Business lobbying under salience – financial industry mobilization against the European financial transaction tax

Abstract

This article examines interest group conflicts surrounding the financial transaction tax (FTT) debate in the European Union (EU). Specifically, it focuses on the advocacy efforts of EU-based financial industry groups at different stages of the policy debate. The article provides a detailed description of changes to the post-crisis regulatory environment and points to public salience as important factor that can constrain business power. Much in line with the existing literature, industry groups did not fare very well under conditions of high salience and public pressure during the agendasetting stage. However, this article also shows that in order to get back on its feet, the financial sector lobby had to employ a combination of quiet and noisy politics during later stages of the policy process. As soon as the contextual conditions provided by the financial crisis started to fade away, industry groups were able to bounce back by using a framing strategy that linked their arguments against an FTT to broader societal goals, by disseminating scientific evidence and by building coalitions with business groups outside of finance in order to water-down the proposed directive.

The MNC‐Coalition Paradox: Issue Salience, Foreign Firms and the General Data Protection Regulation

“…Once Edward Snowden put the GDPR under the spotlight's harsh glare, these groups were ready to take advantage of the new opportunity structure. Such institutionalized mobilization is relatively rare, particularly when compared to issues like financial regulation where salience appears to have recently had limited effects (Kastner, 2017). Furthermore, these groups were able to use information uncovered by the leaks to keep attention on the Regulation long after the initial shock.…”

“…This recent theorizing, coupled with numerous empirical examples, illustrates that policy salience is no panacea for pluralistic participation or pro‐consumer reform. For example, Kastner () finds that as the initial salience of the financial crisis receded, industry groups were able to team up with non‐financial firms to blunt implementation of a financial transaction tax. In other words, we still need to further clarify how and when salience affects domestic and transnational outcomes, and recent work suggests that who forms the lobbying coalition is key to understanding outcomes under high salience.…”

The political economy of the abolition of wealth taxes in the OECD

“…The opposite happens under quiet politics environments, where technical experts can influence the work of small working groups to obtain policies that resemble their preferences (Culpepper, 2011). Kastner's (2018) analysis of the unsuccessful proposal to implement a financial transaction tax in the European Union is an example of the above. She finds that the lobbying strategies of the financial industry failed during the agenda-setting stage of the proposal.…”

Fiscal fault, financial fix? Capital Markets Union and the quest for macroeconomic stabilization in the Euro Area

“…The key variable for the success of financial sector lobbying, however, is the strategic interest of policymakers in market-based finance as a governance infrastructure (Braun, 2017). For instance, when opponents of the financial transactions tax found themselves to be pushing against an open door with policymakers, the primary reason was the ECB’s strategic interest in a deep and liquid repo market (Gabor, 2016b; Kalaitzake, 2017; Kastner, 2017). As Cornelia Woll (2014: 45) convincingly argues, in the relationship between finance and the state ‘being needed is of fundamental importance, not influence peddling, as many assume.’ While it is a truism that in a capitalist economy finance is, and has always been, in a structurally powerful position (Block, 1977; Gill and Law, 1989), the degree of influence varies with the structure of the state and the availability of macroeconomic policy tools as well as with the prevailing ideas about the nature of financial markets.…”

“…This finding is consistent with the literature that has found policymaking to increasingly blur the lines, drawn originally by Heclo, between ‘powering’ and ‘puzzling’ (Boswell, 2008; Culpepper, 2002; Heclo, 1974; Mudge and Vauchez, 2012). On the one hand, solid evidence exists of the structural and instrumental power of finance in the European political process, especially at EU level (Culpepper and Reinke, 2014; Gabor, 2016b; Kastner, 2017; Woll, 2016; Young and Pagliari, 2017). At the same time, technocrats undoubtedly pursue their own policy goals, and they ‘puzzle’ over how to achieve them.…”