Building a massive, specialized factory is a more effective way to control the government than hiring a team of lobbyists.
Firms gain political leverage by making irreversible technological investments that the state cannot afford to let fail. Once a specific infrastructure is in place, the government is forced to regulate in a way that keeps that system functional. We usually think of corporate power as a series of secret meetings or campaign donations. This model shows that the physical reality of industrial assets creates a trap for policy makers. The state ends up serving the interests of the company because the alternative is a total systemic disruption.
Market Power Is Power
SSRN · 6730098
We argue that in market democracies firms can wield political power through a mechanism that does not rely on lobbying, campaign contributions, or persuasion. When voters cannot commit to future regulation, firms can use irreversible technological investments to reshape ex-post political incentives. We call this mechanism the political holdup problem. We show that, in equilibrium, a firm's de facto power to avoid regulation coincides with standard measures of market power. This form of power is