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"

Published October 11, 2014 12:15PM (EDT)

  (David Goldman/Fox News/Reuters/Yuri Gripas)
(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.

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.

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 personal corruption,” 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.

By Janine Wedel

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