The Cancer of Corruption – Part 3

Consumer confidence in the financial markets has been slow to return since the financial crisis began. However, confidence in our government and politicians has only deteriorated, taking with it any hope of immediate recovery. Public policy researchers, Betsey Stevenson and Justin Wolfers noted in a May 2011 study, what they called a “recent sharp decline in the confidence the American public has in their government, financial, and business sectors, and to a lesser extent, their media and their courts.” Stevenson and Wolfers concluded: “The business cycle has immense influence in shaping the public’s attitudes about its bankers, business leaders, and politicians. When times are good, their approval ratings rise, and when times are bad, like during the economic crisis, those ratings plummet, and corruption rises.” The fact that businesses have so much control over modern day public policy and law, demonstrates the level of corruption involved.

This left me wondering, “Can corruption be regulated?” The brightest minds in the worlds of philosophy, law and politics agree corruption is a cancerous threat, but nobody can figure out how to effectively fight it.  The founding fathers and authors of our nation’s Constitution and Bill of Right accurately predicted, “Corruption would be a constant and lasting threat to our democracy”.  The simple exchange of cash for a vote, or what the Supreme Court in its 2010 campaign finance decision called, “quid pro quo corruption”, is just one part of the broader scope of corruption.

A politician using the power of their public office for private means poses a real threat to the American republic.  Philosopher Baron de Montesquieu stated, “The misfortune of a republic happens when the people are gained by bribery and corruption: in this case they grow indifferent to public affairs, and avarice becomes their predominant passion.” Fighting corruption on a case-by-case basis has proven to be exceedingly difficult to manage.  Our democratic system seeks to counteract corruption through a few structural safeguards, but they all have loop holes, and those loop holes have loop holes. What’s the old adage, “Where there’s a will there’s a way”?  America’s legal and political system maintains a continued concern for addressing corruption but does not go far enough to address it or correct it.

Our democratic system fosters a culture of allowing private interests (lobbyists) to provide public servants with remuneration, which creates a debt, and humans feel an almost innate need to repay their debts. These private interests have no qualms strong-strongarming those same politicians when a debt is owed to intercede on behalf of their private affairs. This “pay to play” mentality is most noticeable and accepted in the legislative branch, where Congressmen and Senators are notoriously known to take pay-offs and bribes. It is only slightly less pervasive within the executive branch, and almost forbidden in the judicial branch. Because of these ongoing legal and ethical concerns, lobbying itself was treated as illegal for much of the nation’s history. This seems inconceivable in today’s political culture, in which “K Street” lobbying dominates our political and financial economies alike.

If anyone has lingering doubt big business corrupts politics, they should look no further than the former king of “K Street” himself, Jack Abramoff.  Abramoff’s lobbying scandal in 2005-2006 stemmed from the work performed by political lobbyists on Native American casino gambling interests for an estimated $85 million in fees.  Abramoff and others grossly over-billed their clients, secretly splitting the multimillion-dollar profits, all the while paying off key politicians.  In one case, they were secretly lobbying against their own clients in order to force them to pay for expensive lobbying services.  In the course of the scheme, the lobbyists were accused of illegally giving gifts and making campaign donations to legislators in return for votes or support of legislation.  An lengthy investigation led to his conviction, and to 21 other people either pleading guilty or being found guilty, including prominent White House officials, U.S. Representative, and Congressional aides.  While corruption may never be eradicated from civilization, the survival of our democratic system is dependent upon us doing our best to contain it.

What are your thoughts? Can corruption be regulated or not? 

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The Cancer of Corruption – Part 2

The recent 2008 financial meltdown is a prime example of how systemic corruption tears at our democracy and threatens everyday lives.  By the time the fallout from the 2008 financial crisis started to sink in, it was too late for many homeowners and investors. The Global Financial Crisis of 2007/08 collapsed large financial institutions such as Bear Stearns and AIG, crashed the worlds stock-markets, and wiped out trillions in consumer wealth.  This crisis was directly triggered by a faulty and complex mix of policies that encouraged home ownership, providing easy money to borrowers and overvaluation of bundled subprime mortgages, based on the theory that housing prices would always rise.  Those responsible were mainly large investment banks who were basing their faulty investments on highly complex derivative models.  These complex financial instruments (derivatives) made it difficult for creditors and regulators to monitor in an attempt to reduce financial risk. These instruments also made it virtually impossible to reorganize financial institutions in bankruptcy, and contributed to the need for the bailouts, which was funded mainly by taxpayer dollars.

Once it became clear we were in deep trouble, questions regarding bank solvency, easy consumer credit, and investor confidence began to take hold.  The immediate response from Washington was to inject billions of dollars through the Trouble Relief Asset Program (TARP) in order to stabilize our nations economy. In addition, Congress instituted several sweeping new policies such as the “Wall Street Reform and Consumer Protection Act”, and the “Dodd-Frank Wall Street Reform and Consumer Protection Act”. While this did some to reassure investors and stabilize markets, it still has not gone far enough in the opinion of many, including myself.

During this period, many in Congress and on Wall Street aggressively pushed to keep the financial markets unregulated, even when facing a second Great Depression. These individuals wanted to keep the financial system “status-quo”, and did not want to add regulations that would limit their executive pay and corporate revenue. After it became clear who was to blame and at fault, our politicians and government did nothing but point fingers during the Financial Crisis Inquiry Commission (FCIC) in 2010. The FCIC reported its findings in 2011, briefly summarizing its main conclusions: “While the vulnerabilities that created the potential for crisis were years in the making, it was the collapse of the housing bubble, fueled by low interest rates, easy and available credit, scant regulation, and toxic mortgages, that was the spark that ignited a string of events, which led to a full-blown crisis of 2008”. There is still a high risk that the lack of transparency in derivative trading, which now totals more than $700 trillion, will come to eventually haunt us. This growing total is more than ten times the size of the entire world economy, yet incredibly, we have little information about it or its implications. During this rollercoaster period, not a single Wall Street executive was prosecuted in this massive financial scandal, which only added to the public’s growing cynicism and distrust of government.

What are your thoughts? Do you trust your elected officials? Do you feel your money is now safe?  

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The Cancer of Corruption – Part 1

Political corruption is commonly defined as “putting individual and private interests over the public good, while holding public office”.  Some would say political corruption was American as apple pie, but apple pie isn’t even American; it’s English, dating back to 1831. Meaning, the United States did not invent corruption, but much like apple pie, we have definitely perfected it. From the early days of Athenian democracy, the worlds first, to modern day Washington D.C., corruption is embedded in, and continues to plague all political systems and all generations. Corruption is ubiquitous and undermines the very laws and principals modern democracy is based upon. No society, system of government, or ethics code has successfully eradicated corruption, and there appears to be no end in sight.

While the United States generally ranks comparatively low in measures of political corruption (In 2104, Transparency International – Transparency International – rated America as the 17th “least” corrupt nation in the world, with Denmark at number one, New Zealand, second, and Sweden third, the U.K. 16, France 23, Cuba 65, Russia 136, with Somalia last at 180), we too continue to confront the high costs of modern day corruption. Corruption among government and political figures remains a big concern, both here in the United States and abroad.  Businesses and individuals with money and influence will always try to push their agendas by whatever means works, and those in positions of power to help them, will always set a high price.  Politics and corruption has become as synonymous as cookies and milk in the minds of many.

Political corruption happens when politicians abuse their power to extract and accumulate private enrichment in order to maintain their power. Example: Former Illinois Governor, Rod Blagojevich is serving a considerable prison sentence for demanding cash in exchange for an appointment to President Obama’s former U.S Senate seat. Corruption occurs at the highest levels of a political system, thus differentiating it from other forms of corruption such as business or bureaucratic corruption. Political corruption typically has a significant impact and violates the public’s trust. After doing some research, I’ve found that political corruption can occur in two forms. The first includes both extraction and accumulation, where politicians abuse their elected power to extract from the private sector, government revenues, and the general economy most often through embezzlement. The second form is when public money is extracted to preserve and extend power, typically in the form of patronage politics. This type includes a politically motivated distribution of financial and material inducements, benefits, advantages, and spoils granted to friends and supporters.

There is also a distinction difference between individual corruption and systemic corruption. Individual corruption typically occurs when a city official or politician is being paid off, or a state legislator sells their vote. This corruption leads to the “bad apple” syndrome, and typically sorts itself out over time. Systemic corruption encompasses a broader sphere that runs deeper than individual transgressions, where instead of bad apples; you have a bad system. Many would argue that corruption is the central ailment of democracy.  As history would suggest, Americans typically hold the government and its elected officials in low regard.  A recent 2014 Gallup Poll found, “54 percent of those surveyed rated members of Congress very low on honesty and ethical standards.  With respect to businesses, 60 percent of Americans believe corruption is widespread amongst corporate America, while only about 1 in 5 has trust in banks.”  The undermining of democratic equality might be considered an example of systemic corruption, as might, questionable campaign financing practices such as political action committees or super PAC’s.

What are your thoughts?  Do you think the U.S is overly corrupt compared to the rest of the world? Can we do more to curtail corruption?  

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The Rising Tide of Big Business – Part 2

In 1887, Congress passed the “Interstate Commerce Act” to prevent railroads from price discrimination, but did little to enforce it. Then, in 1890, Congress passed the “Sherman Antitrust Act”, which outlawed trusts, and any other contracts that restrained free trade. It prohibited certain business activities that federal government regulators deemed to be anti-competitive, and required the federal government to investigate and pursue trusts. Many highly criticized the Act by asking if it improved competition and benefited consumers, or merely aided inefficient businesses at the expense of more innovative ones?

In his essay entitled Antitrust, former pro-business Federal Reserve Chairman, Alan Greenspan, condemned the Sherman Act as stifling innovation and harming society. He is quoted as saying, “No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible”. The Sherman Act would later go on to become extremely important in regulating big business.

Originally the Act was so loosely phrased, it often had unintended effects. Instead of regulating businesses, it regulated the labor unions that challenged these monopolies. State and Federal courts cited the “Sherman Antitrust Act” to restrain laborers’ right to strike. The courts often ruled that strikes violated the act’s prohibition against “a conspiracy in restraint of trade.” Today, the Sherman Act is still in place and frequently cited in business cases, though mostly applied in a civil manner.  Per the Federal Trade Commissions website, “The penalties for violating the Sherman Act can be severe. Although most enforcement actions are civil, the Sherman Act is also a criminal law, and individuals and businesses that violate it may be prosecuted by the Department of Justice”.

Because of these court decisions, big business benefited from the Supreme Court’s pro-business stance and its unwillingness to restrict commercial behavior. It was not until the early 1900s that the government began to enforce the Sherman Antitrust regulatory policies in full, but ultimately it was too late. The owners of big business had solidified their stranglehold on the nation and its politicians through these powerful trusts. This cutthroat business model made them, and the people who operated them, exceedingly powerful and rich.

Once the business elite and their respective shareholders obtained their wealth and power, it was only natural they would do everything within their authority to ensure its protection. This meant controlling and corrupting those individuals who had the dominion to regulate them, our nation’s politicians. The institutionalized political corruption we know today is a direct result of these early heavy-handed business tactics, fueled by the learned behavior of human greed. The upside to this unabated power and corruption propelled the United States into the Industrial Revolution of the early twentieth-century, solidifying our position as a major world power. The obvious downside is we now are left to face a level of cancerous corruption, the likes of which, the world has never seen.

What are your thoughts? Do you feel the U.S government does enough to keep Corporate America in check? 

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The Rising Tide of Big Business – Part 1

If you are anything like me, you may be curious how business and politics became so intertwined. Human greed and desire for power is as old as civilization itself. Some argue that greed is an essential part of “human nature”, and socialist sharing has proven to not work. Much like human nature, greed has a history that noticeably emerged with the onset of class divided society. Part of human nature and ultimate survival, is to produce enough resources to support your family. The use-value system originally limited most greed (measured in land, crops, cattle, etc.), because you can only consume so much corn or steak. With the development of abstract exchange value (money), greed began to quickly accelerate and come into how we know it today. Human desire to accumulate (business) and protect (law/politics) this newly formed wealth became an end in itself, which serves as a macro-level explanation for why business and politics are seemingly inseparable.

I find world American history fascinating for a multitude of reasons.  What I find even more fascinating is how we got to where we are today, particularly with regards to our political system.  Since the United States emerged from the Civil War, big business has significantly influenced American politics. Through the early twentieth-century, the federal government took a hands-off approach towards regulating businesses. Much of society believed that economic markets should operate freely without government intervention, which meant extensive corporate expansion and un-checked market monopolization. Leading up to the Civil War, Congress passed legislation, allowing private businesses to form corporations without developing a charter. This legislation allowed them to be ultimately free from federal oversight and regulation. This relaxed methodology ignited unrestrained competition throughout the economy, which was actually a good thing initially. Entrepreneurs consolidated their smaller businesses into trusts, or what we know today as mega corporations. These trusts integrated control of many companies, both horizontally by combining similar companies, and vertically by combining companies involved in all stages of production.

Some of the most famous examples of trusts included, John D. Rockefeller’s, Standard Oil Company (Exxon-Mobile), and J.P Morgan’s banking network (Chase Bank). These trusts dominated every aspect of their respective industries, solidifying control by managing their empire under one board of trustees. Companies in other industries caught on and quickly imitated this trust model. Unregulated market control allowed these corporations to force out competition and set prices for goods and services at whatever level they saw fit. By the turn of the twentieth-century, it became clear that these mega corporations were too powerful, and had operated unchecked for too long and the public was outraged. Consumers grew increasingly upset over high prices, while small business demanded government protection to ensure their own survival.

A perfect example of this are the railroad monopolies of the late nineteenth-century, run by such big names as Vanderbilt and Harriman. These ruthless businessmen are credited with helping to create the nations infrastructure, but were also heavily criticized for spreading untold political corruption to ensure continued business growth. The railroad monopolies were severely overcharging small customers, while giving massive rebates to politicians and favored clients. State and local legislatures attempted to limit this abuse by issuing maximum rate laws. These laws set a ceiling on the prices a railroad could charge. At the railroads request, Congress struck down these local laws claiming they were unconstitutional. As public anger grew over these unfair practices, the federal government had little choice but to slowly institute rules and regulations, but would do little to enforce them.

What are your thoughts and questions?

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Introduction and Thesis

How often as an American voter have you wondered, “Are political elections ultimately bought and paid for by big businesses, and does my vote even matter?” Has the image of our, to quote Ronald Reagan from his 1984 Republican Nomination acceptance speech, “shining city on a hill”, become interminably tarnished by corporate influence, and the quid pro quo relationship between business and politics? Within these blog posts, I will research and discuss how America, once the global symbol for democracy, became synonymous with corporate greed, and political corruption. The First Amendment to the United States Constitution grants individuals and corporations the right to support political candidates and parties with financial donations, but to what extent, and should there be a Constitutional amendment to limit these amounts?

The first topic I will begin to tackle is the historical role big business plays in politics from The Civil War to today. Second, I will research and discuss the impact such wars as World War II, Vietnam and Iraq/Afghanistan have on our political and economic system. Finally, I will delve into the rising effect of Political Action Committees, or Super PAC’s, and how recent changes to campaign finance laws impact our democratic system. Specifically, I will address how Citizens United v. Federal Election Commission (2010) was a landmark, yet controversial United States Supreme Court case in which the court upheld the D.C. Circuit’s ruling in Free SpeechNow.org v Federal Election Commission (2009), that the First Amendment prohibited the federal government from restricting independent political expenditures by corporations and labor unions. I will explain my research and opinions through a critical lens, while shedding light on our complex and uniquely American political system.

The impact of free enterprise on modern-day politics is undeniable, and election cycle after election cycle we see that impact increasing. Regarding the Supreme Court’s decision invalidating aggregate campaign contribution limits on an individual during an election cycle, popular comedian and liberal political commentator Bill Maher said: “They say the Constitution was created by geniuses so idiots could run it. I need to amend that. I think the idiots have found a way to break it. I do. I think the idiots have finally won over the geniuses.” Maher took particular aim at Chief Justice John Roberts for decreeing in the 5-4 controlling opinion that giving large sums of money to politicians does not give rise to quid pro quo corruption. Maher went on to state, “Either he is a liar or he is to naïve to hold any important job, including, and especially this one,” he said. “This is like a legal ruling written by the Little Mermaid. Are you crazy?” Now whether you agree with this view or not, you cannot deny there was indeed a fundamental and profound impact.

The main focus of my research and blog posts will explore the effect of Citizens United v. FEC on our election system, and analyze the impact this decision has on campaign expenditures. I will explain my research through incontrovertible historical evidence, including excerpts from the recent Supreme Court Decision, and fact based journalism. My goal is to elicit thoughtful discussion and analysis on the state of our political system and its relationship with big business, while providing historical and fact based evidence to support my opinions.

Other questions I will address:

  • Is corruption, broadly understood as placing private interests over the public good in public office, at the root of what ails American democracy, especially as it relates to big business?
  • Do wars of conquest have causality running in both directions? Meaning is the evolution of warfare and of world economic history and politics intertwined?
  • Should there be a Constitutional Amendment limiting campaign contributions in order to protect individual voting rights?

What are your thoughts and questions?

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