Small Business, Small Lobby, Big Power

A 2008 article from the Boston Review documents the success of the National Federation of Independent Business, a lobby for small businesses and their owners. The NFIB is a relatively small lobby that has made a powerful name for itself in Washington. The success of the lobby fits with Olsen’s theories on how small special interest groups are generally more powerful when formed strictly for the purpose of gaining political influence.

“For close observers of American politics, this story fits a familiar pattern. While NFIB is relatively small—600,000 members compared to AARP’s 38 million—it is remarkably powerful. Fortune has frequently named it the most powerful business lobby in Washington, and in 2005 Republican members of Congress identified it as the most powerful congressional lobby. And just last month, Republican presidential hopeful John McCain deemed the organization sufficiently important to provide the keynote address at its National Small Business Summit.”

Olsen’s article shows that small groups tend to function better when you cannot exclude people from benefits because they avoid a substantial free rider problem. This article though highlights some problems that can arise with smaller, powerful lobbies. The NFIB doesn’t actually seem to represent the diversity of small business owners very well as it lobbies for a mainly conservative agenda. The article suggests this could be because its data collection polls are not very complex or that small business owners are not always educated and may vote in ways that go against their economic interests. Another explanation could be that since the lobby is so concentrated (a small lobby representing a large group of Americans), the members that are extremely active lobby for their own interests and not the ones of small business owners as a whole. This seems like a way for the lobby to minimize the free rider problem, but is the tradeoff between power and representativeness actually good for smaller lobbies?

The article also briefly mentions the second form of successful lobby that Olsen describes. It describes small-business organization that form locally to promote business, “community vitality” and other economic interests but end up gaining a voice in local politics. While the article is talking about local lobbies (not exactly the large lobbies that Olsen is dealing with) it represents the same concept of some successful lobbies starting for purposes other than political influence.