It’s time to start fighting the most insidious form of corruption -- the kind that’s legal.
- By Janine R. WedelJanine R. Wedel, University Professor in the School of Policy, Government, and International Affairs at George Mason University, is the author of Unaccountable: How Elite Power Brokers Corrupt our Finances, Freedom, and Security.
Last month Greeks delivered a sharp blow to the European Union by voting in the left-wing Syriza Party, which has vowed to end years of painful austerity policies. But Syriza owes much of its popularity for its opposition to something else: elite corruption. As one news report put it, “Many in Greece feel slashed public spending has hit the most vulnerable hardest, while leaving… corruption of the apparent elites untouched.”
This sense that something on high smells bad has galvanized protesters in recent years in countries as different as Brazil, Turkey, Ukraine, and the United States. They seem to share an intuitive sense that the system is gamed against them, that it compromises their livelihoods and futures, and that it makes it harder to have their voices heard, let alone discover who is responsible. (The photo shows Occupy Wall Street protesters in Chicago on the eve of the May 2012 NATO summit.)
Petty corruption, such as having to pay a bribe to a bureaucrat or customs official, also leads to discontent around the world. Some scholars call this “need corruption,” because it is driven by everyday people trying to navigate an impossible system to receive basic goods and services. And since corruption became a “hot” issue in the 1990s, global efforts to combat it have concentrated largely on this need corruption, with major players like the World Bank and Transparency International at the forefront.
But it’s often the corruption of elite insiders, not petty bribery, that most foments distrust of leaders and public institutions. As I describe in my new book, this “new corruption” may be less visible, but it is practiced on a wide scale by a set of global power brokers who have rigged the system to their advantage in innovative ways. The worldwide protests triggered by this form of corruption are proof that a growing number of people have turned into disaffected outsiders, all too aware that they stand squarely apart from this system of power and influence. This is the most damaging and far-reaching form of corruption that exists today. And this “new corruption” — difficult to detect, but insidious — deserves our attention.
The essence of this new (legal) corruption –- the violation of public trust – harks back to ancient notions of corruption. Yet its practitioners follow a thoroughly 21st-century playbook, written over the past few decades as privatization, deregulation, the end of the Cold War, and the advent of the digital age have transformed the world. These developments have broken down barriers and created new openings for elites to exercise their power and influence in a system that is more complex and opaque than ever, enabling them to use the levers of power to their own advantage while, at the same time, denying responsibility. (Many bankers, for example, trade in derivatives so complex that even they can plausibly deny understanding them.)
Practitioners of the new corruption assume a tangle of roles that fuses state and private sectors. They abrogate public trust by working on behalf of their own, instead of those on whose behalf they purport to act. Just think of Goldman Sachs, often derided as “Government Sachs” for its seamless enmeshing of Wall Street and Washington. In the years leading up to the financial crash of 2008, Goldman routinely pushed the envelope — such as the notorious ABACUS case, in which the bank sold investments it knew were bad to one client at the behest of another. Yet the company apparently broke few or no laws along the way. Goldman also famously helped Greece (and possibly other struggling European countries) hide debt in the early 2000s. When the day of reckoning came for Greece, it wasn’t Goldman Sachs, elite insiders, or national leaders who paid the price of slashing austerity measures.
That the system is rigged in new ways resounds worldwide, even in the West. There’s a documented loss of confidence in formal institutions: governments, parliaments, courts, banks, corporations, the media. A 2014 research project attempted to quantify how gamed the system is in the United States. Two political scientists looked at 1,779 policy issues hashed out from 1981 to 2002 and found that policies widely supported by economically elite Americans were adopted about 45 percent of the time. If these same privileged Americans didn’t support particular policies, then their rate of acceptance dropped to 18 percent. The scholars write: “The central point that emerges from our research is that economic elites… have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence.”
In the United States and many European countries, then, the new corruption appears to have surpassed the old. How can it be that bribes and blatant illegality have come to matter more than insider elites who betray our trust but go mostly unscrutinized, let alone unsanctioned?
Clues can be found in the evolution of the post-Cold War “anti-corruption industry,” which I witnessed firsthand in the 1990s as an anthropologist in Eastern Europe and occasional World Bank consultant. With economists as its intellectual leaders, the industry focused primarily on need corruption, which lends itself more neatly to the models and metrics they favor. The industry — using the prevailing World Bank definition of corruption, “the abuse of public office for private gain,” often taken to mean simple bribery — enjoyed its heyday in the late 1990s, when the American economy was roaring, despite market tremors overseas. In this heady atmosphere, anti-corruption economists and activists, along with their brethren in the business and investment community, strove to crack the problem of corruption in Africa, Latin America, Asia, and the former Soviet Union and Eastern Bloc. They sought to “do good” by making countries “out there” more hospitable to investment. “Crony capitalism” applied only to certain Asian countries (following the financial crisis that had swept the region) and perhaps some post-Soviet ones, not to any place in the West.
Yet Washington insiderism and Wall Street malfeasance were already thriving, only to reach their calamitous peak in 2008. While some noted economists served as handmaidens for investment banks, regulatory institutions, and credit-rating agencies as these institutions engaged in some of the boldest violations of the public trust in history, other well-intentioned members of the same profession were acting as the brains of the anti-corruption industry.
Economists at the World Bank and Transparency International had devised metrics to make sense of corruption in terms of a single number or score. TI was making its mark with its annual Corruption Perceptions Index, which garnered extensive media attention and helped put and keep the organization on the map. The CPI measures corruption in countries around the world, as perceived by experts and business leaders. A single score, the story lines imply, conveys the corruption of an entire country. Ordering countries by rank shows us how they compare to each other. In 1999, a typical year, Scandinavian and Western European countries ranked the highest, meaning the most “clean,” with the United States not far behind. Economies like Indonesia, Nigeria, and Cameroon were at or close to the bottom.
It’s easy to see the appeal of corruption-as-bribery and of ranking systems. Single numbers are easy to grasp, seductive in their clarity, and welcome fodder to media and pundits.
But is this in the public interest? The low-level functionary in a non-Western country is disparaged or even punished for taking bribes that feed his family. Meanwhile, prestige-cloaked practitioners of the new corruption whose undisclosed roles and influence help shape policy and whose actions have a far greater impact on our health, habitat, and pocketbooks, get a pass.
My point is not that the corruption targets of the economists and World Bank-and-TI establishment were wrong. To the contrary. But anti-corruption efforts, scholarship, and solutions were focused so narrowly that, by definition, the new corruption and the massive unaccountability inherent in it were essentially excluded. However well-intentioned some of the anti-corruption economists and their acolytes may have been, their narrow view of corruption offered the perfect intellectual cover — and enabled them to ignore the new corruption right under their noses.
With many of our experts and leaders giving us plenty of reason not to trust them, is it any wonder that public opinion polls show that people’s trust in leaders and institutions has plummeted? Or that Greece’s electorate would vote for new, untested leadership, possibly risking the country’s place in the EU? What is happening today is that the systems in place are (inadvertently) generating outsiders en masse (think the huge percentage of unemployed Greek youth). And these outsiders, understandably, have scant faith in the system.
The result is a pervasive feeling of helplessness, fatalism, and gallows humor strikingly similar to the mood I observed as a young anthropologist in Eastern Europe during late communism. Witness the trenchant headline from one website when Goldman Sachs settled its notorious ABACUS case with the U.S. government: “BREAKING — Goldman Did Not Break Any of Those Laws It Wrote.”
Today we run the risk of creating a permanent class of outsiders. That is one reason we need to redefine corruption as violation of the public trust and not just as bribery or illegal behavior. This reconceptualization will move us toward reestablishing the broken connection between people on the ground and public institutions.
Photo by Spencer Platt/Getty Images