arguments in favour of business dominance, some studies conclude that business influence on political decisions is often limited. This applies to both the EU (Geddes 2000; Mazey 1998; Mazey and Richardson 1993) and other political systems (Bauer, de Sola Pool and Dexter 1963; Vogel 1987; Hojnacki et al. 2015). A key argument made by these authors is that the presence of countervailing interests limits business power (Galbraith 1952). In fact, a political system that offers access to many different interests will not be dominated by a single group – not even by business (Dahl 1961; Truman 1971). The easier it is to penetrate the “political stratum”, these scholars argued, the more pluralistic the 17

distribution of power will be. The EU’s multiple tiers of government, for example, provide numerous access points that non-business interests can use to influence decision-makers. The Commission is sympathetic to these groups because they serve as allies in its attempts to enhance its competences and legitimacy (Pollack 1997b). The growing powers of the European Parliament, which offers particularly easy access to citizen groups (Kohler-Koch 1997), further aids diffuse interests in pursuing their political goals.

Mitchell (1997, 69) accepts that the political-economic system of democratic capitalism is structurally loaded in favour of business, but then argues that business can still lose. Facilitated by external events such as scandals or catastrophes, non-business interests and policymakers can sometimes succeed in creating an environment that is conducive for policymakers to embark on a ‘fit’ of heroic policymaking (Mitchell 1997, 10). In these situations, policymakers are able to temporarily override the business confidence factor and the negative inducement effects commonly attributed to such disregard. Unlike in Vogel’s (1989) theory of cyclical patterns of public support for business, business legitimacy in this view varies not so much cyclically, but rather as a function of irregular, shock-like perturbations to the political climate within which business operates. Mitchell (1997, 78) suspects interruptions to the structurally induced routine of acceding to business demands are more likely to occur either when policymakers discount business interests’ impact on public support against other factors affecting support or because they have reason to interpret economic performance or other policy outcomes differently. But while this means that the business confidence factor is a conditional rather than constant factor in politics, Mitchell’s ‘post structural view of business confidence’ relies on exogenous shocks that upset the political routine to temporarily offset an otherwise firm grip of business structural power over public policy.

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The theoretical perspective that we put forward in this book relates to many of the arguments presented above. It is similar in many respects to neo-pluralist perspectives stressing the limits to business power while acknowledging its sources. Business interests do find it easier to mobilize than non-business interests; and they also possess resources that are valuable to decision-makers. But business finds it difficult to translate these advantages into policy successes. While some existing accounts – under the label of neo-pluralism (Lowery and Gray 2004; McFarland 2007) – attribute this difficulty to countervailing interests, in our view the relevant interests are not only countervailing non-business groups, but crucially public institutions that ally with specific interests to pursue their proper aims. In the present book, the public institutions that we focus on as allies of the non-business groups are the European Commission and the European Parliament. By making this argument, we thus ‘bring the state back in’ to the analysis of interest group and business power.

Our perspective, however, also predicts fluctuations of business power over time, as a result of the presence or absence of influential institutional allies. In the sixty years during which the process of European integration has taken place now, there have been periods when business actors were better able to shape the direction of politics and others during which they have been less influential. Business influence was large when the European Commission focused on the elimination of barriers to trade and capital flows in the EU. During this period, the Commission was an institutional ally of business interests. Since the completion of the single market in goods and labour, however, the political fortunes of business in the EU have been declining. They only have an ally in the European Commission in some policy areas, such as trade policy, and tend to find themselves in opposition to the European Parliament.

Overview of the book’s contents The next chapter (Chapter 2) describes the patterns of contemporary policy conflict in the EU 19

and sets out the methodology that we use to assess business influence. To this end, we first introduce our sample of policy proposals and provide information on the interviews that we carried out to collect systematic data on these policy proposals, as well as on our effort at cross-validating the resulting data. The data description and methodological discussion is completed by a brief review of the spatial model of politics that guided us in our data collection. Thereafter, we provide descriptive evidence about the structure of conflict in the EU. The key questions that we address in this chapter are: how unified are business interests in EU legislative lobbying? Where are business actors’ ideal points located relative to the regulatory status quo and relative to the ideal points of other policy actors? How close are business actors to the positions of the main decision-making institutions in the EU, namely the European Commission, the Council of Ministers and the European Parliament? Next to our numerical data, we also use qualitative evidence to illustrate and interpret the patterns that we find.

The measurement of the political influence and success of organized interests – our dependent variable – continues to be among the thornier tasks faced by social scientists. Therefore, we devote a full chapter (Chapter 3) to this task. The methodological challenges include determining the preferences of key actors and the extent to which these are satisfied by the policy outcome. We first examine how interest group success has been measured in the literature before developing an alternative, spatial approach to measuring lobbying success. We present and compare different spatial measures of success using both simulations and our original data. We demonstrate that the choice of measurement has implications for the findings generated by studies of interest group success. Assessments of success differ according to whether or not they consider a reversion point. However, we also show that different modes of incorporating the status quo (or, if a sunset clause or a decision by the European Court of Justice prohibits a reversion to the status quo, another reversion point) lead 20

to largely similar empirical findings. In this way, we arrive at a measure of lobbying success that is suitable for analysing business influence in the context of EU legislative politics.

In Chapter 4, we develop our main argument. We argue that business actors tend to defend the status quo in a polity in which policy change is highly likely once a legislative proposal is on the political agenda. As a result, they are overall less successful than citizen groups in the European policy process. However, business lobbyists can protect their interests if inter-group conflict is low or if the role of the European Parliament is restricted. Exposing these arguments to a rigorous quantitative analysis, we find robust empirical support for our expectations. In the case of contemporary EU legislative politics, business success is limited relative to the success of citizen groups. With business interests mostly defending the status quo and citizen groups, together with the European Commission and the European Parliament, pushing for policy change, the former tend to be in a defensive position with respect to much legislative activity. By producing findings that run counter to conventional wisdom in the field, this chapter raises further questions: Why do business actors fail to benefit from the resources they can muster in the lobby process? Why do they not utilize their privileged access to policymakers better? These questions are pursued in detail in the following two chapters, with the first focusing on the role of information and the second on institutional allies.

Chapter 5 focuses on the role of technical information in business lobbying across EU policy proposals. It is widely considered that the capacity of organized interests to supply high quality information to policy-makers is a key determinant of their political success. It is also commonly held that business actors are better endowed with this commodity than other organized interests, providing them with a comparative advantage in lobbying. But while the literature on this question is rich in theoretical treatments, to date there has been very little 21

empirical, and almost no quantitative, work done to examine the effect of information on lobbying success. Analysing our quantitative data, we find a positive association between interest groups’ higher levels of policy specific knowledge and them achieving their policy goals. However, this effect is not evenly distributed. In fact, in comparison to business, citizen groups derive significantly more policy benefit from acquiring high levels of policy relevant expertise. Furthermore, we find that the value of technical information as a currency of influence varies according to the principles of supply and demand. Organized interests’ high quality information is significantly less valuable if a competing side of lobbyists has also acquired good information. Similarly, policy information, no matter how good, is relatively ineffective when the policy-maker already has sufficient information on the proposal at hand.

Chapter 6 investigates the institutional factors shaping lobbying success in greater detail. Rather than explaining the extent to which interest groups’ preferences are reflected in policy output, in this chapter we look at the ability of interest groups to affect the policy positions of the major institutional actors in EU politics, namely the European Commission, the European Parliament and the Council of Ministers. Our analysis shows that both the European Parliament and the European Commission are closer to citizen groups than to business actors. Not even the Council of Ministers turns out to be a clear-cut ally of business interests. We then explain the distance between the EU institutions’ policy positions and the positions of lobbyists by combining the information argument presented in the previous chapter with another argument featuring prominently in the literature: that belonging to a policy community helps lobbyists to shape policy formulation. Based on a critical engagement with the literatures on asymmetric information and policy communities, we propose that both factors interact with each other to shape the positioning of policymakers relative to organized interests: Informational resources are particularly effective in reducing the policy gap between the relevant EU institution and the lobbyist if both are part of the same policy community. We 22

thus expect business actors that possess high-quality information to be particularly influential in shaping the EU institutions’ positions on policy proposals for which business-friendly policymakers have primary responsibility. We find that, even though business actors are much more likely to deal with a friendly policymaker than other actors are, they are not very successful at influencing the policymaker’s position. As a result, the policy agenda of the contemporary EU is biased against the political preferences of business.

In Chapter 7, we use three case studies to trace the causal processes underlying our quantitative findings. The cases we look at are the regulation of chemicals in the EU, the reform of the EU’s financial market rules in the wake of the financial crisis and the formulation of the EU’s position in external trade negotiations. These case studies allow us to address several issues that cannot adequately be dealt with using quantitative data analysis only. Our in-depth case analyses enable us to see which policy proposals actually made it onto the political agenda and which ones never materialized. This allows us to study the agendasetting power of business relative to non-business actors. Moreover, analyzing qualitative data allows us to illustrate the causal mechanisms put forward in the preceding chapters. The fact that our cases concern policy areas rather than individual legislative proposals also allows us to study possible interdependencies among proposals in greater detail. Finally, the inclusion of a trade negotiations case allows us to analyse business influence on non-legislative matters in the EU, thereby delineating the scope and limits of our theoretical argument about how organized interests shape contemporary EU policy.

In the concluding chapter (Chapter 8), we summarize and discuss the main findings. Tying together the insights from Chapters 3 to 7, we draw a comprehensive picture of business influence in contemporary EU policy making. Finally, we spell out the normative implications of our findings and relate these to current debates about the legitimacy of EU politics, 23

corporate political activity, and lobby regulation: While business actors are disproportionately influential given the numerical strength of the individuals (owners and managers) behind them (Olson 1965), they are under a great amount of political pressure. Some of this is due to the historical constellation of current EU politics and the particular inter-institutional relations of the political system of the EU. But against the wider history of European integration, what marks the current state of the EU is its maturation as a political system whose main institutional features are developed and whose societal groups are mounting increasing demands on the system. With many non-business groups being very successful at this game, we conclude that our analysis is good news for civil society groups aiming to restore political equality.

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