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Friday, July 12, 2013

On the Poor Definition and Measurement of Corruption

Sadly, we’ve entered into a world where the word “corruption” has become inadequate to describe the many and varied practices of profitable abuse by the powerful and connected of their inferiors. Like the popular (and sadly apocryphal) accounts Inuit with their numerous words for “snow,” we need more refined and granular terminology to describe various types of corruption. Hugh uses “kleptocracy” but that’s a name for a system of governance, not particular behaviors within that system.

I’m reluctant to make an object lesson of a large scale and, within its limits, well researched report by Transparency International (see end of the post for the full report). It surveyed 114,000 people in 107 countries. The study concluded that corruption had risen in most countries since its last poll two years earlier (the countries reporting a fall in corruption were Belgium, Cambodia, Georgia, Rwanda, Serbia, Taiwan). On a scale of one to five, with one indicating corruption was not a problem at all and five signifying a very serious problem, the average response across all countries was 4.1.

Yet how did the survey define corruption? In practice, they only asked about two types of behavior: bribes and “when decisions to allocate public resources are distorted by money, power, access, or some combination of the above.” So in cruder terms, it’s pilfering of the public purse. But even then, the survey didn’t hone in crisply on the issue (for instance, question 3 was “In your dealings with the public sector, how important are personal contacts and/or relationships to get things done” and question 4 was “To what extent is the country’s government run by a few big interests looking out for themselves?”).

Now in fairness, these questions might be taken as reasonable proxies for corruption. But the focus of the report on bribery, which is a big issue in many countries (over 1/4 of the respondents reported paying a bribe in the previous year, including 7% of the people surveyed in the US, 5% in the UK, 5% in Italy, 7% in Switzerland (?). France and Germany appear to have been exempted from this survey.

The problem is that this model of corruption implicit in this survey appears to be a developing country model of corruption, in which you can have abusive local headmen running towns of local offices as personal sinecures, and various levels of organized crime either controlling certain services or competing with government in providing “protection” (not that we don’t have that happening in advanced economies too, but we see it as an anomaly). But in the US, we have institutionalized corruption, and it includes form that don’t even register on the Transparency list.

To name some:

1. The revolving door, which leads to outcomes like regulations not being rigorously enforced or wink-and-nodding through rent-extraction mechanisms being waved in during rulemaking. This isn’t a budgetary allocation, which is what Transparency worries about, but it’s often more valuable.

2. The erosion of property rights. If you can’t have your property rights upheld in court, you effectively don’t have property rights. Homebuyers learned in the bust that if they have a mortgage on their house, their ownership rights are in fact seriously qualified even if you pay your mortgage on time. The media has reported on cases where homes with paid off mortgages have been foreclosed upon, or where servicers have refused to correct errors in their records, or similarly sent back validly submitted, timely payment and proceeded to foreclose. I have a colleague, an attorney and securitization expert, who says 10 years ago he had a problem with a servicer where he sent in two months payment while on vacation and was sure to space them out a little. Even so, two were credited to one month and the following month was treated as a missed payment. He was able to get it straightened out (with some damage to his credit report) but he says if that happened now, he is certain he would have been foreclosed on.

And how about being compelled to enter into one-sided contracts? You can’t participate in society without having a credit card (if you have a job that requires travel, your employer will expect you to buy airfare and rent cars). How about a cell phone contract (you can semi opt out with a more costly prepaid phone).

And it isn’t just small fry that are getting the short end of the stick. Investors in mortgage backed securities effectively had no ability to get courts to enforce their rights. Servicers have been systematically looting MBS via refusing to do modifications and via excessive charges of every variety imaginable (the few investors who have tried suing have had very little in the way of success; the big exception is bond guarantors, whose had stronger rights to pursue certain types of litigation than mortgage bond investors). Similarly, the business press relentlessly spouts the myth of shareholder democracy when the academic literature describes public companies as a classic principal-agent problem (as in the principal, meaning shareholders, can’t adequately control their agent, so the agent does what is best for him, not for his nominal principal).

3. Government authority used to promote corporate interests at the expense of individuals, vitiating the right of free speech and peaceable assembly. I’m sure readers can add to this list, but here are some starters:

Government crackdowns on protests and surveillance of protestors, even when the issues at stake are still in play politically (Keystone is a classic example, or the criminalization of photographing of factories and labs where suspected animal abuse takes place). Remember the Bank of America chalk case?

Overzealous enforcement of intellectual property rights (Aaron Swartz is the case study here)

Despite the fact that their questions do allow for the idea of an oligarchical takeover of government, their remedies still assume the public has some sway. Transparency has a chipper section at the end where they say 2/3 of the respondents believe “ordinary people can make a difference” and 87% of the respondents say they’d be willing to “get involved” (I have to tell you, having done survey research, that this sort of question will elicit unrepresentatively positive responses. People are much more willing to say they’ll do something than actually do it). But how much do you think these types of action will move the needle in the US or other advanced economies?

Screen shot 2013-07-12 at 4.11.26 AM

People in the US still shop at Walmart, for instance, and predictably, the measure most Americans said they’d take, signing a petition, is the least effective.

Perhaps I’m being too cynical, but there is a failure to recognize that the fish here are rotting at the head. Whistleblowers, even with whistleblower protections a matter of the law, are as a matter of course fired on trumped-up charges. Their concerns typically are either ignored entirely or are treated by management as an warning to tidy up the records. Overwhelmingly, large companies view performance as paramount and don’t ask many questions of a manager or executive who delivers the goods. I’ve seen multiple examples of people who engaged in questionable conduct at Goldman and McKinsey back in the 1980s when both were seen as models of well managed, upstanding firms and the general standards for behavior were much more stringent than now. Looting and abuse have become pervasive and the only questions now seem to be of degree, not of kind.

At a minimum, I hope readers will help come up with more exact codification of the various flavors of corruption. Orwell was correct to focus on the debasement of language an important tool in subjugating a population. Confucius focused on exact terminology as critical to running a state well:

If names be not correct, language is not in accordance with the truth of things. If language be not in accordance with the truth of things, affairs cannot be conducted successfully. When affairs cannot be conducted successfully, propriety will not flourish. When propriety does not flourish, punishments will not be properly meted out. When punishments are not properly meted out, the people will not know how to conduct themselves.

Or the more common recap of this discussion: The beginning of wisdom is to call things by their proper names. We need to take our language back.

Transparency International's 2013 Global Corruption Barometer



  • gonzomarx says:
    July 12, 2013 at 5:05 am

    G4S faces fraud investigation over tagging contracts

    this type of corruption… “He has also taken action within the justice ministry after disclosing that his own officials became aware in a limited way of some of the problems in 2008 but failed to take adequate steps to address them.”

    also includes Serco which I believe is the company behind Obamacare!

  • Skeptic says:
    July 12, 2013 at 6:11 am

    Corruption and language. “Orwell was correct to focus on the debasement of language an important tool in subjugating a population.”

    Ireland and many other countries are great examples of this where the Occupiers knew that to destroy the local language was very important to their occupation. Even today, Ireland has its sell out, state RTE broadcaster to spout Elite propaganda.

    Many kudos to NC for hitting on the important facets of the Great Deterioration. Corruption and language are two important elements of this period and are little understood and poorly described by the language we use. NC really sees the Big Picture and how health, nutrition, agriculture, corruption, language, finance, etc. tie in. Many alternative sites see only their particular issue and fail to see the connections and commonalities.

    The most obvious example is to call Holder’s fiefdom The Department Of Justice. It is the exact opposite, The Department of Injustice (and Intimidation). Another obvious one, Department of Defense. USMC General Smedley Butler even wrote a whole book on this one and called it WAR IS A RACKET. So War Racket would be a good descriptive term for what we actually have. A USMC General twice decorated with the Congressional Medal of Honor should know!

    Another obvious one is Home Ownership. In the vast majority of cases, it is Home Debtorship. Simple enough. Or how about Froud Stamps. Food Stamps, as they call them, are not about either Food or Nutrition but Fraud in Food. Another one is Infernal Combustion Engine.

    Maybe some enterprising blogger or alternative institution might consider setting up a site as a clearinghouse for a new language, the Language of The Occupation. Victims of the Elite could contribute their own creations to such a language. For instance, who better to describe the language of Foreclosure or our Industrial Prison System than its victims and inmates? If you are not already a victim, you soon will be so start describing it in your own terms, not Theirs.

    As for corruption, the US must be the most corrupt country with the trillions stolen domestically and internationally. Then there are all the War Crimes and Racket. US number one!

    • change agent says:
      July 12, 2013 at 6:45 am

      The United States of Americaries.

    • jake chase says:
      July 12, 2013 at 9:42 am

      Nice writing job, but I think it nearly useless to ferret out subspecies of corruption in an effort to evaluate the American system. We have a government operated for the exclusive benefit of large corporate interests. Every large corporation is operated from the exclusive benefit of its top executives. The actual passage and massaging of laws and rules is dictated by corporate interests, and corporation designated appointees handle implementation of the rules during lackluster sojurns from their business engagements. Individual people sink or swim in this cess pool, and the only protection available to any of them is whatever money they manage to accumulate. Show me a person who expects to be protected by law or have his interests advanced by any State or Federal Government or Department or Agency. You’d have far less trouble producing a dog with three heads.

      What these Departments and Agencies actually do is systematically oppress helpless individuals ensnared in an endless array of traps for the unwary.

      • Banger says:
        July 12, 2013 at 12:21 pm

        Certainly looks that way.

      • sgt_doom says:
        July 12, 2013 at 1:53 pm

        jc again makes come very cogent points!

        And if I recall correctly, Transparency Int’l was originally financed/founded by the banksters (Goldman Sachs, JPMorgan Chase, Morgan Stanley, et al., the usual suspects).

        Corruption is simple; if it benefits the super-rich to the exclusion, and frequent mortality, of everyone else, that be corruption to the max!

        With the fix in for LIBOR, interest rate swap ratings, currency exchange fixed, oil/energy prices fixed, financial manipulation through naked swaps, naked shorting of virtual stocks through the DTCC’s Stock Borrow Program, and the fact that the banksters/oil companies own all the financial exchanges and clearinghouses (just check on the interlocking ownership of ICE, or InterContinental Exchange, the NYSE, the DTCC, etc., etc., etc.), everyone sure does appear rigged to this humble soul.

    • Banger says:
      July 12, 2013 at 12:39 pm


      Indeed this ability to understand the grammar of modern power-relations is essential and, frankly, avoided by the American left as if it was a carrier of the plague. The issue is that the left tends to accept the mainstream narrative almost completely.

      The first thing to do is to deconstruct the media narrative which is largely false. It is no accident that the American populace is dazed and confused–it is a deliberate project by the mainstream media/PR nexus.

  • July 12, 2013 at 6:46 am

    I think the real problem is an underlying shift in culture fron one based on some sense of justice, i.e., ethics to which all are subject, to one based on power. We have become a Thrasymachian society, to borrow from Plato’s Repblic, in which whatever benefits the stronger is just. Or more recently, it’s the ethics of Ayn Rand.

    In the Thrasymachian (Randian) world, property rights, governmental corruption, corporate theft all become meaningless: if it benefits the stronger party, it’s just. Since modern economics places consumption, and therefore wealth, as the greatest good, the rich can do what they want. Just look at the writings of Richard Posner and others in the “Law and Economics” crowd—parties can pretty much do what they want, so long as there is “economic benefit”.

    Ironically, as Hannah Arent noted, the destruction of collective rights is ofen associated with a maturing of populist movements. She argued that political movements based on the rights of the masses often degenerate into individualistic movements that are ripe for transformation into fascism or corporatism. In a strage way, “left” and “right” have a way of meeting up. As Robert Maynard Hutchins noted, “In a contest between Hitler and people who are wondering whey they shouldn’t be Hitlers, the finished product is bound to win.”

    The real problem is to move culture away from a myopic focus on economics to politics. We need to keep everyone (or the majority) focused on the values and behaviors that define democracy: justice, truth, and freedom. When we move away from that triad—especially worshipping freedom blindly—we weaken our commitment to democracy and drift toward tyranny.

    We’re alomst there now.

    • Banger says:
      July 12, 2013 at 12:20 pm

      In fact, the focus on economics is an example of how the system uses misdirection. Essentially there is no such thing as economics as separate from politics–it is a subset, and a minor one, of politics, i.e. it is the chief way of allocating power. You are powerful to the degree you have money not a bad political system as a system but it is a political system first and foremost.

      When the system features “economics” it neutralizes politics–the misdirection is that people are all looking at the economic system to give them something while the real players are stealing from them because they know the score.

      • sgt_doom says:
        July 12, 2013 at 1:55 pm

        I forget the man who said this (a great Jewish-American thinker and popularizer of Thorstein Veblen), but economics is basically the institutionalization of the excuse as to the existence of inequality; why some are born with everything and most are born with nothing!

  • They didn't leave me a choice says:
    July 12, 2013 at 6:47 am

    I wonder, is there any academic material on classification and categorisation of corruption in its plethora of forms? It would be highly interesting to move this discussion rapidly away from “mere” anecdotes (as if those didn’t matter to the people who suffer) and into the realm of wide understanding.

  • Brooklin Bridge says:
    July 12, 2013 at 8:13 am

    A possible mistake in first line: Sadly, we’ve entered into a word world(?) where…

  • Eleanor says:
    July 12, 2013 at 8:19 am

    Love the quote from Confucius. I’ve known it for decades, but this post makes the meaning of “rectification of names” clear. Another way to say it is “call a spade a spade.” But in this situation we don’t have an adequate vocabulary for all the kinds of spades/corruption we are seeing.

  • Moneta says:
    July 12, 2013 at 8:33 am

    IMO, the root of the problem is wanton money printing ant TBTF.

    The reason why you tax is to redistribute. When people pay taxes they get implicated.

    The reason why you want to limit deficits is because it forces the population to evaluate what it really wants and use its resources efficiently.

    The only country in the world that can generate deficits without quickly getting penalized is the US because it has the reserve currency.

    But as we can see this position comes at a price. These deficits mean that there is no need for America to evaluate the merits of projects. If it lacks resources, it will just get another country’s resources by printing. This means that everything in its economy is misevaluated because there is no need to do it. Since taxes have been going down and the deficits are supported by money printing, this means the population is completely disconnected from the nation’s finances.

    The US system is disenfranchising the people. It can probably keep on doing this for quite a while but it will hit a wall. The 1% will end up suffering because even they are out to lunch, have no clue and are out of control.

    One example… while the real estate bubble was expanding, there could have been more investment in the court system. With a zero deficit policy this would have limited the bubble because building courts would have sucked money out of the real estate industry. With a deficit policy, you would have gotten even more growth because more than 1 sector would have seen soaring. But since taxes have been coming down, the court system is probably seen as a cost and economies of scale meant more population per court was a good efficient thing.

    But too small is not good and too big is not any better. Our systems have gotten too big for he people and they are still getting bigger. If we had 100 companies instead of 1, there would be more middle class. Therefore, the economies of scale efficiencies are killing us.

    Easy money promotes finance and its ensuing M&A that leads to jumbo firms. Without TBTF policies, firms outgrowing their optimal size would be forced to break up, creating more jobs.

    IMO, all the other problems are derivatives of money printing and TBTF policies. But it will probably get worse because austerity will not work and we’ll start printing again without fixing anything.

    • F. Beard says:
      July 12, 2013 at 8:53 am

      With a zero deficit policy this would have limited the bubble because building courts would have sucked money out of the real estate industry. Moneta

      Nope. Don’t forget that the Fed creates reserves as needed to support credit creation by the banking cartel. How about we eliminate that “money printing”, hmm?

      And even raising interest rates might not work during the boom because speculators profit off the spread between what they can buy at and what they can sell at. Moreover, interest rate manipulation is a very blunt tool and is likely to damage non-speculators too.

      • Moneta says:
        July 12, 2013 at 9:10 am

        zero deficits policies are a constraint or else they would not take them away.

        • F. Beard says:
          July 12, 2013 at 10:10 am

          Zero deficits are NOT good since deficit spending by the monetary sovereign is where new fiat comes from and some money creation is good.

          What next? Are you going to suggest we return to a gold standard?

          • washunate says:
            July 12, 2013 at 10:28 am

            I would counter that money creation is amoral (at modest levels). It is neither good nor bad. The value judgment is in its distribution.

            • F. Beard says:
              July 12, 2013 at 2:03 pm

              Given that the government-backed credit cartel DRIVES people into debt, the government has a moral IMPERATIVE to at least provide the INTEREST needed!!!

          • wunsacon says:
            July 12, 2013 at 12:16 pm

            >> some money creation is good

            In an electronic world where you can subdivide and where there are already trillions of electronically defined money, you no longer need to create more.

            As for people hoarding capital, a progressive wealth tax would encourage them to spend it.

            • F. Beard says:
              July 12, 2013 at 12:32 pm

              The banks only create the principal for loans, not the interest, which, if it does not come from the banks as even more debt, must come from the monetary sovereign as deficit spending.

              And, btw, debt-free money is possible with both fiat and common stock.

              And Federal taxation does NOT discourage hoarding, it makes it even more lucrative by destroying money and thus increasing the value of what remains.

          • Moneta says:
            July 12, 2013 at 1:04 pm

            I guess they are not good for the US because it stops them from consuming effortlessly.

            Why waste time and energy analyzing and planning when it can print and plunder other countries while they sheepishly keep on devaluing their currency and depleting their assets to serve it?

            IMO, MMT will work and will continue… until Wall-e comes to life.

      • Moneta says:
        July 12, 2013 at 9:19 am

        And BTW, my intent was essentially to show how economies of scale and a focus on cost reduction all in the name of efficiency is leading to M&A, Big Corp. and then to TBTF.

        Kill TBTF and firms will be forced to get to a more human scale… spin-offs and more jobs over time. The problem is that in the short-term the restructuring from spin-offs and bankruptcies would entail more layoffs or a recession… but you know, we can’t have one of those.

        • F. Beard says:
          July 12, 2013 at 10:06 am

          Economies of scale and efficiency are GOOD. The problem is that the profits thereof are not justly SHARED with the workers as they would be without the government-backed credit cartel.

          “Kill TBTF …” Moneta

          Of course. But one should do that according to principle. One such principle is that the monetary sovereign (e.g. US Treasury) ITSELF should provide a risk-free storage and transaction service for its fiat that makes no loans and pays no interest and NOT provide deposit insurance or a lender of last resort to the banks and credit unions.

          • Moneta says:
            July 12, 2013 at 10:23 am

            I never said economies of scale are bad. I just said that they can only reach a limit. When TBTF policies are instituted, chances are we’ve past that point.

    • washunate says:
      July 12, 2013 at 10:25 am

      I think this position is too preoccupied with deficits. They just don’t matter.

      12 months is such an arbitrary and short time period that it’s simply irrelevant.

      What matters is how the money is spent, not whether cash flows net out to zero. The government doesn’t even use GAAP based accrual accounting. It’s a cash-basis reporting of revenue and expenses where the revenue (taxation) is completely unrelated to the expenses (spending). The government has an unlimited supply of the unit of measurement of the deficit (dollars).

      • Moneta says:
        July 12, 2013 at 3:02 pm

        I agree 100% that the important factor is how the money is spent. But deficits do matter as long as we are not spending it properly.

        Furthermore, if they matter for other countries, they matter for the USA. Why? Because our global financial/monetary systems are still based on measures that care about deficits.

  • F. Beard says:
    July 12, 2013 at 8:42 am

    You can’t participate in society without having a credit card (if you have a job that requires travel, your employer will expect you to buy airfare and rent cars). Yves Smith

    Actually, a debit card will do. And the US should have a Postal Savings Service to provide those for all citizens.

    • July 12, 2013 at 10:26 am

      Um, that’s exactly what we did have for more than half a century.

      Note that one reason for scrapping the bank in the 60s was the enactment of reforms in the private banking industry. A century ago it seemed necessary to protect depositors from crooked and/or irresponsible banking institutions, especially customers of the socalled “immigrant banks” set up in big-city ethnic neighborhoods.
      But thanks to tougher banking regulations, the PSB was–it appeared–no longer needed. Hoo Ha.

      • F. Beard says:
        July 12, 2013 at 11:49 am

        Thanks for the history lesson and a reminder that bank regulation is NOT the solution since it will eventually be repealed anyway.

        I don’t know why people still think that despite 317+ years of trying without success that central banking can be made to work properly.

        Hint: A money system based on usury for stolen purchasing power CANNOT be made to work properly UNLESS God is mocked and He isn’t.

  • diptherio says:
    July 12, 2013 at 9:35 am

    Here’s what the Stanford Encyclopedia of Philosophy has to say (in part):

    In fact, corruption is exemplified by a very wide and diverse array of phenomena of which bribery is only one kind, and nepotism another. Paradigm cases of corruption include the following. The commissioner of taxation channels public monies into his personal bank account, thereby corrupting the public financial system. A political party secures a majority vote by arranging for ballot boxes to be stuffed with false voting papers, thereby corrupting the electoral process. A police officer fabricates evidence in order to secure convictions, thereby corrupting the judicial process. A number of doctors close ranks and refuse to testify against a colleague who they know has been negligent in relation to an unsuccessful surgical operation leading to loss of life; institutional accountability procedures are thereby undermined. A sports trainer provides the athletes he trains with banned substances in order to enhance their performance, thereby subverting the institutional rules laid down to ensure fair competition. It is self-evident that none of these corrupt actions are instances of bribery.
    The wide diversity of corrupt actions has at least two further implications. Firstly, it implies that acts of institutional corruption as a class display a correspondingly large set of moral deficiencies. Certainly, most corrupt actions will be morally wrong, and morally wrong at least in part because they undermine morally legitimate institutions. However, since there are many and diverse offences at the core of corrupt actions, there will also be many and diverse moral deficiencies associated with different forms of corruption. Some acts of corruption will be moral deficient by virtue of involving deception, others by virtue of infringing a moral right to property, still others by virtue of infringing a principle of impartiality, and so on.

    The article is long and probably worth reading in full (I haven’t yet), but it doesn’t quite seem to get to what Yves is asking for. More research is required.

  • washunate says:
    July 12, 2013 at 10:18 am

    Great read.

    The good news is I think most Americans ‘get it’ that whatever particular language is utilized, something is wrong. Public opinion isn’t driving public policy. Rather, the problem is that we haven’t (yet) figured out how to translate public opinion into political action.

  • July 12, 2013 at 10:26 am

    Contemplating the flavors of corruption. They were once much stronger. We are all thieves descended from even more savage thieves. So naturally, over the course of our “civilization” we have tried to mitigate the slaughter. With legal code. When you’re bored surfing, go to your state government web site and browse your state statutes. It’s as fun as reading the dictionary! Therein you can find a description of every naughty act ever tried by our justice system. But you will not find the guts to actually prosecute.

  • July 12, 2013 at 10:38 am

    We need a new certification. Like an organic food guarantee. Which nobody believes, but never mind. So far the only certification is for the felons – that somehow they will always be bailed out. So we need our own guarantee of a bailout. It can’t be based on being defrauded because the whole system is puffery. It could be based on minimum expectations without fine print exceptions. And backed by the taxpayer, since the taxpayer backs everything else. That would at least level the playing field.

  • July 12, 2013 at 10:40 am

    A must-read for anyone trying to make sense of what is miscalled “corruption” in the supposedly “developed” world.

    • from Mexico says:
      July 12, 2013 at 11:16 am

      From the book description:

      The existential motive of all oligarchs is wealth defense… Moreover, the rule of law problem in many societies is a matter of taming oligarchs.

      It sounds like the author is deeply into materialist territory, along with folks like Machiavelli, Hobbes, Bernard Mandeville, Adam Smith, Michael Parenti and C. Wright Mills.

      Some days I’m in that camp, but other times I find myself drawn to the more spiritualist theorizing of folks like Immanuel Kant, Reinhold Niebuhr, Hannah Arendt, and Joan Silk.

      • Banger says:
        July 12, 2013 at 12:08 pm

        Both are camps are valuable, really. When I think about politics I think in Machiavellian and systems analysis terms. Why? Because it always works with only very minor exceptions.

        Having said that the materialist perspective offers us nothing in terms of solutions only more of the same with different characters and a slightly different dynamic. What offers us a possibility of real change, particularly in this historical period, is spirituality–which I might define differently.

      • Phrase says:
        July 12, 2013 at 1:29 pm

        @ from Mexico

        “Some days I’m in that camp, but other times I find myself drawn to the more spiritualist theorizing of folks like Immanuel Kant, Reinhold Niebuhr, Hannah Arendt, and Joan Silk.”

        I do appreciate Yves blog, and the above post. … However, sometimes i need to try to formulate a broader vision of the context within which such illegitimate, illegal, immoral actions move with such impunity.
        Has civil society lost the ability to imagine and entertain a vision of a time when the a real world context (pluralistic at that) , would mirror for ex., … Rene Forst’s ‘right to justification’, … propelled by free safe investigative journalists given global distribution in the name of transparency, accountability, and that master-word, democracy ? … The case of Michael Hastings is truly alarming ! … And yet the disenfranchised are demonstrating even though public policy furthers elite global neoliberal agendas maintained by the manipulation of different fear factors.
        But, the reason for my response was just to share the name , and the work of, a cultural anthropologist … Arjun Appadurai, “Modernity At Large: Cultural Dimensions of Globalization” (1996)

        … “ The new global cultural economy has to be seen as a complex, overlapping, disjunctive order that cannot any longer be understood in terms of existing center-periphery models (even those that might account for multiple centers and peripheries). Nor is it susceptible to simple models of push and pull (in terms of migration theory), or of surpluses and deficits (as in traditional models of balance of trade), or of consumers and producers (as in most neo-Marxist theories of development). Even the most complex and flexible theories of global development that have come out of the Marxist tradition (Amin 1980, Mandel 1978, Wallerstein 1974, Wolf 1982) are inadequately quirky and have failed to come to terms with what Scott Lash and John Urry have called disorganized capitalism ( 1987).The complexity of the current global economy has to do with certain fundamental disjunctures between economy, culture, and politics that we have only begun to theorize.’
        I propose that an elementary framework for exploring such disjunctures is to look at the relationship among five dimensions of global cultural flows that can be termed (a) ethnoscapes, (b) mediascapes, (c) technoscapes, (d) financescapes, and (e) ideoscapes “
        Arjun Appadurai’s writings are a recent find for me. I am very interested in the idea that visual culture has replaced print culture. I’m still working my way from Deleuze’s ‘control society’ of self-imposed censorship to a more current vision which Appadurai’s ideas are currently shaping. … Imagination, and aspiration unlock transformative motivated energy in me. … best regards ! … phrase

      • sgt_doom says:
        July 12, 2013 at 2:00 pm

        Please never mention C. Wright Mills, a real fraudster and redirection specialist if there ever was one!

        Ferdinand Lundberg, in his classic book, The Rich and the Super-Rich, makes a highly valid point about Mills when he points out that Mills completely ignored the most important socioeconomic study of that time, and probably still is, the TNEC study (Temporary National Economic Committee study, major parts of which are still confidential to this very day, and was the causal factor for the lawsuit brought against 17 investment houses of Wall Street [US Government v. Morgan et al.]).

        Nor, I believe, does Mills ever mention any of the studies undertaken in congress by the greatest populist and Real American from Texas, Wright Patman.

  • Moneta says:
    July 12, 2013 at 11:29 am

    You will notice that often the trees that grow the fastest to be the biggest have distinct characteristics:

    - In time, they destroy and/or crowd out other trees.
    - As a whole, they are usually OK in their early days but get uglier with time.
    - They get uneven quickly. Some branches are so big they create an imbalance that is sure to get hit with a good storm. Some branches are fine and others rot away or have no leaves.
    - They become prone to lightning and other ravages from storms
    - They become full of parasites
    - Their life expectancy is shortened because they suck up the minerals too quickly.
    - They are the ones the builders plant and other impatient types.

    Now guess which country we can compare this tree to…

    So what kind of tree would you like to plant?

  • Banger says:
    July 12, 2013 at 12:03 pm

    Yves, sometimes you come up with some great articles that get to the heart of matters and this is one of them. This subject is very important and needs a lot of thought. The problem I have though is the question: what do we mean by corruption as a general idea? I’m not sure we can define it. The word itself comes from the Latin to destroy. So corruption is about destroying society and here I’m not sure we can say that the definitions you give actually destroys society.

    I see things from a systems viewpoint. As I see it the system (which is society) actually works very well. All the things you cite here are things that contribute to the robust nature of the system. If you are familiar with Washington it bears a lot of resemblance to organized crime in a highly sophisticated way. There are operators, fixers, consiglieri, and even hit men along with the obvious actors covered in the mainstream media and all of them act to maintain the stability of the system. Each of them wax and wane in power depending on all kinds of external forces that they have, over time, learned to adapt to and game. Washington, from the point of view of Washington, works very well. And let’s speak frankly here, even though the public is now pretty convinced that there’s something very rotten in Denmark there is no real effective movement for reform or changing the system other than a strong nihilist component on the right that serves as an effective tool for the power-elite.

    Even you, about as smart a commentator as we have on the internet, really has no clue on how to change things or what course to chart to move towards fundamental reform of the financial system that is pragmatic and not just a lot nice items on a bucket-list. Without thoroughly understanding the nature of this regime and how it enforces its will through various institutions including the entertainment industry and particularly the mainstream media we have no hope in countering the current system which remains, as we speak, utterly immune to real change.

    Only by admitting our powerlessness can we begin to gain power first through knowledge (I think we are getting there) but very slowly–we still refuse to see the real lineaments of power in all its frightening aspects–you have to deconstruct everything, all the myths the state heaps on us through the various ways it has of manufacturing consent. I maintain that every issue we face from economics to external threats serve the function of controlling the public and have nothing to do with reality. This is easily discovered by the most elementary inquiry into the assumption of the mainstream narrative which crumbles into dust like the famous Wicked Witch scene in the Wizard of Oz.

    • Moneta says:
      July 12, 2013 at 1:11 pm

      there is no real effective movement for reform or changing the system other than a strong nihilist component on the right that serves as an effective tool for the power-elite.
      Action-reaction. Maybe that is the accelerant.

      • Banger says:
        July 12, 2013 at 2:25 pm

        Ultimately I agree. The whole situation has a aura of perfection–it certainly is cool as a human artifact. Nihilism leads to major social realignment–it is fundamentally unstable and may well be the crack we are all waiting for.

        • Ulysses says:
          July 12, 2013 at 3:10 pm

          “The crack that we are all waiting for”– maybe. Certainly the corrupt elites have pretty much captured and neutralized all of the traditional methods of translating public outrage into meaningful political action. Here in the U.S., for example, participating in our two-party system (except in rare instances at the local level) is to maintain a kayfabe deception, cleverly supported by the MSM, that citizens actually have a meaningful “choice.”

          The notion that Dianne Feinstein and Mitch McConnell “oppose” each other on the senate floor is pure delusion. They both oppose the interests of most Americans, while steadfastly advancing the interests of the 0.01%

          The MSM maintains an illusion of meaningful political dialogue by focusing on purely social issues, like gay marriage, that have no impact on the plutocrats’ bottom line. Plutocrats like the Koch brothers, wasting billions on trying to stop gay marriage, only help to maintain this delusion.

          We need to focus on identifying the handful of plutocrats who control the system, exposing their vulnerabilities, and toppling them from power. They won’t respond to “political pressure,” except to make the politicians they own do a better job of suppressing the righteous anger of the people.

          David Hume was correct when he said in 1742: “For so great is the natural ambition of men that they are never satisfied with power; and if one order of men, by pursuing its own interest, can usurp upon every other order, it will certainly do so and render itself, as far as possible, absolute and uncontrollable.”

          The plutocrats’ power in our present system is almost absolute and uncontrollable. We cannot reason with them, we cannot vote for better and less corrupt politicians to “reform” the present system. The present system is beyond reform. This doesn’t mean that a constitutional republic couldn’t be restored here in the U.S.– it simply means such a restoration will never happen as long as psychopaths like Jamie Dimon continue to walk free.

          • Banger says:
            July 12, 2013 at 4:09 pm

            The genius of the American system was the idea of checks and balances, i.e., that any one faction would have to overcome considerable practical obstacles to establish and maintain control. The great thing is that, for the most part, it worked pretty well despite some periods of considerable larceny and schemes. But because the interests in the country varied greatly with locality and sector combinations were difficult to establish and maintain.

            That balanced approached has been gamed–in my view the deal-breaker was the growth of the CIA and related institutions that operate beyond all the three branches of government as a practical affair. Now a unified coherent and very robust system is in place almost unassailable in its power. At the same time, the people are becoming more skeptical of the media and their governments. When the Boston incident, for example, happened several people expressed doubt about the official story–this is very unusual because the mainstream media suppresses all alternative views on all major issues. Where do these ideas come from? As this skepticism spreads the power of the State will diminish thus encouraging a skeptical view of the mainstream narrative is more essential than advocating for individual issues.

    • July 12, 2013 at 3:20 pm

      Step one. But “powerlessness” over what?

      • Banger says:
        July 12, 2013 at 4:18 pm

        Powerlessness over the system as a whole–it is very robust and interconnected system at this point the result of thousands of efforts. We(by that I mean the community of dissidents) cannot intrude into the government; we have no voice and no power at present because we are unable to make any section of the system feel pain by our efforts and indeed we don’t even have real community as, for example, the African American community had in maintaining the Montgomery bus boycott. The power-elite don’t, right now, even need our support or consent–they can, in my view force almost anything down our throats using already established techniques. You know, if things get dicey, just create enemies and external threats.

        As I’ve said many times, the essential work is to de-legitimize the system, question their version of reality and point out the fakery that is at the heart of our political discourse. Unless that is done rigorously at every chance we will remain powerless.

  • sublimejah says:
    July 12, 2013 at 1:27 pm

    “The original idea behind this volume was to examine only the Progressive Era, but Americans began grappling with corruption long before the 1890s.As it turns out, Progressive Era reformers and twenty-first-century economists think about corruption in a way that is, in one critical dimension, 180 degrees removed from the concept of corruption that prevailed until the mid-nineteenth century. The title of McCormick’s essay, “The Discovery that Business Corrupts Politics,” captures the essence of the modern concept of corruption, or, as Shleifer and Vishny define corruption, “the sale by government officials of government property for personal gain” (1993, p. 599)….
    What I define as systematic corruption is both a concrete form of political behavior and an idea. In polities plagued with systematic corruption,a group of politicians deliberately create rents by limiting entry into valuable
    economic activities, through grants of monopoly, restrictive corporate charters, tariffs, quotas, regulations, and the like. These rents bind the interests
    of the recipients to the politicians who create them. The purpose is to build a coalition that can dominate the government. Manipulating the economy for political ends is systematic corruption. Systematic corruption
    occurs when politics corrupts economics….
    Title: The Concept of Systematic Corruption in American
    Author: John Joseph Wallis

  • Hugh says:
    July 12, 2013 at 1:27 pm

    Lobbying and campaign finance are two forms of legalized bribery. Citizens United legalized political corruption for corporations and showed the complete corruption of the Supreme Court which decided it. Astroturfed political organizations, the manufacture of “popular consent”, are another form of corruption in politics. The hiding of contributors to these and other groups gives cover to their corruption.

    The media are corrupt, even a lot of the blogosphere is. It is all propaganda all the time, just segmented and tailored to different audiences of rubes.

    Universities are corrupt. They no longer fulfill an educational mission rather they are purveyors of the status quo. They are corrupt in their corporate structure, in their alliances with other corporations, and in their foisting of debt on to their students.

    Academia is corrupt. There is the whole publish or perish thing that results in most of academia’s research product being worthless and useless. This is even before we get to the quack sciences like economics. Academic economics is completely corrupt. The dominant politico-economic system of our times is kleptocracy. Yet almost no academic economist will acknowledge it let alone make it central to their point of view.

    The judicial system and the judiciary are corrupt. How else to explain our two-tiered justice system? The great criminals of our times, the largest frauds in human history, are not only not prosecuted, they are not even investigated. And how can anyone take the Supreme Court to be anything but corrupt? This is an institution that except for a couple of decades around the Warren Court has, for more than 200 years, always been on the side of the haves against the have-nots, for the powerful, against the powerless, pro-slavery, pro-segregation, and anti-worker. How can anyone take decisions like Bush v. Gore or Citizens United to be anything other than corrupt, politics dressed up as legal thinking?

    In a kleptocracy, all the institutions, at least those controlled by the rich and elites, are put into the service of the kleptocrats to loot or justify and defend looting and the looters. So corruption is endemic and systemic.

  • Jackrabbit says:
    July 12, 2013 at 1:32 pm

    A related question (and one that is more interested to me) is how the ground was prepared for today’s corruption over the last 20+ years. Over that period, our society seems to have drunk a toxic cocktail of selfishness (consumerism/careerism/cronyism) and fear. Is it any wonder, then, that we now have a unhealthy respect for power along with (quelle surprise!) an abusive hierarchy/neo-aristocracy that claims legitimacy – with a straight face – through a transparently corrupt pay-to-play/vote-with-your-money faux democracy.

  • Ramon Creager says:
    July 12, 2013 at 2:17 pm

    Words to this crowd are maleable tools, and thus having a conversation with them is as meaningless as playing Scrabble with an opponent that has all blank tiles. Take Obama’s ‘transparency’, for example. If Obama can say with a straight face that the super secret FISC is transparent, then the word has lost all meaning. You may think it means something; but to him it means “Don’t worry, trust me.” Or the abuse of the word ‘relevant’, of which redifinition into its opposite meaning “legally” allows the NSA to secretly spy on everyone’s communications. Or the attempts to redefine ‘journalist’. Or the redefinition of toxic carbon fuels as ‘clean’, to enable one to bless that which we should condemn (fracking, etc.). When this happens all pretense of good faith are gone; you have a better chance arguing with an adolescent. I don’t know of a single word that describes this pervasive rot. Perhaps ‘Orwellian’.

    One thing that we could do is stop participating in this charade. Stop voting for Democrats because they are not Republicans, & vice-versa. Any attempt to fix this problem from within this thoroughly corrupt, rotted system is doomed to failure (thanks, Obama, you really drove that point home). Deny the institution its veneer of democratic legitimacy. That would be a start.

    • Banger says:
      July 12, 2013 at 4:22 pm

      In general this is the right direction–but the focus ought to be on the single institution that allows this situation to persist, i.e., the mainstream media in which I include the entertainment media. They all need to be rigorously critiqued and challenged. They are the ones who are a conduit for the PR firms who represent the major corporate oligarchs and K Street hustlers.

  • Jim says:
    July 12, 2013 at 3:52 pm

    What combination of generosity and cruelty is necessary to take down a corrupt regime?

    It seems like a difficult task to get that mixture right.

    What roles do vengeance, anger, ressentment, selflessness and love have in this process?

  • F. Beard says:
    July 12, 2013 at 4:02 pm

    “The beginning of wisdom is to call things by their proper names. “ Yves Smith


    The fear of the Lord is the beginning of wisdom; a good understanding have all those who do His commandments; His praise endures forever. Psalm 111:10

    The fear of the Lord is the beginning of knowledge; fools despise wisdom and instruction. Proverbs 1:7

    “The beginning of wisdom is: acquire wisdom; and with all your acquiring, get understanding. Proverbs 4:7

    The fear of the Lord is the beginning of wisdom, and the knowledge of the Holy One is understanding. Proverbs 9:10

    But yea, let’s call the banks what they actually are – a government-backed usury for stolen purchasing power cartel. But that’s not easy to do in our usury-soaked, credit-swilling so-called “society”, is it? Unless one understand which side the Angels are on?

  • allcoppedout says:
    July 12, 2013 at 4:41 pm

    Susan has us all as thieves descended from more savage thieves. True – but we can do better. 2.5% of UK males between 16 and 64 will have been a high-rate offender at some time and a third of us get a List One conviction by 30. Having nicked a fair few ordinary criminals I’m pretty convinced we don’t handle the stupidity and lack of opportunity plus mental illness of many of these at all fairly.
    The goon my dog could outsmart who nicks your television to get a fix for his girlfriend (he takes your hoover from his mum too) eventually gets prison. The bank clerk who lies to you about PPI or just adds it to your loan account without asking gets her bonus – the same being true of the restaurant manager who recycles unfit food that gives you food poisoning. The list of petty corruption is very long and punishments and the way we deal with such very unfair long before we get to the mega-corrupt we knight for running banks.
    Wittgenstein would want us to define corruption through our many uses of the term in its forms of life. I could nick ‘Finn the tea-leaf’ more or less at will, but no one has been arresting ‘Brenda the bank clerk’ en masse, or the poisoning floozie putting two-week out of date food in front of her customers to get her bonus for two week in Ibiza (two victims die in agony).

    A key feature in Wittgenstein is that our enquiries create complexity even as we think we are unraveling the knots we think are the problem. I’d suggest our banks and many other sales outfits create a culture for corruption and law that ensures this cannot easily be regarded as criminal. I believe trying to define corruption is likely to miss what an established definition will do in the embedded confusions of practice unless we free practice from presupposes of its immensely manifold connections, regrouping the entire language (Big Typescript 423 – sort of).

    Most of the law concerning our corporations, banks and politics has been written so as to be of no account to those who can cover their tracks and practice psychological rationalisation. Hardly surprising when our money system is designed to legalise theft. Our question marks are not in deep enough. Corruption is embedded in us by what is there to soak up in practice.

    ‘Finn’ doesn’t do burglary dwelling these days. Instead he does borrowing from shops and other commercial premises – this is as a result of him weighing the likely penalties and risk of being caught. I am not sure Obama or Cameron do any more.


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