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Sunday 19 January 2020

Why Silicon Valley is outspending Wall Street on lobbying US leaders

Wall Street. Photo: Thinkstock Images
Wall Street. Photo: Thinkstock Images

A political weather map of America would show Wall Street under a cloud, and Silicon Valley bathed in sunshine. Over the Obama administration's eight years, the technology industry has embedded itself in Washington.

The president hung out with Facebook's Mark Zuckerberg and hired the government's first chief tech officer. At the lower levels of officialdom, the revolving door with companies such as Google is spinning ever faster - as it once did with Wall Street.

Politicians have played down their connections to finance since the taxpayer bailout of 2008. No such stigma attaches to tech, for now. But as the Valley steps up its lobbying efforts, with a wish-list that ranges from immigration to rules for driverless cars, some critics warn that similar traps lie in wait: it's not easy for the government to police an industry from which it poaches talent and solicits help with writing laws.

"If you're trying to influence government policy on behalf of a corporate sector, it's not better that you do it for the tech industry than for Goldman," said Jeff Hauser from the Centre for Economic Policy and Research in Washington.

Hauser heads the Revolving Door Project, which scrutinises political appointees. Even amid mounting concern over inequality, he says wealthy tech executives and their companies are still considered cool. In other words: It may be hard to persuade people these days that what's good for Goldman Sachs is good for America - but it might just work for Google. The five biggest US tech companies are now the five biggest companies - at least as measured by market value - and they're flexing that muscle.

Tech firms spent $49m on Washington lobbyists last year, while the five largest banks shelled out $19.7m, data shows. On the personnel front, the Campaign for Accountability, a non-profit group, studied the to-and-fro between government and Google. It found 183 people who worked under Obama through last year were hired by Google, while 58 headed the other way.

Google is in Washington to "help policy- makers understand our business and the work we do to keep the internet open and fuel economic growth," it said. Facebook's goals in the capital include protecting customers, "explaining how our service works, and maintaining an open internet and a culture of innovation".

There have been other high-profile moves out of Washington: former Attorney General Eric Holder took a job at Airbnb, and David Plouffe, Obama's one-time campaign manager, started at Uber in 2014.

Persistent rumours have linked Facebook ceo Sheryl Sandberg with the post of Treasury secretary in a Hillary Clinton administration. The view is that tech people are welcome in Washington because they can help make things work better - and help is certainly needed.

Penny Pritzker, the commerce secretary, says the government is shifting toward using technology the way business has been doing for years. It has set up a coding boot-camp for staff, while data scientists work across federal agencies to mine the archives and help improve transportation projects.

Megan Smith, the former Google manager who took a job as Obama's chief technology officer in 2014, says the long-term goal is to make government services as smooth a user experience as that offered by Amazon or Dropbox. Collaboration with tech companies pre-dates Obama's creation of a post to oversee it. Zillow Group Inc., the real-estate website, helped the Treasury after the housing- market collapse, according to Stan Humphries, its chief analytics officer.

"I was struck by how little data the government had in areas such as price indexes or foreclosures," Humphries said. The Seattle-based firm filled the gap, offering its micro-data to Federal Reserve researchers. "They were soon sucking up every bit of data that we had available," said Humphries.

In Washington, favours typically come at a price though. Tech giants, which are in the habit of buying up smaller companies and also trying to tie customers to their own platforms, keep a close watch on antitrust policy. In 2013, Google - like Microsoft before it - was threatened with a potentially costly legal battle. Federal Trade Commission staff said the company "unlawfully maintained its monopoly" over internet searches, though the 20-month probe was eventually closed.

"Competition policy, that's the thing they're most scared of," said Barry Lynn, a senior fellow at the New America Foundation. "If a Microsoft-style case was brought against any of these companies, it could totally change their business prospects. It could result in radical changes to the scale and structure of their corporations."

Clinton has talked about tougher antitrust laws. She's also taken aim at shifting profits overseas to avoid taxes.

Hauser, who previously worked at the Justice Department's antitrust division, said tech firms "are at the leading edge of tax avoidance because of the ways they've perfected moving their intellectual property overseas".

He said Treasury Secretary Jacob J Lew's support for Apple, after it was ordered to pay back-taxes in Ireland, is an unprecedented stance for a Democratic administration. Her Republican rival Donald Trump proposed a tax cut for companies that repatriate profits.

Then there's the labour market. Trump has taken aim at Apple and others that have shifted jobs overseas. "We're going to get Apple to start building their damn computers and things in this country," he said. But the iPhone-maker announced this month it's setting up a second R&D centre in China.

Big tech simply doesn't hire on the same scale as its heavy-industry predecessors and technology is reshaping the workforce in other ways too, with Silicon Valley favourites like Uber and Taskrabbit at the forefront.

Beyond the shopping-list of specifics, says Lynn, the industry has one overarching desire: light-touch regulation. "They want to be left alone," he said. "They want to be allowed to do what they want to do."

And to keep Washington at arm's length, it helps to get close to it first. (Bloomberg)

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