Regulatory Capture

Those of us who teach classes in public administration routinely include lessons on what is called “regulatory capture.” That’s jargon for the “coziness” that often develops between regulators and those whom they regulate.

The more technical and “exclusive” the area being regulated, the easier it is for employees of the government agency charged with oversight, and the representatives of enterprises they are overseeing to become comfortable with each other, and to develop a trusting relationship.

The concern, of course, is that it gets too trusting, and that the oversight intended to protect the public becomes too lax.

Regulatory capture is generally not intentional–familiarity leads to comfort, and things slip between the cracks. But of course, there are also situations in which lax enforcement is, shall we say, more calculated. The question being asked in the wake of two Boeing aircraft crashes, and reports that the FAA allowed Boeing to “self-certify” the safety of its aircraft, is: which kind are we dealing with?

According to the Washington Post, Boeing and the government have long had a “special relationship.”

As a top economic adviser to President Bill Clinton, Dorothy Robyn was charged with advancing America’s aerospace industry.

Part of the job was not choosing sides between companies. But there was one exception: Boeing.

“It was the one company for which I could be an out-and-out advocate,” Robyn said Thursday. In competitions between American companies, the administration as a rule remained neutral. But Boeing’s commercial airplane division employed tens of thousands of Americans and its prime competition, Airbus, was in Europe.

“In the engines business, you can’t choose between GE and Pratt & Whitney. With Boeing, that’s it. They’re ours. It is the only sector where we have a de facto national champion and you can be an out-and-out advocate for it.”

That “special relationship” has existed for decades. Boeing makes the planes that fly as Air Force One. A former Boeing executive, Patrick M. Shanahan, was tapped by Trump to be acting defense secretary after the resignation of Jim Mattis, despite the fact that he had no prior government experience. Boeing’s business is so dependent on federal government policies that the company spent $15.1 million last year on approximately 100 Washington lobbyists.

Boeing booked a record $101.1 billion in 2018 revenue, up 13 percent from the year before, and analysts say about a quarter of that was from government contracts. In 2017, Boeing received an estimated $23.3 billion in taxpayer-funded contract awards, not including classified military funding. And its joint ventures with Lockheed Martin and Bell Helicopter Textron received $2.2 billion and $2.5 billion, respectively, in federal contract funding in 2017….

Daniel Auble, a senior researcher at the Center for Responsive Politics, called Boeing “an excellent illustration” of the “the undue influence of money in our political system.”

In the wake of the two crashes, Congress has demanded answers about FAA oversight of Boeing, including why the FAA didn’t ground the company’s planes until regulators in Europe, China, Australia and elsewhere had done so.

Some FAA personnel have complained that the agency has given Boeing too much responsibility for its own safety checks.  Concerns about a lack of rigorous oversight–especially as reports have emerged about Boeing’s “rush” to beat a rival and deliver these aircraft–is only the most recent evidence that warnings about the company’s “cozy” relationship with the government are not misplaced.

The close relationship between the Pentagon and Boeing is part of a long-standing revolving-door culture in which senior defense officials move back and forth between jobs in government and with defense contractors.

In 2004, Darleen Druyun, a high-ranking Air Force procurement official, was sentenced to prison after she admitted that she approved a purchase of 100 refueling airplanes from Boeing at an inflated price of about $20 billion to enhance her job prospects with the company. She also leaked proprietary pricing information from a competitor and helped Boeing secure a separate $4 billion as a thank you for hiring her daughter and future son-in-law.

According to Bloomberg (link unavailable)

In one previously unreported case involving a separate aircraft program, a Boeing engineer sued three years ago, claiming he was fired for flagging safety problems that might have slowed development. Boeing has denied the claims.

If the investigations now underway find evidence that regulatory oversight was lax–whether due to an excess of trust or something worse–it will be yet another item on the growing list of reasons other countries no longer feel they can trust us.

As airlines cancel several billion dollars of orders for Boeing airplanes, and the company’s stock tanks, the livelihoods of Boeing’s 153,027 employees are at risk. The economic consequences for the whole country could be very ugly.

America is about to get a lesson that our anti-government Republicans won’t like: effective regulation and oversight are essential to economic stability and growth, and only government can provide it.


  1. Only government can provide it? Ever the answer to problems facilitated or caused by government is more government. Couldn’t the solution also be less centralization and power? Maybe getting a good housekeeping seal of approval from the FAA is part of the problem.

  2. “The more technical and “exclusive” the area being regulated, the easier it is for employees of the government agency charged with oversight, and the representatives of enterprises they are overseeing to become comfortable with each other, and to develop a trusting relationship.”

    I fully understand the vital issue now being addressed regarding airline safety and Boeing; uppermost the recent loss of lives and the possible cause, the national economics and possible job losses involved, but can “Regulatory Capture” be brought down to local levels? Such as the money pouring into the College Avenue Corridor, the Red Line public transportation which will aid business owners but not provide transportation to the public in areas where it is most needed. But; I must question how much “aid” the line will be to businesses if the public has no transportation to support their business?

    “America is about to get a lesson that our anti-government Republicans won’t like: effective regulation and oversight are essential to economic stability and growth, and only government can provide it.”

    Our “anti-government Republicans” who are doing away with regulations and oversight are the very ones in need of “regulation and oversight”. Am I not understanding the crux of the full meaning of “regulation and oversight” as it pertains to government, business and the public at all levels. Along with the airline safety issue regarding Boeing; we are faced with the Trump/DeVos deliberate dismantling of our entire Public Education system; including the hard fought for provisions for “special needs” students. Trump and DeVos are both totally uneducated in the education system in this country and want to bring the intelligence level of our future leaders DOWN to their level. “When the blind lead the blind, both fall into the ditch.” But they are dragging the country down with them due to their own lack of their much needed “regulation and oversight”. Boeing is a major corporation; where do you believe Trump’s and the Republican’s loyalties will be placed? Think Citizens United!

  3. Eric, there should have been more “government” in the beginning so that “more government” would have not been necessary later, and while there have been criminal cases arising from the coziness of regulators and the regulated, your conclusion that the “problems facilitated or caused by government” is misplaced. The problems are primarily causes by the regulated, or in this case, Boeing. Regulators don’t build planes.

    The real problem at the present time is Donald Trump, who is inviting further chicanery by Boeing with his Defense Department appointment and a speech I heard him give at a Boeing conclave in which he ended it by saying: “God bless America, and God bless Boeing,” thus inserting divinity into the DNA of the maker of war machines that slaughter Yemeni women and children, among Syrian and other such venues.

    The answer, if there is one since human nature and greed are involved, is to have rigorous oversight of our regulators in their interplay with Boeing starting with an end to self-certification, and yes, with a better than “a good housekeeping seal of approval from the FAA.”
    I think you would,have trouble in selling your “less government” story to the relatives of those who died in the “new” 737 crashes of Ethiopian and Indonesian airlines, relatives with whom I would agree.

  4. Maybe if we had applied our anti-trust laws, we wouldn’t have only one aircraft maker. Has Boeing become too big to fail?

  5. Boeing isn’t the only problem. Remember Volkswagon? It was allowed to certify the emissions levels of its diesel engines, so it added a software subroutine to hide the fact that the engines violated the clean air act. And the disaster in Flint Michigan was due to the fact that the Mid-West EPA office didn’t bother to monitor what was going on when the city switched to a water supply that General Motors wouldn’t use in its factories because of pollution.

    Regulatory capture is rampant.

  6. ” Some FAA personnel have complained that the agency has given Boeing too much responsibility for its own safety checks.”

    Safety checks is a euphemism for self-certification. This is a 10 year old program wherein a Boeing engineer “acts” as a FAA representative “certifying” that the new or altered systems (over 60 in this case) met the FAA safety standards. The FAA IG was critical of this program on the same plane in 2011 and 2016.

    Sheila, Pascal et al are correct that regulatory capture is rampant

  7. This today from the Guardian: Monsanto found liable for California man’s cancer and ordered to pay $80m in damages.

    In a verdict during an earlier phase of the trial, the jury in San Francisco unanimously ruled that the herbicide was a “substantial factor” in causing the cancer of Edwin Hardeman.

    “As demonstrated throughout trial, since Roundup’s inception over 40 years ago, Monsanto refuses to act responsibly,” Hardeman’s lawyers said in a statement. “It is clear from Monsanto’s actions that it does not care whether Roundup causes cancer, focusing instead on manipulating public opinion and undermining anyone who raises genuine and legitimate concerns about Roundup.”

    Aimee Wagstaff, Hardeman’s lawyer, told the jury that Monsanto had a “cozy relationship” with Environmental Protection Agency (EPA) employees and had also paid “prestigious” scientists to author “favorable” studies: “Monsanto has influenced and manipulated the science through its relationships with regulatory officials and through ghostwriting.”

    Given the Corporate influence over both major political parties, it is not surprising that regulations and rules would not be enforced or neutered. One of the principal rules of Steroid Capitalism is, “Anything that impedes profits, must be eliminated”.

  8. Closer to home here in Indianapolis. From IBJ:
    Plan for private health clinic at Broad Ripple Park hits opposition.

    A proposal to bring a health care clinic to Broad Ripple Park is receiving criticism from some residents who say it’s inappropriate to use park space for businesses. Broad Ripple Park Alliance was formed in recent weeks as a last-ditch effort to derail a potential public-private partnership.

    The city’s Department of Metropolitan Development and Indy Parks are in the process of selecting a private-sector partner that would help pay to construct a clinic and family event center on about 4.5 acres of land where the existing park center currently stands.

    “While health clinics are certainly a needed and desirable component of a sustainable and healthy community, we do not believe it is appropriate to encroach on public park land for a private company to construct and operate facilities which further reduce our already insufficient inventory of public park land and open space,” the group said in a written statement. “This is especially objectionable because other appropriate locations in established commercial areas are available within a reasonable distance.”

    For critics of the plan, the issue goes beyond a private entity encroaching on public land—though that’s certainly one of the issues it lays out.
    Even though $teve Gold$mith is long gone the spirit of privatizing “the commons” lives on.

  9. Full disclosure requires me to mention that I worked for Boeing ( in an IT capacity) for about 5 years before my final retirement.

    One of my sons is a captain for American Airlines and has flown virtually every model of the 737 including the Max 8. He finds the Max 8 superior to its predecessors. While he admits that Boeing should have made the MCAS recovery procedures more readily available, he believes, and explained after the Indonesian crash, that an experienced pilot should have known how to recover from the conditions imposed by the faulty software. I’m not sure he had heard, at the time of our discussion, the recently reported fact that the pilots had only 40 seconds to recover from the nose-down dive.

    He added that in the case of the Somali accident, that the first officer, with only 200 hours of flight time (most qualified airline pilots have thousands of hours) would have been barely qualified to drive to the airport let alone fly a jet passenger plane. It seems likely that with his background, the first officer may have added to the problems rather than helping to analyze them.

    My view is that Boeing is playing a dangerous game by selling safety add-ons to cash-strapped airlines. In a more sensible world, anything known to make flight safer would be incorporated into the base price of the aircraft. Safety is not – or should not be – an option.

  10. And, of course, not much need to note, but it grates me…When a big company is fined millions of dollars for regulatory failure, no executive goes to jail and the fine is a tax write off!

  11. Where does the thought “too much” or “too little” government even come from? By what measure is either true? Is there a government that is, as Goldilocks famously opined, “just right”? Which one is it?

    The thought should never enter into political discourse yet it does all of the time.

    As technology has continued to blossom at an unprecedented rate regulators and the regulated are both, for each technology, part of an exclusive club for that technology, who understands it in detail. Regulation can’t be “do good and avoid evil” but a complex analysis of risks and costs and engineering detail.

    The Boeing situation seems to be boiling down to one sensor vs two and the software to determine actions if two report the same or different by some degree senses of aircraft attitude. Not a field for amateur regulators or corporate engineers. Both regulator and regulated uniquely share the knowledge about the intimate details of designs achieving adequate performance.

    No, too big or too small government is not even a question. Good government, just like good corporations, has to be the standard and that is so far beyond the capabilities of the crime family in this administration that the right admonition for them is don’t touch anything. Leave everything alone and let experts do what they are uniquely equipped to do.

  12. A concurrent issue and almost never talked about is that “experts” more and more go to work at businesses rather than government as “public service” becomes less attractive from lesser salaries/career opportunities and the increasing threat that the work may become awash in partisan politics.

    The geniuses who help the rich avoid taxes do not work at the IRS figuring out and preventing these tactics when the laws are written…

  13. It’s obvious Boeing didn’t do anything wrong. Just like the banks. American companies–just like Republican Mueller– have our best interests at heart. Our government agencies are working tirelessly and their acumen is superlative. This is the fault of Russia and Putin!

  14. Gerald, what percentage should government be of the total economy? The amount where there would be no regulatory capture.

  15. Deregulation over the past 40 years is only slightly worse that corporate self policing and ignoring that lives and safety are expendable in the latter case. Convenience and sane air travel so long ago that two generations have passed since the advantage of regulation was an every day travel experience. Dedicated monopoly routes allotted to airlines on which huge profits were made. In return benefiting airline had to serve a route or two at a modest loss. No overbooking, much more direct flights, less layover and changing planes were the norm. Flights were seldom delayed and carriers made good profits. Deregulation transformed this into the terrible experience we have in air travel today. Allows short term goals, share holders getting dividends, execs huge salaries and bonuses . All done on borrowed money from investment banks while carriers operate at a loss. I will take regulation and dignified travel over riding in today’s fly cattle cars.

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