The War for Washington: Corporate America’s Political Surge
The increasing importance of politics to the economy foreshadows a dramatic escalation in corporate engagement of Washington, D.C. The looming battle for the public sector extends far beyond conventional lobbying to encompass an array of influence mechanisms. Amazon provides the leading example of the unfolding surge in corporate political advocacy and threatens to ignite an influence arms race among the Fortune 100.
Politics Overwhelms Markets
Desiccated social capital, sprawling global military obligations, and accelerating technology, among other factors, have combined to make a larger and stronger public sector both necessary to, and preferred by, modern America. Under Democratic and Republican administrations alike, the arc of history bends toward bigger government.1 Although any one of several emerging crises might compel austerity, support for a muscular, expansive state today dominates the American political landscape. Even the Right, which served as the long-time rhetorical home to advocates of limited government, increasingly eschews libertarianism.
For example, the country’s most popular cable television host, Tucker Carlson, who draws an estimated 3.2 million viewers per show and himself is a former libertarian, in a July 2022 speech declared: “The Republican Party somehow found itself in this position where they feel like they have to defend the aesthetics of the dollar store – and the economics of it! Ooh, well that’s free enterprise. No, it’s not. It’s an atrocity that diminishes people, that destroys God’s creation, that oppresses us with its ugliness.”2
In place of Schumpeterian forces, public directives allocate private capital with rising frequency. The federal budget and the Federal Register serve as proxies for this trend. Federal spending increased from 16 percent of GDP in 1955 to almost 21 percent in 2019 (pre-COVID).3 This figure ballooned to more than 31 percent during the pandemic.4 The pages of the Federal Register expanded by more than 611 percent during the same period (1955 to 2019).5 Most tellingly perhaps, from 1950 to 2020 the population of the Washington, D.C. metropolitan area increased by 338 percent, compared to 57 percent for New York, 109 percent for Boston, and 71 percent for Philadelphia.6
The Prime Mover: Amazon
Amazon’s massive engagement of the public sector represents an unexpected and largely unrecognized innovation in business competition. By moving aggressively to capture strategic ground generally considered unconquerable, the company has attempted an audacious maneuver that already has yielded astounding gains measured in revenue from tax advantages, economic development incentives, and government procurement. For example: Baron estimates that by 2025 “The Everything Store’s” revenue from government procurements alone will be the equivalent of a Fortune 75 business. Amazon’s approach to government encompasses several key subcategories beyond conventional lobbying (on which Amazon spent more than any other company during the third quarter of 2022).7
The Everything Public Policy Organization
Amazon shapes political developments through a massive internal public affairs organization staffed by approximately 600 full-time employees in the United States, more than 75 of whom have been hired during just the past six months. Although the company confronts several threats that require defensive measures – particularly in the areas of antitrust and labor – many recent personnel additions advance the company’s offensive priorities in far-flung domains. The company now has dedicated personnel in metropolitan areas including Atlanta, Chicago, Denver, Los Angeles, New York, and Miami. Amazon’s head count in some subdepartments of its public policy organization rival the total public policy staff of many Fortune 100 firms.
Along with expanding internal public affairs capacity, Amazon has dramatically increased investment in third-party groups such as think tanks, issue advocacy groups, and chambers of commerce. From 2015 to 2021, the number of such organizations funded with five-figure or larger grants by Amazon increased almost tenfold, from 47 to 465. Since the inauguration of President Joe Biden, the company has given to 11 left-of-center organizations for the first time and two, including New America, for the first time since 2018. This pivot reflects enhanced risk posed by the rise of the progressive “hipster antitrust” movement. In addition, the company has addressed the growing power of Environmental, Social, and Governance (ESG) by doubling donations during 2021 to energy and environmental grantees such as the Environmental Coalition of South Seattle, Sustain South Carolina, and the Environmental Council of the States. This spending reflects another pattern in Amazon’s giving: an emphasis on state and local policy organizations as the conditions confronting the company in Washington, D.C. deteriorate.
Amazon in recent years has hired thousands of former mid- and senior-level officials and military officers directly from government, many to work for Amazon Web Services (AWS) promoting cloud services to the U.S. Department of Defense and the Intelligence Community. Although these “revolving-door” hires occupy positions throughout the organization, departments (in addition to public policy and AWS) with disproportionally high numbers of former public-sector employees include the company’s third-party logistics operation (Amazon Distribution and Fulfillment Solutions), low-earth orbit satellite constellation (Kuiper), and B2B offering (Amazon Business).
Jeff Bezos has made several particularly shrewd investments of deep relevance to exerting lasting influence on the public sector. For example, his recent $200 million pledge to the Smithsonian represents the largest in the museum’s history, securing unparalleled influence for Blue Origin and Amazon’s Kuiper over popular perceptions of air-and-space history.8 In 2013, Bezos purchased The Washington Post for $250 million.9 The prudence of this expenditure might be understood through the following comparison: Amazon’s founder purchased the most important news outlet in Washington, D.C. for reportedly less than a quarter of the price paid by Axel Springer last year for Politico.10 Bezos’s acquisition in 2016 and subsequent conversion of the former Textile Museum into a private residence has been described by associates as in part attributable to his interest in Blue Origin’s lobbying efforts.11 Amazon’s investment in a second headquarters in the Washington, D.C. region near the Pentagon – known as “HQ2” – has an estimated development budget of more than $2.5 billion and will establish the Seattle retailer as a pillar of the National Capital Region.12 Finally, Amazon has committed more than $2 billion “to preserve and create more than 20,000 affordable homes in three communities where we have a high concentration of employees,” including the “Arlington, Virginia region.”13
Aligning Spending with the New Reality
As private investment in public affairs grows, sophisticated enterprises will make outsize investments in thought leadership on sectoral trends, rather than ad hoc lobbying campaigns. Although few companies will even approach Amazon’s spending level, large firms will increase budgets and expand non-traditional programs. Early indications suggest an emphasis on influencer engagement, specialty media outlets, and customized monitoring capabilities.
Survival Strategies for Small- and Medium-Sized Enterprises
As a handful of massive corporate empires contend for dominance, smaller firms will require creative approaches. In geopolitics, countries like Singapore, Israel, and the United Arab Emirates outperform through asymmetric military capabilities and alliances. In the words of retired Israeli general Assaf Orion: “Israel seems well aware of its size and limitations… [A]s a small country lacking the heft to shape its environment in a grand way, it seeks to adapt to its changes and use their potential for prosperity and for strengthening its security posture.”14 Political survival strategies for small- and medium-sized enterprises will include a shifting mix of deterrence, cooperation, and defensive alliances.
CEOs as Heads of State
Many business leaders pride themselves on maintaining a polite indifference – if not a thinly veiled hostility – toward Washington, D.C. Although this disposition reflects an admirable desire to “focus on the business,” the nature of contemporary politics and the modern administrative state renders such a posture impractical. Instead, CEOs should understand their role as akin to a head of state to whom Washington, D.C. looks to define interests and explain conditions in their domains. A corporate government relations office in Washington, D.C. should be thought of as an embassy in a capital of critical importance. Most of all, company leaders should make regular visits year after year to understand trends and build trusted relationships with legislators, regulators, issue experts, and other thought leaders.
Twenty-First Century Washington, D.C.: Imperial Capital in an Era of Corporatism
In the current era of political economy, decisions in Washington, D.C. increasingly shape business competition and tip markets. Building support in the public sector has joined more traditional sources of competitive advantage as an urgent priority. With growing domestic needs and an intensifying rivalry with China defining the U.S. political agenda, corporate leaders will be more challenged than ever to manage accelerating government intervention in the private sector.
1. “Historical Budget Data,” Congressional Budget Office, https://www.cbo.gov/data/budget-economic-data#2.
2. Press release, “FOX News Channel Dominates Third Quarter of 2022 and Remains Cable’s Highest-Rated Network in Primetime and Total Day Viewers,” Business Wire, September 27, 2022, https://www.businesswire.com/news/home/20220927006041/en/FOX-News-Channel- Dominates-Third-Quarter-of-2022-and-Remains-Cable%E2%80%99s-Highest-Rated-Network-in-Primetime-and-Total-Day-Viewers; “Tucker Carlson Joins the Cato Institute,” Cato At Liberty blog, Cato Institute, February 23, 2009, https://www.cato.org/blog/tucker-carlson-joins-cato-institute; and Tucker Carlson, Remarks at Family Leadership Summit, July 19, 2022, https://thefamilyleader. com/watch-fox-tvs-tucker-carlson-speech-at-2022-family-leadership-summit.
3. “Federal Net Outlays as Percent of Gross Domestic Product,” Federal Reserve Economic Data (FRED), Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/FYONGDA188S.
5. “Federal Register Pages Published, 1936-2021,” Office of the Federal Register, National Archives and Records Administration, https://uploads.federalregister.gov/uploads/2022/05/20110716/FR-Stats-2021-Pages-Published.pdf.
6. Recognizing that the U.S. Census Bureau definition of metropolitan statistical areas has changed over the years. “1950 Census of Population: Preliminary Counts,” U.S. Census Bureau, November 5, 1950, https://www2.census.gov/library/publications/decennial/1950/pc-03/pc-3-03.pdf; “Resident Population in Washington-Arlington-Alexandria, DC-VA-MD-WV (MSA) (WSHPOP),” Federal Reserve Economic Data (FRED), Federal Reserve Bank of St. Louis, https://fred.stlouisfed. org/series/WSHPOP; “Resident Population in New York-Newark-Jersey City, NY-NJ-PA (MSA) (NYTPOP),” Federal Reserve Economic Data (FRED), Federal Reserve Bank of St. Louis, https:// fred.stlouisfed.org/series/NYTPOP; “Resident Population in Boston-Cambridge-Newton, MA-NH (MSA) (BOSPOP),” Federal Reserve Economic Data (FRED), Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/BOSPOP; and “Resident Population in Philadelphia-Camden-Wilmington, PA-NJ-DE-MD (MSA) (PCWPOP),” Federal Reserve Economic Data (FRED), Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/PCWPOP.
7. “Top Spenders,” Open Secrets, https://www.opensecrets.org/federal-lobbying/top-spenders.
8. Press release, “Smithsonian To Receive Historic $200 Million Donation from Jeff Bezos,” Smithsonian, July 14, 2021, https://www.si.edu/newsdesk/releases/smithsonian-receive-historic-200-million-donation-jeff-bezos.
9. Neil Irwin and Ylan Q. Mui, “Washington Post Sale: Details of Bezos Deal,” The Washington Post, August 5, 2013, https://www.washingtonpost.com/business/economy/details-of-bezos-deal-to-buy-washington-post/2013/08/05/968a2bc4-fe1b-11e2-9711-3708310f6f4d_story.html.
10. Benjamin Mullin and Dave Sebastian, “Axel Springer to Acquire Politico,” The Wall Street Journal, August 26, 2021, https://www.wsj.com/articles/axel-springer-to-acquire-politico-11629984117; and Press release, “Axel Springer Completes Acquisition of POLITICO,” Axel Springer, October 19, 2021, https://www.axelspringer.com/en/ax-press-release/axel-springer-completes-acquisition-of-politico.
11. Benjamin Wofford, “Jeff Bezos’s DC Mansion Has Made Its Social Debut,” Washingtonian, January 27, 2020, https://www.washingtonian.com/2020/01/27/jeff-bezos-dc-mansion-has-made-its-social-debut.
12. John Schoettler, “Amazon Shares New Details on HQ2 Hiring Ahead of Career Day 2021,” About Amazon, Amazon, September 1, 2021, https://www.aboutamazon.com/news/amazon-offices/the-next-chapter-for-hq2-sustainable-buildings-surrounded-by-nature.
13. “Housing Equity,” About Amazon, Amazon, https://www.aboutamazon.com/impact/community/ housing-equity.
14. Assaf Orion, “Israel’s Grand Strategy Ripples Begin at Home,” Hoover Institution, May 11, 2021, https://www.hoover.org/sites/default/files/research/docs/orion_webreadypdf-rev.pdf.