Everyday Corruption

June 22, 2010 7:06 AM

There are several conventional explanations for why so much corporate money has flooded into Washington over the last three or four decades. Large corporations have much more market power, which translates into more political power. Politicians have become more corrupt or rapacious. The Republican Party has been ever more effective at raising money. The increasing size and scope of the federal government have required that corporations spend more in order to protect themselves. Corporations have greater need to confront the countervailing power of unions. All of these explanations are wrong. Everyday Corruption by Robert Reich.
posted by wittgenstein (25 comments total)

The real reason is the structural shift in the economy, beginning in the late 1970s...

Pfff.

Business Plot of 1933
posted by DU at 7:15 AM on June 22, 2010 [2 favorites]

Thanks wittgenstein. All you have to read, all you have to know, is this:

By virtue of these contributions, the elected officials gain or keep power, which to many of them is its own reward. And to the extent there is a quid pro quo, the exchange inevitably leads to legislative outcomes and decisions that would not be made but for the contributions.

The coward McCain swore to make it his life's work to undo this evil, and quickly backed away once he saw the red carpet unroll before him. He decided to forego his priniciples and "ride the big rides." It is time for the citizens of the USA to put a stop to this. This is the thing that is most broken about our political system; unfortunately we have a supreme court that seems to believe that campaign donations = free speech. Support candidates who support campaign finance reform. Create a constitutional showdown with the crooked corporate supreme court. Put a cap of $100 on any contribution from any source, and you have a whole different ballgame; a less crooked ballgame.
posted by Mister_A at 7:20 AM on June 22, 2010 [1 favorite]

All you have to read, all you have to know, is this:

And ummm, maybe this:

Instead, we need to consider how to prevent high-stakes market competition from intruding on political decision -- making, to create what might be considered "safe zones" where the market has no influence.

And a bit of this:

In order to create a genuinely safe zone, public financing should match the money raised by any major opponent in a general election campaign who opts to raise money privately. A dollar-for-dollar match is critical; any private money going to a candidate should be neutralized by public money.

And maybe a bit of this:

Instead, we might require that all contributions to any candidate or 527 be deposited into a "blind trust," so that the candidate may never know who contributed what. (Any breach of secrecy would be met with criminal penalties.)

Or one could, of course, maybe read the article.
posted by philip-random at 7:26 AM on June 22, 2010 [2 favorites]

I wish people would stop bad mouthing our lobbyists. It is easy to have a real job and be ethically upright, but someday you might lose that job and become a lobbyist and then you will see how important lobbying is for the well being of our nation.
posted by Postroad at 7:31 AM on June 22, 2010 [3 favorites]

Doesn't appear to be restricted to the US. The Bank of Italy recently published a report (a 36-page PDF in English) “revealing” that the revenue premium granted by political connections amounts to 5% on average, it is obtained through changes in domestic sales but not in exports, and it is not related to improvements in firm productivity. [ ... ] These findings suggest that the gains in market power derive from public demand shifts towards politically connected firms. We estimate such shifts reduce the provision of public goods by approximately 20%.

In other words, as we say in Italian, they’ve invented hot water! It took them 36 pages of graphs, formulas, equations and technical vocabulary (“greasing wheel”, “grabbing hand”) to explain what everybody already knows: the more politicians you connect with, the more money you make. They even sounded surprised: These gains only accrue to firms establishing a connection through politicians appointed with the party (or coalition of parties) that won the elections: firms connected through other politicians see no increase in market shares, just as non-connected firms.

I’ll bet they’re ROFL in Palermo and Catania.
posted by aqsakal at 7:41 AM on June 22, 2010 [2 favorites]

The fights that actually preoccupy Congress day by day, which consume weeks or months of congressional staffers' time and which are often the most hotly contested by squadrons of Washington lobbyists and public-relations professionals, are typically contests between competing companies or competing sectors of an industry or, occasionally, competing industries. The result has been a clamor of business interests -- a cacophony so loud as to almost drown out serious deliberation over the public good.

This - "contests between competing companies or competing sectors of an industry or, occasionally, competing industries" - this is what democratic government has been degraded into. Capitalism has found that when you have a republican form of government it is easier (and more profitable) to compete in the market of government than to win actual consumers in the real marketplace.

It's not crooked. It's a logical result of influencing 100 Senators vs. 300+ million consumers.

This is where I can agree with the Tea Party that too much of what happens in Washington has a tangible influence on the fortunes of Wall Street.
posted by three blind mice at 7:46 AM on June 22, 2010 [3 favorites]

Meanwhile, the DISCLOSE Act is going through the House right now, requiring disclosure of lobbying expenditures from everybody.

Except the NRA. Look what those lobbying dollars will get you! An exemption from lobbying disclosure!
posted by backseatpilot at 7:57 AM on June 22, 2010 [2 favorites]

It's not crooked. It's a logical result of influencing 100 Senators vs. 300+ million consumers.

This is right up there with advertising in general wherein, over time, the prevailing wisdom has become that it's far easier (and cheaper) to spend a few million bucks lying to people about how good your product than it is to actually make a good product.
posted by philip-random at 8:15 AM on June 22, 2010 [2 favorites]

[The past few decades have] shifted almost all industries in almost all rich economies from being organized around stable oligopolies, in which competitive advantage derived mostly from economies of scale, toward far more intense competition in which competitive advantage comes from innovation -- and from favorable treatment by government.

Here's the key argument, and there's a lot going for it. I work in a regulated industry--property and casualty insurance--where regulators' decisions can mean the difference between profitability, losses, or outright market exits. The reason is that the industry is almost perfectly competitive. The products being offered are more or less interchangeable* and given that pricing is regulated** and many significant marketing opportunities outlawed as "unfair competition,"*** the primary way of protecting and expanding both market share and profitability is through regulatory changes.

Example: car insurance or its equivalent is mandatory in almost all states. It doesn't have to be--New Hampshire has no mandatory insurance--but it is. You think personal auto carriers didn't have something to do with that? Of course they did! As soon as a state makes coverage mandatory they get a few million new customers instantly. Most people think that mandatory auto insurance is a good thing, but that doesn't mean the industry didn't have its own selfish reasons for lobbying for it.

But insurance isn't the only industry like this. Every industry is regulated to a certain extent, even if only by product safety standards. Slate actually has an article about this, pointing out that the reason our furniture is still soaked in flame retardants of dubious utility but demonstrable toxicity is because the manufacturers of said retardants were successful in lobbying the ridiculously safety-minded California into requiring it and it's cheaper to just soak everything than to set up two manufacturing lines.

This is the natural result of two fundamental elements of the American economy, indeed, of most modern, unplanned economies: the ability for anybody to sell anything to anyone combined with state actors restricting how products can be manufactured, marketed, and transported, mostly with the public good in mind.

Or, at least, that's the official story. Telling the difference between true consumer protection and handouts to industry is very difficult, as data on these sorts of things is 1) pretty hard to come by, and 2) not really important to the Think Of The Children! helicopter-style parents who tend to get exercised about these things.

Either way, what we've got is a market characterized by such tight competition that all competitive advantage other than regulatory action has largely been factored in. We aren't seeing much in the way of new products anymore, at least not products which create their own market rather than compete with existing market players, e.g. ShamWow may be new, but they compete with regular old towels, which still work just fine, thank you. And our culture is already so consumer-minded**** that competing on service is pretty tough, especially given that service is hugely expensive. Wal-Mart has led the charge about removing inefficiency from supply chains and forced efficiency on suppliers themselves, further enhancing the overall reliance on economies of scale and bringing margins down to the low single digits.*****

So what's left? Regulation. Tax breaks, product safety tweaks, streamlined approval processes, lax environmental oversight, lower benefits requirements, hell, outright subsidies: when you're operating at a razor-thin margin to begin with, a minor tax break or hiring a few illegal immigrants can be the difference between profit and loss.

I'm not sure where there is to go from here. I'm not sure there's any other way of organizing an economy with 300 million participants or a world of six or seven billion. Yeah, corporations have a lot of power, and yeah, this is starting to influence the political system, but how could it not? We're dealing with systems which were designed when the world's population was less than a sixth of what it is today. Is it any surprise that those systems are starting to show their age?

I think we need to stop complaining about how the old systems don't work anymore and start coming up with new ideas.

*Carriers who distinguish themselves on the basis of their products, like my employer, tend to occupy niche markets.

**Insurers in most states must file their rates with state departments of insurance, who can disapprove rates which are either too high as excessive or too low insufficient to secure carrier solvency.

***This is a good thing most of the time, as it prevents both fraud and carriers attempting to get around rate setting by the states.

****There are still problems, otherwise The Consumerist wouldn't be a viable concern, but compared to both the level of service assumed in other countries and in our own history, contemporary American consumers have got it made.

*****Wal-Mart may represent the single greatest source of innovation in the American economy for the past few decades. They don't make anything, but they've revolutionized--for good or ill--the way American does business. If you're going to sell in volume, you have to do it their way, or they're going to eat your lunch. Your only other option is to go for quality, which is hard and expensive.
posted by valkyryn at 8:24 AM on June 22, 2010 [12 favorites]

What if they forbid any and all corporate and personal political contributions? All a candidate would get would be a basic stipend to run their little campaign. Instead of thinking "running a campaign requires X (usually thousands/millions of dollars)", think "how can i run a campaign given X dollars". The politicians would then have to figure out how to use all the new-fangled low-cost avenues of spreading the word (viral media, wikis and the rest of it).

Oh, and when election day comes you get a credit of $Y per vote you've won.
posted by storybored at 8:32 AM on June 22, 2010 [1 favorite]

Or one could, of course, maybe read the article.

I did read the article, and I stand by my conviction that the critical, and obvious, problem is that legislators' decisions are heavily influenced by heavy donor contributions. The USA has not owned up to this obvious problem, preferring to chase divisive distractions. I read and respect Mr. Reich's ideas on campaign finance and lobbying reform; I prefer something simpler and more drastic.
posted by Mister_A at 8:44 AM on June 22, 2010

The Republican Party has been ever more effective at raising money.

The coward McCain swore to make it his life's work to undo this evil, and quickly backed away once he saw the red carpet unroll before him.

I could be mistaken, but wasn't it McCain who ended up taking public financing, and Obama who backed out on his public financing pledge then out-spent McCain like 20-to-1?
posted by ZenMasterThis at 9:21 AM on June 22, 2010 [3 favorites]

Mister_A: All you have to read, all you have to know, is this:

"Money talks."
posted by Greg_Ace at 10:37 AM on June 22, 2010 [1 favorite]

I stand by my conviction that the critical, and obvious, problem is that legislators' decisions are heavily influenced by heavy donor contributions.

This is actually a rather complex problem because disentangling the causality is very difficult, but there's relatively little evidence for donations influencing votes.
posted by ROU_Xenophobe at 10:44 AM on June 22, 2010

there's relatively little evidence for donations influencing votes.

The weird thing is... this is true. There is almost no one-to-one correlation between political contributions and voting records, e.g. Goldman Sachs has given more than half of its money to the Democrats for almost two decades.

No, this isn't nearly as easy a problem as simple corruption. Agency capture is way too complicated. How are we supposed to factor out the problems which arise when an industry gets so complicated that the only people competent to regulate it are highly placed in the industry? Even if we can eliminate all financial conflicts of interest--which isn't all that hard--we're still left with a problem not only of excessive "chumminess," if you will, but also that such persons almost necessarily buy in to the assumptions which dominate their respective industries. This isn't the sort of situation which produces objective, hard-hitting regulatory oversight, as they'd have exactly the same perspectival blind spots that everyone else in their industry have.

But what else are we supposed to do? I'm a member of a learned profession--law--and I know damned well that laymen really don't get how the legal system works. I also know enough to know damned well that while I have enough knowledge of both the health care and financial systems to successfully navigate them on my own behalf, I wouldn't know the first thing about how to regulate them. Once you start talking about things that aren't simple, and most useful things aren't, the simple fixes are almost always insufficient at worst or simply wrong at best.
posted by valkyryn at 11:02 AM on June 22, 2010 [1 favorite]

Yeah, but they make good sound bites for politicians who want to manipulate the masses.
posted by ZenMasterThis at 11:03 AM on June 22, 2010

Browsing around on the OpenSecrets Heavy Hitters list is kind of interesting. Most people associate big corporate donations with the Republicans. Oddly enough, of the top twenty political contributors in the country, representing some $600 million in contributions between 1989 and 2009, fourteen gave far more to Democrats than Republicans, twelve are unions, three were rather balanced in their giving, and three lean Republican. Of the top fifty only ten lean Republican. Of the top hundred, it's only eighteen, and half of them have given less than $10 million in the last two decades.

And the Democrats are bitching about Citizens United?
posted by valkyryn at 11:30 AM on June 22, 2010

And the Democrats are bitching about Citizens United?

Why not? It's a win-win -- bitching about a Supreme Court ruling is always a good move, since it gets the prolesvoters riled up but doesn't really have any substantiative effect. It's a lot less dangerous than complaining about unpopular legislation, which runs the risk of landing you in a position down the road where you might have to vote on it and choose between your previous statements and personal gain. But there's no way for Congress to really do anything about a Court decision, so you can yammer on about it all you want for free.

Jumping on the Court over Citizens United is one of the smartest things the Democrats have done recently. The fact that they'll probably benefit from it as much as the Republicans -- if not more -- is completely irrelevant. They've created the impression that they're aghast, just horrified, at all those corporate bucks that are going to come flowing in, and it's perception that's important.

When it comes to national politics, I am not convinced that the truth has ever been in style.
posted by Kadin2048 at 11:56 AM on June 22, 2010

Pretty sure the only right answer is corporate citizenship.

Right now any bright little pencil licker with $200 can make a corporation in a week or two, and it is ready to go -- an entirely separate person as far as the law goes. That's bad, and I'll tell you why.

The same pencil licker can get with an appropriately gendered partner and for nothing and nine months make a separate person as far as the law goes. Except that this person isn't really a person for eighteen years. During which time it learns how to be a citizen by growing up in society.

Now, there's easier ways of becoming a citizen... you got your people like me who say, "Hi, Canada, you're pretty can I come in and be one of you?" And after a couple thousand bucks, a lot of paperwork and like five years of waiting, I get to be a Canadian citizen. But they wouldn't have let me in if I hadn't either been an upstanding member of a previous society, or the child of similarly upstanding parents.

So you have these corporations -- people, remember -- that can be made in a week with a couple hundred bucks, who not only have no social upbringing and civics class requirements and parental oversight, but by their very definition are not responsible to anyone or anything but their shareholders. Who, of course, for the most part don't feel the recriminations THEMSELVES when the corporate person behaves badly.

Corporations are like Golems -- the classical golems. They have a piece of paper in their heads and they do exactly what they are told by their owner, and they go stomping around the world wreaking all kinds of hell, not feeling any guilt at all, and they're very difficult to kill etc etc etc. Okay, so... golems BAD. Corporations BAD.

So what we do is make corporations, who wish to have the rights of citizens, also have to fulfill the duties and responsibilities, and feel the penalties, of flesh and blood people too.

Pretty simply you got three principles:

1) Corporations must be treated like flesh and blood people as far as responsibility and jurisprudence and civil and criminal liability. For one example: if a corporation has to go to jail for breaking laws, then the corporation must cease operations for that time just like a flesh and blood person.

2) Corporations wishing to become citizens of a jurisdiction (do business in it) must "take a civics test" and "swear an oath" according to principles of that jurisdiction. If you break the oath, you lose your citizenship rights. So make the oath something simple and easy to interpret.

3) I'm okay with financial immunity for board members (corporations need a reason to live, and when dealing with billions of dollars there has to be a benefit), but there MUST BE NO CRIMINAL IMMUNITY for corporate board members. If the corporation is criminally liable, the board is criminally liable. No exceptions.

Corporations have had a long, long period of time where they've spent trillions of dollars on legislation on getting the long, long end of the "citizenship" stick. It's time to start hitting them with the other end of that stick, the end that reads: Responsibility and Liability. The same end that you and I have to deal with every fucking minute of our lives.
posted by seanmpuckett at 11:57 AM on June 22, 2010 [11 favorites]

Browsing around on the OpenSecrets Heavy Hitters list is kind of interesting. Most people associate big corporate donations with the Republicans.

The way opensecrets usually does things is that donations from BigCorp aren't just limited to donations from BigCorp's PACs, but also include every donation from anyone who happens to be employed at BigCorp, and possibly their spouses.
posted by ROU_Xenophobe at 12:33 PM on June 22, 2010 [1 favorite]

Most people associate big corporate donations with the Republicans. Oddly enough, of the top twenty political contributors in the country... twelve are unions.

And we see how the unions have dominated politics over the last twenty years. Not. Influence of "heavy hitters" disproven. Of course, if you have dozens of "light hitters" working together, their collective clout outweighs the "heavy hitters" and they can stay under the radar.

This whole argument plays into the hands of the Randist/Tea Party/Corporatists who want to keep Government from making it harder to do Monkey Business. If we actually enforced the regulations and laws already in place, Bernie Madoff would've been jailed after the first iteration of his ponzi scheme and the Deepwater Horizon would've been shut down before it leaked a drop. But we do not support (or fund) enforcement of the laws we have. Of course, if we really enforced ALL our laws, 10%+ of the U.S population would be in jail for illegal drug use (instead of less than 1%), 20%+ of drivers would be bankrupted by the cost of traffic tickets, the cost of enforcing everything on the books would easily double the cost of government at all levels and a truly massive outcry might force our elected officials to reconsider what laws we make and for what. However, mandatory auto insurance is one of the few laws/regs that appears fully enforced (you can't get a license without it) but it seems to have a minimal effect on highway safety, and there is no outcry for finding a better way to do it. So, maybe not. I have no viable solution, but most of the solutions I'm hearing from people are not solutions at all.
posted by oneswellfoop at 12:48 PM on June 22, 2010

You can't just go and outright buy votes, but of course you can buy a seat at the table via your expensive lobbyists, many of whom used to be legislators or aides; and you can buy an awful lot of goodwill with a well-timed campaign donation or 527 donation.

Something else to consider: If you run an oil company, you are going to contribute to oil-friendly candidates. When your chosen candidate wins office you will continue to contribute to his campaigns, not because you want to change a critical vote, but because you count on his or her vote, and do NOT want it to change. So, you could say, "Senator Jackson was going to vote for this favorable policy re: oil leases on federal lands anyway; the donation doesn't influence his vote at all!" But the donation may well influence the outcome of the vote by helping Sen. Jackson stay in office. These donations are an investment in a relationship, not a method to buy single votes at critical moments.

That's the whole problem—at no point do the best interests of anyone not represented by lobbyists, and not capable of significant donations, enter into it. Corporate interests trump public interests, without question. This is bad and wrong. Leaders of and lobbyists for corporations should not have such cozy relationships with lawmakers. Former lawmakers should not become lobbyists. Billy Tauzin should be in jail. I could go on.
posted by Mister_A at 1:00 PM on June 22, 2010

If we actually enforced the regulations and laws already in place,

I'm reminded of early modern England, when the power of the monarchy was paradoxically both at its zenith and on the wane. There was a spate of laws increasing in both their frequency and stridency, criminalizing ever more conduct with ever severer penalties. Nineteenth and early twentieth century historians tended to construe this as evidence of how tyrannical kings are and how awesome democracy is.

But just as laws were getting harsher, their enforcement was getting laxer. Ironically enough, the number of executions was falling in almost inverse relationship with the number of capital crimes.Contemporary historians tend to construe this as evidence that early modern monarchies were keenly aware of their inability to exert real control over their populations; one can almost gauge their annoyance and unease this way.

Of course, it was less than a hundred years after this point that the English Civil War and Glorious Revolution marked what appears to have been the permanent end of monarchial dominance in England.

Reading parallels here is depressing.
posted by valkyryn at 1:06 PM on June 22, 2010 [1 favorite]

And we see how the unions have dominated politics over the last twenty years.

Okay, this is derail territory, but this isn't as accurate as it seems. On the federal level, yeah, they've been pretty ineffective. But on the state and especially the local level, they're pretty much the undisputed king of the hill. AFSCME represents something like 1.4 million municipal workers nationwide, and the AFGE represents a huge chunk of federal employees.

I'm not talking about the SEIU or teachers' unions here, though they've got their own issues. Neither of them has been nearly as successful in enforcing their agenda as the government employees' unions have. The public sector is far more unionized than the private sector, and it's one of the only areas of the economy where union membership is growing, not shrinking.

What happens is that unions are able to get municipalities and states to pass laws not only saying that contractors have to be unionized, but that municipal employees can't be fired or replaced by non-union employees. This goes way beyond collective bargaining, which can be re-negotiated or set aside by a court. This makes it impossible for government entities to do anything else.

People--and not just your standard conservative union-busters--are arguing that these government employees' unions have gone a long way towards breaking California's budget. CalPERS is sitting on tens of billions in unfunded liabilities.

My only point here is that though unions haven't been all that successful on the national level or in the private sector in general, they've got a death grip on state and local governments, and as such their financial contributions aren't meaningless.
posted by valkyryn at 1:21 PM on June 22, 2010

cf.
posted by kliuless at 9:45 AM on July 11, 2010