The big “middle class” rip-off: How a short sale taught me rich people’s ethics So many of us are clueless about business and finance. Here's why that's just the way the investment class likes it EDWIN LYNGAR The closest I ever came to acting like a rich person was two years ago when I short-sold my primary residence. I might have been able to keep it but strategic default made life easier. I owed about $400,000 on a house that short-sold for $150K. The bank lost more than a quarter of a million dollars, and I lost at least $80K in down payment and property improvements. In a short sale the bank agrees to settle debt for the lesser amount and the seller gets nothing but is “punished” by not being able to finance another house for at least two years (rules vary). My moment of acting rich was when I bought a second housebefore short-selling the first to skirt around the repercussions of my own bad luck. When the housing market tanked a few years ago, the government rescued every bank and business (even a damned insurance company), while ignoring everyone else. I realized that the game was fatally lopsided, so I didn’t just walk away in middle-class shame, but rather I employed all my (extremely limited) cunning and deviousness to get a similar home before ditching the old one. I was able to cash in on low housing prices from a couple of years ago, coupled with low interest rates, to come out on top. The biggest barrier to getting a great deal was an almost overpowering need to behave like a middle-class sucker. I was taught growing up to “keep my word” and that your handshake “meant something.” Yet businessmen and individual wealthy people make decisions that are far less moral than a short sale. People “incorporate” so they can avoid legal responsibility for individual actions. It works great. You can stiff creditors, declare bankruptcy, pollute daily and raid pensions to enrich individual executives. If it all goes wrong, like it has so often for Donald Trump, you can keep your mansions and individual fortunes. It is no accident that the best-paid CEO in America has never made a dime for the company. If regular Americans acted like corporations and the moneyed class, our country would collapse in a week from systemic theft, corruption and greed. I always knew business was getting over on me, but I had no idea the extent until I started looking to short-sell. I first learned all I could about private home financing. I called up some shady investment groups around town and questioned them at length. I didn’t end up using them, but they were frank, informative and unashamed. “Who would pay 11 percent on a home loan?” I asked. “Rich people,” said “Bill” from the legal loan-sharking company. “The rich have terrible credit.” Rich people = bad credit: Just let that sink in. Bill told me in roundabout ways that rich people never pay a bill if there is any way around it. If something goes wrong in an investment or a business, they always preserve their own assets first. We’ve all heard the generalization that they’re lousy tippers. Most Americans are clueless about business and finance. Instead, we are a caste of customers. We consume short-term predatory lending, school loans that can never be discharged, inflated mortgages, high-interest credit cards, fast food and overpriced automobiles. We “invest” in basic IRAs, doomsday prepping or Ponzi schemes. The worst part is that no matter how much money we gain or lose, the investor class always gets paid [bold mine]. During the same five- or six-year period my house value tanked, I also lost tens of thousands of dollars in retirement accounts. At the same time, my “money manager” collected a fee day after day, month after month. Since he is the dealer of America’s crack-based stock market, he got paid regardless of performance. Middle-class Americans just aren’t the same species of human as the wealthy, but we refuse to even discuss the class issue in America. “Class” is for the British, even though the U.K. now has more upward mobility. There have been many great essays and movies about the parallel but unequal capitalist systems in America. There exists a baffling, byzantine maze of corporate and personal benefits enjoyed by the super-rich and investment class both indecipherable and unavailable to regular people. We pay banks for the privilege of fleecing us, a fact made obvious by the growing slice of corporate profits generated by the financial sector. Employment in the financial sector hovers around 5 percent of the American workforce, while they skim a third of all corporate profits off the top. They create nothing and add nothing, so in essence, a massive chunk of American profit is made up of handling fees. Lest I be accused of “sour grapes,” because I’m not rich, let me be clear. I live what used to be a middle-class life. We vacation every year without fail, own a home and live in a nice neighborhood. My hands stay clean at work. Of course, it could all crumble tomorrow, but for the moment, I’m a “winner” of some kind. Because I’ve reached some small level of financial stability, I’ve had the time to look around and see how utterly broken the system has become for most people. Living a middle-class life is an impediment to meaningful change. We are taught that we have everything we should dare to expect and capitalism has “worked” for us. Middle-class people are also urged to hate poor people, and those who cannot or will not work. They are the “other,” the moocher class. Poor people are the reason you haven’t gotten a raise in five years or that your house is worthless or that your company only gives you one week off a year. Those who have something detest those with nothing. We’re letting rich people get away with fleecing America, while turning our rage on poor people. When you examine it, you cannot blame the rich for the oligarchy we’ve become or for what looks more and more like the return of Dark Age feudalism. Rather, the blame lies with my fellow work-a-day slobs who vote for politicians and policies that favor investment and wealth over the work of regular people. Middle-class Americans are self-flagellating and dispirited over their own lack of wealth, as if it were a character flaw. At the same time, they fall for the deception that everyone can be rich when, of course, most people lack the connections, education and plain old luck to even get close. I can uncover an individual’s actual potential for wealth with one easy test: If you equate business opportunity with a multilevel marketing scheme, like Amway, you will never be rich. If that doesn’t work, just ask yourself if you think you’ve got a shot at winning the lottery. If the answer is “yes,” you will most assuredly die poorer than you are now. For my entire life (and I don’t think this will ever change) I’ve watched friends and family engage in one Fred Flintstone-esque, get-rich-quick scheme after another. I’ve also been caught up in more of these than I’m comfortable admitting, and they always fail, without exception. At the same time (at least in my own circles) this starry-eyed group of middle- and lower-class strivers vote overwhelming for the Republican Party. I find a direct correlation with an unlikelihood to ever become wealthy corresponding with a stronger commitment to vote Republican. They further solidify institutional advantages of the business elite to which they will never, ever belong. As a public service to every member of the get-rich-quick community I offer this: You will never (ever) become millionaires. Not with a “paying gold claim” or a giant Amway distributorship. Not with a system for winning at blackjack or a rich uncle about to croak. I beg you, for your own sanity and well-being, stop voting for more benefits for the monocle-wearing, martini-sipping, trust fund class. They care nothing about you, your feelings, your family, or life or death. They already have plenty, so stop enriching them at your own expense. I do have the start of a solution, and it starts with America taking a hard look at itself. As a people, we suck at self-examination, but if we can manage it let’s ask: Why does society exist? Does every human live with the sole purpose of enriching the smallest sliver of the species? Do we consider rich people better than the rest of us? Or, should we insteadattempt to bring the greatest good to the greatest number of people, while still promoting innovation and competition? I entered the shark-infested waters of high finance with a short sale. It was the worst ethical decision, but finest, most profitable business moment, of my adult life. It was an informative, even transformative, experience. People are too hesitant to talk about such dealings, especially because most people make shitty financial decisions (like me), but this sheepishness perpetuates systemic financial illiteracy. As a species, the American-brand human is reluctant to talk about fiscal failure and our own constant victimization at the hands of faceless corporations. Furthermore, our misplaced “ethics” in dealing with big business, a group devoid of anything resembling morality, hurts regular people and society as a whole. If I could legally find a way to screw over a bank, I’d do it without hesitation. The financial industry would screw me six ways from Sunday to save a nickel. The least I can do is return the favor. I only wish I had more homes to short-sell.
LOL, this article was comically bad, and the part you bolded was particularly idiotic, thx for the laughs judy!
And Fortune and The Wall Street Journal agree with me. But for a detailed breakdown: http://projects.propublica.org/bailout/list As I said, GM was a loser (though the company is alive and therefore paying taxes every year, as are its employees), but overall TARP was a winner. And why wouldn't it have been? We are in a liquidity trap, there is no competition for money.
They agree with you (as I said) but they're going with the Treasury's calculations because they don't have the raw data. The Huff Po article cites an independent audit group.
Cross-posted Water is the new oil: How corporations took over a basic human right LINDSAY ABRAMS When you talk about human rights, not to mention human necessities, there’s not much more fundamental than water. The United Nations has even put it in writing: it formally “recognizes the right to safe and clean drinking water and sanitation as a human right that is essential for the full enjoyment of life and all human rights.” That’s the theory, at least. In practice? Well, on Monday, U.S. Bankruptcy Judge Steven Rhodes arrived at a different conclusion from that of the U.N., in a ruling on Detroit’s hotly contested practice of cutting off water access to tens of thousands of residents who can’t pay their bills. “It cannot be doubted that water is a necessary ingredient to sustaining life,” Rhodes conceded. Yet there is not, he continued, “an enforceable right to free and affordable water.” Water, in the eyes of the court, is apparently a luxury. While it’s shocking to watch a city deny the rights of its own citizens, that’s nothing compared to what could happen if private water companies are allowed to take over. In “The Price of Thirst: Global Water Inequality and the Coming Chaos,” Karen Piper details the litany of examples worldwide of this very thing happening. In a classic example of the shock doctrine, Piper argues, water shortages are being seen as a business opportunity for multinational corporations. Their mantra: “No money, no water.” By 2025, it’s predicted they’ll be serving 21 percent of the world’s population. Piper, who teaches at the University of Missouri, traveled to six of the world’s continents to expose the way corporate control has redefined water as an economic good, with consequences ranging from increasing inequality to civil unrest. Her conversation with Salon, which has been lightly edited for length and clarity, is below: There have been a few drinking water crises in the U.S. this year that I think made people stop and think about where their water is coming from, but I’d say most probably don’t give much thought to the politics behind drinking water. What are some of the main misconceptions you’re working with about how water access works? It depends on what country you’re talking about. I think here in the U.S., we have the misconception of taking water for granted completely and forgetting the long history of the battle people went through to get public water in this country. It used to be that there were private companies running the water supplies in the United States. At the beginning of the century, they started having major cholera outbreaks, which led to it being turned over to public utilities. Now, because we haven’t taken care of that system in terms of providing the funding for it, I think there’s a danger of losing it. As we decrease our funding for public water, private companies are being courted to come in and take over cities that are in dire circumstances with their water infrastructure. So Detroit, for instance, is an example. I guess that’s an example of what can go wrong. Yeah. In Detroit, you know, they ran out of money to support public infrastructure, so they’ve been basically raising rates for consumers as a way to entice private water companies to take over. But they’ve also been cutting off tens of thousands of people from their water when they can’t pay. And that’s the kind of thing that you look at. Corporations are a lot more ruthless about water cutoffs. So they raise rates and they cut off water. So what does this look like globally? Pretty dire. I think there are three main issues facing the planet in terms of our water supplies and a global water crisis. One is climate change, one is pollution and one is groundwater over-extraction. Basically, we have the same amount of water on Earth as we’ve had in the time of the dinosaurs, and a lot of people don’t realize that. The problem is that what has changed is where water is located. So climate change moves water, pumping groundwater moves water. But people are not so movable. You just can’t pick up Los Angeles and move it to wherever the water has gone when this year’s snowpack disappears. “Water shortage” is a sort of misnomer. What we’re losing are our water storage systems. So we’re losing our glaciers, which are called our freshwater banks, and we’re losing our fossil water, which takes thousands and millions of years to be replenished. One of those places is in the United States: the Ogallala Aquifer is disappearing. Also, in Northern India there’s an aquifer that’s been depleted so much they’re experiencing epidemic fluoride poisoning right now, because when you get to the bottom of those aquifers you find pollutants that have settled there over time. They’re naturally occurring minerals that have settled there. Then there’s also the problem of pollution. Twenty percent of the world right now does not have access to clean water. Twenty percent of the world also happens to live on less than a dollar a day. And it’s interesting to look at how much those two groups overlap. When people don’t have water, what you get is social instability, basically, and that 20 percent may have been living next to the same river since the beginning of time, but suddenly that river is polluted and they get sick and die when they drink it. So what happens is that corporations see water pollution as sort of a boon for them because as water gets more polluted, it gets more expensive to drink and then you get even more of a divide between the rich and the poor over who gets clean water and who doesn’t. And one last thing with climate change. I think people don’t really understand a lot about how it works. They say, “Oh, the glaciers are melting so we’ll have more water.” But the problem is that water is just rushing into the ocean. So you have to think of climate change as this giant saltwater-making factory, almost. It’s just like sending water to the ocean. And we couldn’t build enough giant dams to stop all that water, and if we did it would cause all sorts of other problems. It’s the same thing with the way we do agriculture. It’s like we’re pumping out these fossil aquifers mainly for agriculture and that’s where the world’s breadbaskets are. But when we do that, that aquifer also becomes polluted and salinated and runs to the ocean. So there’s an enormous amount of water that we’re just throwing away in this sense. You’ve traced some major conflicts to water shortages, or at least seen that as one of the contributing factors … And right now what I have my eye on is ISIS. When I wrote my book, I sort of saw that something like that would happen there, because there has for decades been a conflict between Turkey and Iraq and Syria over how much water Iraq and Syria get. Their water comes from Turkey, which is a water-rich country, and Turkey has been cutting it off with these massive dam systems that have been supported by the World Bank until recently. ISIS, now, is very aware of this issue, and one of their main goals has been to take over the water supplies in Iraq and in Syria. So right now, all three of those countries are using water as weapons against each other. Turkey has cut off water to Syria, for instance, as a way to get Syria not to support the Kurds there. And also, Turkey has just been very belligerent about saying those water resources are theirs and not coming to the negotiating table over it. I saw people really fighting over this at the World Water Forum because it was a disaster waiting to happen. When it’s reported in the media, it always bothers me, because the media reports it as just evil fundamentalists. And it’s true there’s that component to it, but you have to think about what’s drawing these evil fundamentalists to these groups. When people are uneducated and in dire circumstances and feel like that’s all they can do, it tends to draw a lot of young kids to that. more . . .
Who Will Profit From the Wars in Iraq and Syria? William Hartung, Stephen Miles If there's one thing we should have learned over the past 13 years of war, it's that war is good business for those in the business of war. Unfortunately, while profits for the Pentagon's contractors increase, so does the cost to taxpayers in billions in waste, fraud, and abuse. As America embarks on yet another war in the Middle East, Congress needs to act now to stop this unjustified bonanza for the Pentagon's contractors. The most recent wars in Iraq and Afghanistan offer an ominous example about what can happen when the rush to war is met with sharp spending increases coupled with little to no oversight or fiscal restraint. The Commission on Wartime Contracting -- a bipartisan congressional body -- estimates that there was $30 to $60 billion in waste, fraud and abuse associated with the wars in Iraq and Afghanistan -- a total of $12 million per day. Even worse, at least $6 billion is completely missing, never accounted for, gone forever. That is a stunning amount of taxpayer dollars -- yours and mine -- to simply disappear into the wind. Among the most egregious examples of corporate and governmental malfeasance during the wars in Iraq and Afghanistan was a multibillion-dollar no-bid contract for Halliburton's Kellogg, Brown and Root (KBR) division to rebuild and operate Iraqi oil fields. Halliburton was found guilty of price gouging on everything from the supply of oil for military vehicles to feeding the troops; shoddy workmanship that resulted in scores of unfinished buildings and inadequate supplies of electricity; and life-threatening situations like defective showers that electrocuted a soldier. A long list of other examples is available in the reports of the Special Inspector General for Iraq Reconstruction, whose investigations helped spur the convictions of 82 companies and individuals of illegal activities connected to contracting in Iraq. A recent estimate of the likely costs of our latest war in Iraq and Syria by the Center for Strategic and Budgetary Assessments ranges from $2.4 billion to over $22 billion per year, depending on whether significant numbers of ground troops become involved. Gordon Adams, the former deputy director of the White House Office of Management and Budget in charge of national security spending, suggests that a full accounting of the costs of operations, replacement of equipment, training and aid to other members of the coalition, and a doubling or tripling of the current level of 1,600 U.S. troops in Iraq could put the annual price of the wars in Iraq and Syria at $15 to $20 billion. While these sums are less than the costs for the wars in Iraq and Afghanistan, the potential for wasteful spending remains enormous. Our latest war represents a welcome new source of profits for arms makers like Boeing (Joint Direct Attack Munitions) Raytheon (cruise missiles), and Lockheed Martin (Hellfire missiles), whose weapons systems have already been heavily used in Iraq and Syria. This is particularly true if the conflicts drag on for years, as administration officials have suggested. There's a chance that the costs of the current wars could spiral out of control, resulting in an even heftier flow of revenue to Pentagon contractors. We shouldn't forget that the Bush administration initially pegged the cost of its Iraq intervention at $50 billion, a figure that grew to more than 20 times that amount over the course of the conflict. The stock prices of the Pentagon's top contractors have hit all-time highs since the recent wars in Iraq and Syria started two months ago, as Dan Froomkin of the Intercept has pointed out. This windfall for weapons makers may pale in comparison to the billions that are likely to go to private contractors like Dyncorps and Triple Canopy that will be enlisted to help train Iraqi police and security forces. The market is clearly betting that the brief age of fiscal restraint at the Pentagon is over. Beyond simply wasteful spending, wars are a prime opportunity for outright corruption and malfeasance. This was was underscored in a recent case in which Dyncorps was accused of letting a subcontractor solicit kickbacks from its employees as a condition of keeping their jobs. The State Department dropped the probe in the face of fierce resistance from the Iraqi government -- not a good sign for oversight of the billions in new contracts that will pour into Iraq as part of the current war effort. The direct costs of the wars in Iraq and Syria may only be a small part of the new business that will flow to Lockheed Martin and its cohorts in the next few years. The new wars will almost certainly extend the life of the Pentagon's war budget, known more formally as the Overseas Contingency Operations (OCO) account. For the past few years, OCO has served as a slush fund to pay for Pentagon projects that have nothing to do with fighting any war. In its most recent effort to raid the OCO account, the Pentagon has proposed using it to fund eight costly F-35 combat aircraft that haven't even been certified for combat yet. There will be a strong temptation on the part of the Pentagon to continue padding this slush fund to levels far beyond anything being spent in Iraq or Syria. Last, but not least, the arms industry will join with the Pentagon and hawks on Capitol Hill to use the current Middle East crisis as leverage to lift the caps on the Pentagon's base budget that exist under current law. If they are successful, it could mean tens or even hundreds of billions of new business for Pentagon contractors over the next decade. As Linda Bilmes of Harvard's Kennedy School of Government -- the co-author of with Joseph Stiglitz of "The Three Trillion Dollar War," a comprehensive costing of the wars in Iraq and Afghanistan -- has noted, "Despite two failed wars it seems the country hasn't learned the lessons about the huge cost of military adventures and the limits to what military intervention alone can do to solve complex foreign policy challenges." The real test of the Obama administration's policy in Iraq and Syria will be whether it makes the United States safer and the region more stable. Neither of these outcomes is likely if the current militarized approach continues. But even as we debate the wisdom of the new wars, we must also ensure that they don't spawn a new round of wasteful spending that costs taxpayers billions of dollars while doing nothing to make us safer.
SATURDAY, OCT 11, 2014 08:15 AM EDT They won, we lost: How corruption became America’s national pastime How the nation's corporate elite "extorts hard working people for their own political and financial gains" JANINE WEDEL Mitt Romney, Bill O'Reilly, Jamie Dimon (Credit: David Goldman/Fox News/Reuters/Yuri Gripas) Excerpted from “Unaccountable: How Elite Power Brokers Corrupt our Finances, Freedom, and Security.” What does “SWIMNUT” know that the world’s supposed experts on corruption or the elites who gather each year for skiing and schmoozing in Davos do not? This anonymous commenter was responding to an online article about the 2013 ranking of the world’s most corrupt countries, as measured by the best-known international arbiter of corruption, the organization Transparency International. In TI’s survey, the experts canvassed perceive Somalia, North Korea, and Afghanistan as the worst transgressors. But “SWIMNUT” sees it differently: Not quite sure how corruption is defined but I think the US needs to be included as one of the most corrupt “civilized” countries in the world. . . . In the US . . . we have created a political elite that extorts hard working people for their own political and financial gains. “SWIMNUT” wasn’t the lone voice of skepticism. Well over half of the 180-odd commenters to this article targeted the United States as an offender that was grievously under-scrutinized. Amid the usual partisanship, name-calling, and crackpot conspiracy theories that one finds in comment sections, many of these readers conveyed undeniable threads of truth, ones I’ve been weaving together for decades. From “kolar63”: . . . Washington DC knows very well how to hide and disguised their corruption thru lobbying elites . . . From “onelifelive”: We are not on top of this list because we call it “LOBBYING”, “FAVORS”, “GIFTS”, “CORPORATE SPONSORSHIP”, “PACS”, ETC. ETC. What struck me in the case of SWIMNUT is that s/he and fellow readers were no longer buying this media performance. A website was engaging in an annual ritual of presenting these metrics without much context or reflection, something that looks and feels like news but really isn’t and probably never was. In fact, the real news story can be found in the comments themselves. They show the chasm between corruption as measured, on the one hand, and corruption as experienced by Americans, who see something deeply amiss in their own land, not just in the far-flung and exotic. Wealth has been fast accumulating among the few, leaving the rest of us languishing with stagnant pay and rampant unemployment among the young. How is it that ordinary people have an instinctual grasp of the real nature of corruption and the inequality that often results, while many experts are still wedded to the idea that corruption happens somewhere “out there”? Witness the “Occupy” protests that began on Wall Street in 2011 and the “Tea Party” movement that helped grind the U.S. government to a halt in the fall of 2013. They may otherwise have little in common, but they share a resounding refrain: that the “system” is gamed by the powerful. Research out in 2014 shows just how gamed it really is. 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 forty-five percent of the time. If these same Americans indicated little support? Eighteen percent. They write: “The central point that emerges from our research is that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence.” Lest you blame the typically business-oriented Republicans, consider what one of the researchers said in an interview: “Both parties have to a large degree embraced a set of policies that reflect the needs, preferences and interests of the well to do.” That the system is rigged resounds worldwide. There’s a documented and striking loss of confidence in formal institutions, from governments, parliaments, and courts to banks and corporations, to the media. Apparently, people feel that their public institutions and leaders now merit even less confidence than in the past. The frustration and anger this breeds appear to be a major reason that middle-class people in democracies around the world—from Turkey and Greece to India, Brazil, Ukraine, and the United States—feel enraged and have taken to the streets. While protestors may have an intuitive sense of this loss, they may not realize that at its core is a modern-day form of corruption that is so far little understood. Their instincts are spot on, even if they don’t quite grasp the ins and outs of what I call the new corruption. Indeed, people the world over sense that unseen elites are at work, using forces beyond anyone’s control. It seems almost conspiratorial, but it’s far more complex and elusive than that; if only it could be so easily dismissed. We sense that something big has changed—and not for the better. But what, exactly? Let’s look at the old world versus the new. By “old,” I mean within recent living memory. In the old world, high officials retired to a life of leisure or good works. Now, many turn themselves into one-man brands, with their public service a stepping-stone to lucrative, enmeshed business, government, philanthropic, and policy endeavors, leaving the public to wonder whose interests are being served. In the old world, players had more defined roles and agendas; now they are more apt to glide among them in an ill-defined blur. In the old world, you could point to the official or lobbyist or interest group wielding influence. Today, players and corporations can use nonprofit or “grassroots” organizations to press their case—but you’d never know it because, more than in the past, they don’t need to disclose who writes the checks. In the old world, the long term was actually long. In the new world, whether in finance or media, short-term results are prized; actions and impact are measured in hours, minutes, or even micro-seconds. In the old world, the media were more focused on real news; now, “likes” and page views shape what becomes “news,” and much airtime and Web space consists of mere “performances” to catch our attention and convince us that action is happening when it hardly is. In the old world, it was easier to locate a bureaucrat who was responsible for solving your problem. Today, you get trapped in an endless phone maze powered by technology, leaving less room to maneuver the outcome to your advantage. In the old world, we, the public, were not implicated. In the new world, we are complicit the moment we turn on our computers, hand over personal information, and “agree” to conditions that we say we have read but, of course, have not. In the old world, those who betrayed the public trust might be found with cash stashed in their freezer and end up in handcuffs. In the new world, no money passes hands, and no one lands in jail. In the old world, people recognized others’ moral failings; now everyone can blame the “system.” Whether it’s trying and failing to figure out whose fingerprints are on public-policy decisions, who is calling the economic shots, or whose dollars are funding various politicians, we are up against shadow influence that is difficult to discern and sometimes even anonymous. This isn’t a conspiracy. As we’ll see throughout the book, many policies that affect us all are no longer molded by conventional power elites, lobbyists, interest groups, or influencers that we can identify and therefore hold accountable. When we can’t pinpoint who has the authority to fix the problem, then lobbying, bribery, or other traditional influencing mainstays don’t work. Meanwhile, there are unregistered lobbyists, campaign financiers, and other shadow influencers who operate in and around government, business, nonprofits, and media. How can we decipher their actual agendas and tangle of roles? How can we know whom to trust, when “experts” besiege the Internet and airways, pronouncing on crucial public-policy issues and presenting themselves as impartial and objective, all the while concealing that they actually have a dog in the fight? In short, how can we have any modicum of trust in public institutions that seem to be so accountability-challenged? Whether it’s the behavior of public figures or the behavior of public institutions, the new corruption is anchored in unaccountability. Unaccountability, as we shall see in the next chapter, is structured into the DNA of many of today’s corporate and governmental organizations. It is an essential but incomplete condition for the new corruption—the violation of the public trust. (cont'd)
For the past several decades, I have been considering what happens to society when the public no longer trusts its institutions, leaders, and public figures—in places as diverse as communist states (where they seldom did) and Western democracies (where not long ago they did much more so). What happens when the accountability needed to sustain that trust is absent from our interactions with the organizations and functionaries on which we daily rely? Or with our relations with once-respected public figures? I began my explorations in communist Poland in the 1980s and have continued them in the United States. Throughout my career as an anthropologist, I have seen it as my mission to explain the changing profile of power and influence, and how people both break and create new rules of the game. Today I am not surprised that people are outraged. Privacy virtually everywhere is under siege, whether by faceless spymasters at the U.S. National Security Agency, through the likes of Google and Facebook, or by government and corporations in concert. Outrage at government and public institutions on nearly every continent, especially since the global financial crisis of 2008, reflects the public’s frustration. The economy continues to stagger with hardly anyone punished for rampant financial abuses. In this fraught environment, the absence of trust threatens to become a permanent feature of our civic life. Some of the chief culprits are even “failing up”: bubble-wrapped from the adversity they helped create, they continue to land influential jobs despite their spectacular and well-publicized errors of judgment and often of ethics. That’s in part because they are conquering media, new and old. The powerful are performing and branding themselves and their preferred narratives on every conceivable digital and old media outlet, leaving satirists like Jon Stewart and Stephen Colbert more truth-tellers than the more sober media, something strongly reminiscent of my time in Eastern Europe under communism. Meanwhile, the rest of us are exposed to the consequences of the culprits’ misdeeds, with little recourse to challenge the practices that now govern our private information and public policy. Betrayal of the public trust is at the core of age-old notions of corruption, such as those revealed in texts in the Bible and the Qur’an. At the same time the most common, internationally sanctioned understanding of corruption today is “the abuse of public office for private gain,” as propounded in the late 1990s and promoted around the globe by Transparency International, the World Bank, and other organizations. Straightforward corruption such as bribery is still common and causes outcry in countries around the globe. Yet the older and, I believe, more currently relevant notions of betrayal of the public trust appear to be closer to the hearts of many protesters—and lie at the heart of the new corruption. In the United States and many European countries, the new corruption may have surpassed the old. Across Europe, with entire economies devastated, signature Western banks colluded with feckless local leadership. Look at the destruction and global ripple effects wrought by Standard & Poor’s, which took cash to bestow AAA ratings on worthless investments in the mid-2000s. Then there’s Goldman Sachs, which pursued an express policy of placing its “alumni” in top government positions in the United States and around the world, like former Goldman managing director Mario Draghi, installed in 2011 as president of the European Central Bank. Goldman, along with other top U.S. banks, “helped” struggling European economies like Greece, Italy, and others hide their debt in the early 2000s and, according to the New York Times, was still “helping” avert the inevitable crash in late 2009. Such collusion between Goldman and government leaders cannot help but fan the flames of public mistrust. In still another case, known as the ABACUS deal, in 2007 Goldman devised investment vehicles for one client without disclosing to other clients—including pension funds, insurance companies, and foreign banks—that they were being set up to lose billions. Notably, this was a case in which regulators actually did try to accuse the company of outright fraud. Yet the matter was settled in 2010. Why? In the eyes of many observers at the time, the government didn’t have a strong case. But in 2014, a retiring U.S. Securities and Exchange Commission trial lawyer let loose at his going-away party. James Kidney, who’d been with the SEC for decades, was apparently one lawyer gunning for more charges against executives. He lost the internal fight, but his parting shot was memorable. Kidney told colleagues and well-wishers that the SEC is “an agency that polices the broken windows on the street level and rarely goes to the penthouse floors. On the rare occasions when enforcement does go to the penthouse, good manners are paramount. Tough enforcement, risky enforcement, is subject to extensive negotiation and weakening.” Another parting shot came from a Goldman Sachs vice president. He described the violation of the public’s and client’s trust, exposing inside practices in the New York Times on the day he resigned in 2012. Here he sums up his belief that the firm violates the public’s (in this case, its clients’) trust: “I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.” Still, we ceremonially attack practitioners of the old corruption. The media (TV, in particular) often cling to narrower definitions of corruption to mean simple bribery and outright fraud. They dish out, and we eat up, the images of former high-flyers handcuffed and perp-walked. In America, these include former Illinois governor Rod Blagojevich, super-lobbyist “Casino Jack” Abramoff, and Bernie Madoff, architect of the largest Ponzi scheme in history. The media had its role to play in the performance. It used all the visual symbols to cue the viewer: here is corruption, the governor with the absurd hair and endless blather, appearing for any TV audience he could find; the hulking figure with the signature black fedora and trench coat; the disgraced investor’s Italian velveteen slippers monogrammed in gold embroidery. Blagojevich, Abramoff, and Madoff may have become symbols, but they are sideshows. Those who practice the new corruption and help create deep and lasting inequalities don’t typically land in jail. As for Madoff and his ilk, we can count their victims, they clearly broke the law, and they were prosecuted for it. They are likely to be defined as corrupt; the others rarely are, if ever. But the consequences of their actions pale by comparison to the shenanigans of the rating agencies, the Wall Street “wizards” who helped bring down the global economy, and all manner of lobbyists, including those on the vanguard who simply choose not to register formally as lobbyists, when they are quite obviously still wielding influence that we can’t see or trace. They will continue to have a far greater impact on our health, habitat, and pocketbooks, and on the execution of America’s wars. Does that make any sense? Have the practitioners of the new corruption not violated the public trust? Isn’t that corruption at its most basic? The rub is that the system works to catch old-style corruption, but it doesn’t work for the new corruption. Where, for example, is the sanction or even the shame for the highfliers who leave public office and take on inscrutable roles of influence within the corporate world or the international relations game? Think, for instance, of former Prime Minister Tony Blair, who, soon after leaving office, used his prestige to create a highly lucrative influence brand that’s been dubbed “Blair Inc.,” what the Telegraph describes as a “confusing mix of business, politics and philanthropy that is administered by a complex system of companies.” Blair has advised a Wall Street bank, a European insurer, the government of Kazakhstan (among others), and even Libya’s brutal dictator Muammar Gaddafi. While counseling Gaddafi at the same time that JPMorgan Chase was seeking deals from Libya, Blair additionally served as an official peace envoy to the Middle East. At the very least, these overlapping roles are more than murky, if not suspicious. Blair mixes formal and informal roles—and, as I’ll discuss shortly, informality can create a giant black hole of accountability. (cont'd)
Or what about former Obama budget director Peter Orszag? In 2010, he left Washington for an executive job at Citigroup, one of the very companies that needed and received government help after the financial crackup of 2008. One of his three titles there is Chairman of the Public Sector Group, which smacks of a stealth lobbying department. Orszag is not accused of wrongdoing. He is a model of “structural rather than personalcorruption,” as journalist James Fallows commented in The Atlantic. “The idea that someone would help plan, advocate, and carry out an economic policy that played such a crucial role in the survival of a financial institution—and then, less than two years after his Administration took office, would take a job that (a) exemplifies the growing disparities the Administration says it’s trying to correct and (b) unavoidably will call on knowledge and contacts Orszag developed while in recent public service—this says something bad about what is taken for granted in American public life.” These kinds of high-level migrations, Fallows observed, “pile up in the background to create a broad American sense that politics is rigged, and opportunity too.” Meanwhile, these players not only challenge accountability—they have helped to create vast inequalities in income and wealth and will long reap the benefits of the policies and the political climate they have abetted. When their policy influence leads to real-world trauma for what has become known colloquially as the 99 percent, these power brokers don’t generally slink into obscurity: they continue demanding high-profile rewards, and often get them. Given all this, it’s clear that we must pay heed to the new corruption—which helped spark the outrage that has fueled today’s far-flung protest movements. In the new corruption, no envelope is passed under the table. No laws are clearly broken. Indeed, the players we meet in this book are far too subtle and sophisticated for the bribe-dispensing or even conventional lobbying of yesteryear. They are difficult to monitor and to hold to account precisely because their “corruption” is elusive, hard to detect—and legal. But don’t they violate the public trust—or get close to doing so? And aren’t their actions often more damaging to society than the old-fashioned bribe? Yet many people and even corruption scholars, influenced by the agenda of what has been called the “anti-corruption industry,” have not thought about it in those terms. Following the Cold War, the World Bank, and NGOs such as Transparency International of corruption-ranking fame, powered the industry in a worldwide anti-corruption campaign. That industry has favored targeting what is now called “need” corruption— people managing an impossible system—over “greed” corruption—people gaming the system. That industry has played a significant role (even if not quite knowingly) in this obfuscation, as we shall see in Chapter 4. Meanwhile, it is telling that systemic violation of the public trust—the emblem of the new corruption—today resonates with protesters worldwide. Recall the insistence of SWIMNUT and his or her fellow commenters that the United States should occupy a high place in corruption rankings. They don’t need experts to tell them that they are subject to a corruption that bears little resemblance to the petty bribes that flourish far away. That’s because ordinary people are grappling with the grim consequences of the well-entrenched new corruption. The elites who helped entrench it scarcely face such costs. No wonder many elite experts don’t even recognize that a problem exists. The financial arena is rife with lapses in accountability and even clear-cut violations of the public trust. But a stunning discovery of my research is that unaccountability invades practically every area of public life. Later we’ll see how stealth influence can quite literally involve life-and-death matters when the pharmaceutical industry and physicians intersect. We’ll see it, too, in cases of unregistered, under-the-radar operatives carrying the water for less-than-savory foreign entities. And it rears its head in once-respected institutions—government, business, the military, and academia, among others. In all these realms, not only is unaccountability a problem: the public trust is under siege. Excerpted from “Unaccountable: How Elite Power Brokers Corrupt our Finances, Freedom, and Security” by Janine Wedel. Copyright © 2014 by Janine Wedel. Reprinted by arrangement with Pegasus Books. All rights reserved.
Re: water wars, I have a friend who lived through this as a teenager. What corps are capable of in collusion with govt. has no bounds. It was incredible, they would be arrested for draining the rainwater off their own roofs into a cistern. Once govt./ powerful corps grow so intertwined that their DNA's can no longer be separated, perceive populations as hamsters in a cage to turn the wheel for their benefit, the people are screwed. IMF, World Bank are pushing hard now.