Conflicts of Interest

On the 21st of January in 2010, the US Supreme Court gave a ruling in the Citizens United vs FEC case. It was a landmark decision that turned their politics upside down. It was legal, the court ruled, for a company or an organisation to spend money on behalf of a candidate they liked, as an extension of the Freedom of Expression. So if, say, Warren Buffet liked some John Cornyn, he could spend close to $32k on behalf of his campaign, as long as he didn’t technically co-ordinate with the candidate himself.

The consequences were either exciting or disastrous depending on which side you lean on. Barack Obama said in a State of the Union address it would ‘open the floodgates for special interests’.

And I suspect he was right.
Here’s a nice graph showing the amounts candidates for Senate (for example) have spent, over the years.

I did not make this. I wouldn’t use this font. Just saying.

And here’s another helpful little graph showing the amounts each of their two parties have spent:

Red is Republicans, blue is Democrats. Just in case you have a life and don’t follow US politics much.

In case you missed it, they’ve both gone up, but not by much.
And now, here’s a graph of campaign contributions made by outsiders: (TA-DA!)

Alternative Title: Percentage of total fucks given to Donald Trump as a society.

If you’re thinking “Eh, what’s that got to do with me? Where’s the chips?” and are about to resume stalking the Victoria’s Secret account on Instagram, wait. There’s something interesting in here somewhere, I promise.

When you have all this money flowing into politics, it not only affects politicians and their policy positions, as this study showed, but it also affects citizens’ distrust of their government. For example, if Hillary Clinton has accepted hundreds of thousands of dollars from Wall Street banks, can you trust her to effectively regulate them?

But if you’re thinking it’s direct quid pro quo (as in I scratch your back and you scratch mine without thinking about how creepy that sounds), it’s not that obvious. Nobody’s going to accept a donation from someone and start making laws for them the next day.
The real impact is much more subtle. As Obama wrote in ‘The Audacity of Hope’ (2006),

…(you realise that) you haven’t changed Washington, and you’ve made a lot of people unhappy with difficult votes. The path of least resistance — of fund-raisers organized by the special interests, the corporate PACs, and the top lobbying shops — starts to look awfully tempting, and if the opinions of these insiders don’t quite jibe with those you once held, you learn to rationalize the changes as a matter of realism, of compromise, of learning the ropes. The problems of ordinary people, the voices of the Rust Belt town or the dwindling heartland, become a distant echo rather than a palpable reality..

The whole quote is candid and thoughtful, and you can read it here.
His competitor in 2008, John McCain, said something similar.

I do not believe that any of us privileged enough to serve in this body would ever

automatically do the bidding of those who give. I do not believe that contributions are corrupting in that manner. But I do believe they buy access… that all of us, including myself, have been affected by this system.

The truth is, when we have some options that directly benefit us, we start using our tremendous brain power to slowly convince ourselves what is good for us is also objectively good. Even if you believe unequivocally that you won’t let your interests bias you, they slowly shift your priorities. Before you know it, you’re on a board that mysteriously changes rules to allow governing members to own yellow cricket teams.

Conflicts of interest are everywhere. There’s a conflict of interest when politicians are paid by the very companies they’re supposed to regulate. There’s a conflict of interest when doctors are given gifts by pharma companies. There’s a conflict of interest when a member of the selection committee is the father of a mediocre all-rounder we once toured England with.

So how do you deal with them?

One of the most widespread solutions is mandated disclosure, like declaring conflicts of interest or affiliations at the beginning of an article. This works on the assumption that there is an asymmetry of information, which is itself the problem. For example, if your doctor told you beforehand what pharma companies have paid him, you have all the information you need and you can make an ‘informed decision’, right?

This is where it gets more interesting.

I’ve talked about this before, but we live in a world of information overload, and that means you may not be able to even process all the disclosed information.

For example, this study found that only 3% people read the privacy declarations that are found on almost all websites. Another study found that 75% of consumers think the mere existence of a privacy policy implies privacy protection.

In short, people just ignore that disclosed information altogether. In this study, more than 90% people said they weren’t worried about the researcher conducting a study on them being paid by a drug company. Basically, if they’re overloaded with information, or they don’t know what to do with the information, people just kind of ignore it. Or they anchor from the biased information and fail to sufficiently discount for it.

Or they go to the other extreme, and discount the advice coming from a possibly biased source altogether. This study found that this is possible, even without overreaction on the patient’s part.
In short, we either trust a biased source too much or not at all.

Oh, it gets better.

The parties disclosing the information go through something called a moral licensing effect. This study in 2005 found that, when someone discloses their bias, they feel much less inclined to actually give unbiased advice. For example, if your doctor has already told you about the sweet money Reckitt Benckiser paid him, he feels more justified in actually convincing you to buy 3 years’ worth of Disprin. These results were replicated in 2011.

To summarise, when Chandler discloses his friendship with Phoebe, the people in his office either discount that information entirely, or just decide he’s completely biased, missing out on some potential gossip about him. And Chandler himself becomes much more inclined to just go ahead and hire her. (He did hire her once, by the way. In this episode.)

To work, disclosure needs to be simple and tailored to our individual needs, which is not always possible. This is why so much stress is put on avoiding even the appearance of conflicts of interest, because we’re just not very good at dealing with or correcting for them, on either side of them.

In India, conflicts of interest are routine. You could argue we just don’t get them as a culture. You know what we call it when someone makes the allocation of 2G spectrum one giant favour to their friends? Thursday.

In 2007, Hema Malini did not see anything wrong with asking the government if it was cutting excise duties on RO purifiers, while being the brand ambassador for one. In 2015, BJP MP Shyam Charan Gupta declared that there was no link between smoking and cancer, while sitting simultaneously on a 350-crore beedi empire and, amazingly, the parliamentary committee deciding on cigarette packaging.

India currently has no major legislation about conflicts of interest.

Members of the Rajya Sabha are supposed to to maintain a ‘Register of Interest’ where they disclose their conflicts of interest. They do not have to disclose interests of their family members. There are no penalties for wrong or incomplete disclosure.

Members of the Lok Sabha do not have to maintain any such register.

In the 15th Lok Sabha, 128 of the 543 members came from the business class.

In 2017, an amendment to the Finance Bill removed restrictions for companies to only donate upto 7.5% of their profits to political parties, and to disclose the party they donate to.

In 2014, the Delhi HC indicted both the BJP and Congress as guilty of accepting foreign donations in violation of a foreign contribution act. While that was being appealed, the Finance Bill of 2016 amended the definition of ‘foreign sources’ in the FCRA bill of 2010 to retroactively let them off the hook. It was pointed out that they were still in violation of a law from 1976.

An amendment in the just-presented Finance bill of 2018 changes the date of application of the new definition of ‘foreign sources’ from 2010 to 1976.

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Notes

1. Fine. If none of this really interested you…

A post shared by Victoria’s Secret (@victoriassecret) on Jan 28, 2018 at 7:04am PST

 

You’re welcome.
2. Here is a good resource if you want to find out more about the state of Indian politics on conflicts of interest.
3. The foreign funding story was reported in The Wire.
4. US campaign finance graphs taken from this article, CC-by-SA 3.0
5. If you’re actually interested in how the moral licensing effect works, this is the really fun experiment I’ve written about up there.