Legal Corruption

There was a 30-year period following World War II in the United States when we made an effort to put our values into practice. It was not just the Marshall Plan or "imposing" democracy in Japan. We did away with segregation laws; we provided housing and education for our veterans; we founded the Peace Corps, the Fulbright Program, the Food Stamp Program. For most Americans life improved, and despite being the most powerful nation in the world, we managed not to be hated. Of course, there were important failures, including McCarthyism and Vietnam and a Latin American foreign policy blind to dictatorship and corruption, but on balance the American Empire was the most gentle in the history of the world.

But since the election of Ronald Reagan, we have been headed in the wrong direction. Not a single American President, Democrat nor Republican, has had a program that would inspire a young person to do anything other than seek wealth. The result has been the institutionalization of legal corruption.

Of course, I realize that the alleged cause-effect relationship claim is almost impossible to prove. How can I demonstrate that the worst part our complex and wonderful national character has been ascendent for more than a quarter-century with disastrous consequences? How do I demonstrate that the self-dependence praised by Thoreau has given way to self-serving with guile, leaving us with little more than self-destructive incompetence?

The best evidence for my argument lies in the layers and layers of legal corruption that we have built into American life for the quater-century. Though the Bush Administration has perfected legal corruption cynically using 9-11 to chisel away at legal protections, they did not begin the process. They are not to blame for the complicity of the Democrats and the American people. We have done as little to stop legal corruption as we have to stop the war in Iraq. Though there are voices constantly telling us what's gone wrong, we seem not to listen and they seem to have no power to change anything.

The Blackwater scandal to illustrates my point. The use of mercenaries was legal, part of a systematic privatization of government. Privatization in itself is not bad, of course. The problem arises only when a decision regarding government policy is reduced to a make or buy decision. Governments are not firms. Only government have a right to send soldiers into battle. Blackwater never should have been in a position to kill Iraqi citizens. The use of mercenaries is anti-democratic. The use of legal mercenaries in a foreign country is a corruption of the system. Yet Blackwater will continue to work in Iraq, and the measures taken to control Blackwater do not fix the problem. Using mercenaries is "un-American".

So did Americans permit the government to use mercenaries? Why are we willing to let life go on as normal in the United States while our soldiers die in battle in a foreign country? Why do we seem not to care about the Iraqis despite President Bush's protests to the contrary?

Perhaps the answers lie in the web of meaning constructed by the conservative movement in the United States that divides the world into have and have-nots, into those with rights and those without. In a divided world of the deserving and the non-deserving, there is always over-determined reasons for doing what the deserving want. This is the basis of legal corruption. It works in China, it works in Putin's Russia, it works in the United States.

It works everywhere; it always has. We invented the democratic social contract to fight this corruption by building a society of laws and not of men. By creating a system that makes it difficult for the bad guys to win.

We know all about this in business. Capitalism was designed to try to overcome some of this behavior. Oliver Williamson, the Berkeley transaction cost economist, describes the behavior of the bad guys as "self-servingwith guile". We expect some individuals to be self-servers and work in their interest and not the shareholders. Corporate goverance is supposed to protect shareholders from these people. But what happens when the self-servers with guile get there hands on the corporate governance? What happens if they get their hands on government and make their self-selving with guile the law of the land?

Blackwater was made possible because of dozens of legal corruptions, large and small. The "small" ones include hedge fund and private equity partners paying capital gains rather income tax on earnings; the automobile industry lobbying against energy standards, pharmaceutical companies paying for FDA studies. These small corruptions cost billions. The truly large corruptions cost thousands of lives. The truly large corruptions include a multi-billion dollar government contracting system riddled with chronyism that buys us private jails and torture. It bought us Blackwater.

... And it was legal. And it is defended as necessary and good by those who benefit day after day.

The underlying "principle" holding together this socio-economic network of self-interest with guile is quite clear: interest group wealth creation is now a legitimate aim. And irony of ironies: our individualistic, meritocratic neo-conservative movement has given us collectivistic self-protection scheme designed to keep the rich rich.

Now you thought that conservatives believed in individualist meritocracy. You were wrong. If they did, they would not struggle so hard against efforts to provide the poor with opportunities to grow up one day and compete with the rich. One of my favorite examples was the Repulbican assault on estate taxes, built around a not-so-clever Frank Luntz campaign to rename the estate tax "The Death Tax". Never mind that Luntz and friends undid a key part of our Rooseveltian social contract: "avoid concentration of wealth and the creation of dynasties."

Political operatives like Karl Rove and Frank Luntz understand that legal corruption is the way to go and that it can be achieved with the consent of the governed. Their strategy is divide and conquer by finding some common ground, no matter how vulgar or cruel, that convinces the losers that they are actually winners. With their help, we have achieved a society divided between haves and have-nots that has convinced itself that the have-nots have exactly what they merit. The self-servers with guile have convinced the have-nots that they too can some day be rich self-servers with guile.

When I was young, I  believed we were committed to building a society that could be based on opportunity and merit. It was about the time that John Rawls' "A Theory of Justice" set out the basic ideas of how to get this done. Hope was in the air and I believed. Why not? We had antibiotics and birth control pills. We had infectious disease under control and sex was good and safe. It was the best of all possible worlds.

Thirty years later, we have AIDS, fundamentalist terrorism and women in full burkas. We have George Bush in the name of The Haves claiming that there's no health care problem in America because The Have-Nots can always go to an emergency room.

I was wrong about the America we were going to have. We do not have a more fair and more just America precisely because we consider the legal rights of privileged interest groups more important than true meritocracy and opportunity. We were lied to by self-servers with guile and we were stupid enough to believe them. We are dismantling the entitlements of the poor and middle-class on the grounds that these entitlements are inefficient and ineffective. (Tell that to my parents who went to City College of New York for free and bought their first house with Veterans Administration home loan.)

In the name of individualism and meritocracy, we have turned our back on the Have-Nots and we have given free reign to legal corruption. Perhaps there is a connection between the two.