Politicians Are Switching To Business?

Politicians who switch to the corporate world often get negative in the news. This creates an image of ‘revolving door politicians’, without it being clear whether this is justified. This article explains what kind of Dutch ex-politicians had a great chance of ending up in the business world in the past ten years.

 

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At the beginning of 2016, VVD MP Bart de Liefde decided to continue his career as a lobbyist at the transport brokerage company Uber. A salient detail is that as a Member of Parliament two years earlier, as spokesman for Competition, he made a plea for Uber. It is not the first time that a politician has made a remarkable switch to the private sector. The best-known example in the Netherlands is Camiel Eurlings who, shortly after his departure as Minister of Transport, Public Works and Water Management, became CEO of KLM. The most striking example in 2016 at the international level was José Manuel Barroso. The former president of the European Commission found a job at Goldman Sachs in London.

Reasons to switch

Whether switching from politics to business is socially desirable is under discussion. For example, it is undesirable for a politician to do favors to a company in the hope of later getting a lucrative job in return. On the other hand, it is also undesirable if an ex-politician does not have the opportunity to use his knowledge and experience where it is best used. Mattozzi and Merlo (2008) argue that there are two types of political careers: there are people who are primarily politicians – they remain active in politics until retirement – and there are people who are active in politics for a while – they time to switch back to the private sector. According to the authors, the most skilled politicians choose to send signals about their skills to the labor market, while the least skilled politicians – due to their poor performance – are forced to leave the political sector. As a result, both the best and the worst politicians end up in the private sector, while the middle-rank in the political sector lags behind. The second reason that may play a role is a political ideology. The idea is that right-wing MPs are more often out to monetize their political careers. That taking right-wing positions is often accompanied by a greater focus on self-interest has been confirmed by, for example, Powdthavee and Oswald (2014).

Dataset and estimate

The Dutch ex-politicians in this study are all members of parliament and ministers and state secretaries who, between 2006 and mid-2016, left the House or their posts or did not return to their party’s electoral list. The ex-politicians are divided into three groups, depending on where they worked in mid-2016: in the private sector (e.g. lobbyist, entrepreneur, or consultant), in the local political sector (e.g. municipal councilor, mayor, or alderman), or other (e.g. NGO employee, teacher, pensioner). If an ex-politician has multiple jobs, including one in the private sector, he counts in this analysis as working in the private sector. For example, former Prime Minister Jan Peter Balkenende works as a professor at Erasmus University and as an advisor at Ernst & Young, so he is assigned to the private sector. In this study, he has been assigned to the private sector. The information for this research was obtained via the website of the Parliamentary Documentation Center, the LinkedIn site of the ex-politicians, and from various news sources. The following are included as explanatory variables: the list position (1 for the party leader, 2 for the number two, etc.) the (party) ideology on the left-right spectrum of Kieskompas (between -6.5 for a SP’er and 7 for a VVD member) and whether an ex-politician has a job history in the private sector. All regressions were also controlled for age, age squared, gender, political experience, and education level. It has been estimated with a probit model. The dataset contains a total of 150 outgoing politicians in that period. As of mid-2016, 48 of them were employed in the private sector, 61 in the political sector, and 41 others.

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