The gushing flow of campaign donations really should be of no surprise this year given the economic...err, political system we currently have. Within our system, it is arguably more effective in the short-run to buy political protection than it is to improve your market position the old fashion way. For instance, facing increasing competition from small-scale producers offering increased cigarette flavor variety, Philip Morris sought to buy protection rather than compete with them (here and here). Regulators were more than willing to say to Philip Morris "We'll destroy your competitors by regulating the market, eliminating the possibility of variety all in the name of saving children. We'll exclude your common varieties (menthol) from the regulation, of course. We'll do this for you only if you give us enough money and promise us enough votes." Rather than compete, Philip Morris turned to government thugs to eliminate the competition.
My biggest concern is not that this activity is currently happening but is how to stop it. Given the willingness of politicians to allow individuals and firms to buy protection, it has become suicide to not participate--if a firm does not buy protection from government thugs, its competitor(s) will buy the favor of the thugs and they will, at a minimum, greatly disadvantage the firm. Now that this train is rolling, it seems extremely difficult to stop it (or even slow it down) short of a complete overhaul of the political system.
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