The world is drowning in corporate fraud, and the problems are probably greatest in rich countries -- those with supposedly "good governance." Poor-country governments probably accept more bribes and commit more offenses, but it is rich countries that host the global companies that carry out the largest offenses. Money talks, and it is corrupting politics and markets all over the world.
Hardly a day passes without a new story of malfeasance. Every Wall Street firm has paid significant fines during the past decade for phony accounting, insider trading, securities fraud, Ponzi schemes, or outright embezzlement by CEOs. A massive insider-trading ring is currently on trial in New York, and has implicated some leading financial-industry figures. And it follows a series of fines paid by America's biggest investment banks to settle charges of various securities violations.
There is, however, scant accountability. Two years after the biggest financial crisis in history, which was fueled by unscrupulous behavior by the biggest banks on Wall Street, not a single financial leader has faced jail. When companies are fined for malfeasance, their shareholders, not their CEOs and managers, pay the price. The fines are always a tiny fraction of the ill-gotten gains, implying to Wall Street that corrupt practices have a solid rate of return. Even today, the banking lobby runs roughshod over regulators and politicians.
Corruption pays in American politics as well. The current governor of Florida, Rick Scott, was CEO of a major health-care company known as Columbia/HCA. The company was charged with defrauding the United States government by overbilling for reimbursement, and eventually pled guilty to 14 felonies, paying a fine of $1.7 billion.
The FBI's investigation forced Scott out of his job. But, a decade after the company's guilty pleas, Scott is back, this time as a "free-market" Republican politician.
When Barack Obama wanted somebody to help with the bailout of the US automobile industry, he turned to a Wall Street "fixer," Steven Rattner, even though Obama knew that Rattner was under investigation for giving kickbacks to government officials. After Rattner finished his work at the White House, he settled the case with a fine of a few million dollars.
But why stop at governors or presidential advisers? Former Vice President Dick Cheney came to the White House after serving as CEO of Halliburton. During his tenure at Halliburton, the firm engaged in illegal bribery of Nigerian officials to enable the company to win access to that country's oil fields -- access worth billions of dollars. When Nigeria's government charged Halliburton with bribery, the company settled the case out of court, paying a fine of $35 million. Of course, there were no consequences whatsoever for Cheney. The news barely made a ripple in the US media.
Impunity is widespread -- indeed, most corporate crimes go un-noticed. The few that are noticed typically end with a slap on the wrist, with the company -- meaning its shareholders -- picking up a modest fine. The real culprits at the top of these companies rarely need to worry. Even when firms pay mega-fines, their CEOs remain. The shareholders are so dispersed and powerless that they exercise little control over the management.
The explosion of corruption -- in the US, Europe, China, India, Africa, Brazil, and beyond -- raises a host of challenging questions about its causes, and about how to control it now that it has reached epidemic proportions.
Corporate corruption is out of control for two main reasons. First, big companies are now multinational, while governments remain national. Big companies are so financially powerful that governments are afraid to take them on.
Second, companies are the major funders of political campaigns in places like the US, while politicians themselves are often part owners, or at least the silent beneficiaries of corporate profits. Roughly one-half of US Congressmen are millionaires, and many have close ties to companies even before they arrive in Congress.
As a result, politicians often look the other way when corporate behavior crosses the line. Even if governments try to enforce the law, companies have armies of lawyers to run circles around them. The result is a culture of impunity, based on the well-proven expectation that corporate crime pays.
Given the close connections of wealth and power with the law, reining in corporate crime will be an enormous struggle. Fortunately, the rapid and pervasive flow of information nowadays could act as a kind of deterrent or disinfectant. Corruption thrives in the dark, yet more information than ever comes to light via email and blogs, as well as Facebook, Twitter, and other social networks.
We will also need a new kind of politician leading a new kind of political campaign, one based on free online media rather than paid media. When politicians can emancipate themselves from corporate donations, they will regain the ability to control corporate abuses.
Moreover, we will need to light the dark corners of international finance, especially tax havens like the Cayman Islands and secretive Swiss banks. Tax evasion, kickbacks, illegal payments, bribes, and other illegal transactions flow through these accounts. The wealth, power, and illegality enabled by this hidden system are now so vast as to threaten the global economy's legitimacy, especially at a time of unprecedented income inequality and large budget deficits, owing to governments' inability politically -- and sometimes even operationally -- to impose taxes on the wealthy.
So the next time you hear about a corruption scandal in Africa or other poor region, ask where it started and who is doing the corrupting. Neither the US nor any other "advanced" country should be pointing the finger at poor countries, for it is often the most powerful global companies that have created the problem.
Originally published by Project Syndicate.
Follow Jeffrey Sachs on Twitter: www.twitter.com/jeffdsachs
Good name in man and woman, dear my lord,
Is the immediate jewel of their souls.
Who steals my purse steals trash; 'tis something, nothing;
'Twas mine, 'tis his, and has been slave to thousands;
But he that filches from me my good name
Robs me of that which not enriches him,
And makes me poor indeed.
Othello Act 3, scene 3, 155–161
http://www.ted.com/talks/jared_diamond_on_why_societies_collapse.html
If these Corporations are so-called people, let them (Executives) be subject to criminal law when they commit crimes. They'll gladly commit crime now if all it means is ponying up fines here and there.
Put them to the test of justice, and let them earn those ridiculous salaries and clean up their acts in the process.
Campaign Finance reform now, Dems!
Democracy sold to the highest bidder
This filibuster of Global Warming brought to you
Buy BP, Exxon, and the Shell of our Government
Green energy makes the CEO see red on the bottom lie
And the battle lines are drawn on Capitol Hill
My interests are not special like Phillip Morris’s
Says the Speaker distributing payoffs
With no warning labels to good soldiers
Capitalism's caste system chains me
Happy to work though I bear the tax burden
Rescuing those reaping the fortune of bad behavior
Derivatives of evil unscathed despite exposed schemes
My neighborhood flooded by a hurricane of
Underwater mortgages, we sink lower
Our wages frozen, we turn down the heat
As corporations sit comfortably on cold, hard cash
A Fox in the coup and my gun is no pen
Just a keyboard linked to the electrical grid
Tyranny dressed as a Patriot Acts to silence the dissent
As the Rush of commercials Beckon with gold sacks
Five dressed in all black hand over the power
Christians home worshipping American Idols
Protecting "life" while depriving health
And poor are denied their daily bread
My constitution grows weaker
Liberty’s words disproven
She weeps.
models that over simplified complex systems sold out to global financial elites. Globalization and increased population putting demands on local environments always creates problems - and we're not addressing the real issues.
1. "I win / you lose" approach (toddler/child-level of interaction)
2. "You win / I lose" approach (Beaten-down/abused-level of interaction)
3. "I win / you win" during compromise (really "I lose / you lose")
4. Needs conflict (where true needs can be sorted out, with caring, and filled) = can become actual "win/win"
5. Values collisions (where at least one side sticks their fingers in their ears and yells, "La, la, la, la la" at the tops of their lungs, while they continually move the goal posts further back.
At this stage of our political conflict, it seems that we must add another stage....
6. War.
Most sentences from the conservatives, TPers, the wealthy begin with "I," "I," "I," "Me," "Me," "Me," "Mine," "Mine," "Mine."
Most sentences from the liberals they hate so much begin with "We."
(please understand I'm kidding - lots of touchy folks around here)
When we start to really get wise they give us a marketing created smooth talking guy who plays to the emotions of the neediest Americans but who is clearly the same as the rest of them. In fact he's worse because he lies to your face with a smile while he does their bidding.
The problem is the decisions the Elites are making are killing this country on multiple levels. Polices that are sold to the masses with trickery. Like the benefits of trickle down economics, and that tax cuts for the wealthy create jobs, or that we need to fight terrorism, and that free trade and globalism are good for the economy. Their greed for wealth and power has no bounds and no limits. They make the rules and buy the players and therefore it's their game to win and they do it consistently.
http://www.businessweek.com/print/magazine/content/11_19/b4227060634112.htm/
During the second half of the 19th century, the world's biggest economies endured a series of brutal recessions. At the time, most forms of reliable economic knowledge were organized within feudal, patrimonial, and tribal relationships. If you wanted to know who owned land or owed a debt, it was a fact recorded locally—and most likely shielded from outsiders. At the same time, the world was expanding...
The result was the invention of the first massive "public memory systems" to record and classify—in rule-bound, certified, and publicly accessible registries, titles, balance sheets, and statements of account—all the relevant knowledge available, whether intangible (stocks, commercial paper, deeds, ledgers, contracts, patents, companies, and promissory notes), or tangible (land, buildings, boats, machines, etc.). Knowing who owned and owed, and fixing that information in public records, made it possible for investors to infer value, take risks, and track results. The final product was a revolutionary form of knowledge: "economic facts." …
We are now staring at a legal and political challenge. A legal challenge because American and European governments allowed economic activity to cross the line from the rule-bound system of property rights, where facts can be established, into an anarchic legal space, where arbitrary interests can trump facts and paper swirls out of control."
It should be:
http://www.businessweek.com/magazine/content/11_19/b4227060634112.htm
The end of the article:
"...We are now staring at a legal and political challenge. A legal challenge because American and European governments allowed economic activity to cross the line from the rule-bound system of property rights, where facts can be established, into an anarchic legal space, where arbitrary interests can trump facts and paper swirls out of control. The rule of law is much more than a dull body of norms: It is a huge, thriving information and management system that filters and processes local data until it is transformed into facts organized in a way that allows us to infer if they hang together and make sense.
Mainly, though, it's a political challenge. Politicians must raise the financial crisis to commanding heights, where the entrenched institutional problems of a failing order can be addressed. Markets were never intended to be anarchic: It has always been government's role to police standards, weights and measures, and records, and not condone legalized sleight of hand in the shadows of the informal economy. To understand and repair one of mankind's greatest achievements—the creation of economic facts through public memory—is the stuff of nation-builders. "