Our Government Is Corrupt Through and Through -- Where's the Outrage?

Last week, jurors in a federal bribery case got a taste of good, old-fashioned corruption as New Orleans' former chief technology officer, Greg Mefford, offered the prurient details of how one vendor, Mark St. Pierre, plied city officials with almost $900,000 in bribes and kickbacks that included luxurious travel, the use of a yacht and boozy, good-old-boy poker parties complete with the requisite hookers.

The story represents the kind of corruption that makes splashy headlines, and of course, rightly outrages people. But the impact of this kind of criminality on our governance pales beside that of the everyday, entirely legal kind of corruption most people seem to take more or less for granted.

Consider just a few items "ripped from the headlines" during the past few weeks.

  • On Monday, Politico reported that almost a third of the “blue dog” Democrats who left office or were defeated in last year's midterms are now working as corporate lobbyists. “The conservative Blue Dogs formed a key voting bloc for much of the last congressional session,” reporter Aaren Mehta noted, “drawing impressive fundraising from the energy, financial services and health care industries.” The blue dogs were instrumental in watering down or blocking key Democratic legislation in both the House and the Senate. With their mission accomplished on everything from health-care reform to financial regulation, Politico notes that “industry groups [then] abandoned the pro-business coalition in favor of its GOP opponents.”

  • An analysis by the Center for Responsive Politics found that “House members who defeated a measure to...end certain subsidies for oil companies received five times more in campaign contributions, on average, from the oil and gas industry in the 2010 election cycle than those who voted to proceed with the motion.”

  • House members who voted to continue the subsidies received, on average, five times more money in 2010 from oil and gas interests. Those voting to block debate received $36,066, on average, in campaign contributions from oil and gas interests. Those who voted to begin debate received, on average, $7,192 in campaign contributions from the industry.

  • Overall, members who voted to continue the subsidies received more than $8.7 million in campaign contributions from oil and gas interests in 2010 while those opposed raised just $1.2 million.

  • 16 of the 18 U.S. House members who received over $100,000 in campaign contributions from the industry in 2010 voted to block debate. One voted to proceed and a second did not vote.

  • Last week, in a move that would prove eye-opening for even the most cynical good-government types, FCC Commissioner Meredith Atwell Baker announced that she would be leaving her position early to take a cushy lobbying job for Comcast just months after approving its controversial merger with NBC. As Free Press director Timothy Karr noted, she wasn't the first: “Many have found the FCC to be a particularly lucrative launching pad,” he wrote. “Former FCC Chairman Michael Powell now earns millions as the top lobbyist for the National Cable and Telecommunications Association, a trade group that lobbies for the industry he was tasked to regulate.”

  • Even those supposedly neutral arbiters in the courts aren't standing above the political fray when big money is concerned. American University legal scholar Herman Schwartz noted last week that Justice Sam Alito attended a series of pricey fundraisers held by the right-wing American Spectator, and Clarence Thomas and Antonin Scalia have both “allowed their names and office to be used for fundraising and other partisan activities.”

Each has attended big strategy and fundraising meetings held semiannually by brothers Charles and David Koch, among the wealthiest and most active of all Tea Party and right-wing financiers....

What seems beyond dispute is that all three justices engaged in conduct inconsistent with the Code of Conduct for United States judges, which requires that a judge “not personally participate in fundraising activities; or use or permit the use of the prestige of judicial office for that purpose … make speeches for a political organization or attend or purchase a ticket for a dinner or other event sponsored by … an entity whose principal purpose is to advocate for or against political candidates.”

This kind of ubiquitous, legal corruption raises occasional eyebrows, but it doesn't result in the kind of outrage it deserves. Most people simply take it for granted that moneyed interests get their way in a democracy, and indeed, a series of studies have found that politicians are far more sensitive to the interests of wealthy constituents than those of the poor, at both the federal and state levels.

But it's important to recognize that this kind of moneyed influence is not evident in all wealthy democracies, or at least not to the same degree it is in the U.S., with its world-leading level of economic inequality. Political scientists call it “state capture” -- private interests effectively gaining control of one or more organs of state and using the power vested in those institutions—publicly financed and ostensibly serving the greater good—to feather their own nests. Usually, the term is applied to banana republics, and the means of capture are nefarious: corruption, threats and even violence.

We do it differently. We have a private campaign finance system that requires members of Congress to start raising hundreds of thousands of dollars to get reelected the moment they take office; a government overrun with well-heeled lobbyists, many of whom are ex-staffers visiting offices in which they once worked to call on former bosses; and a well-oiled revolving door between regulatory agencies and the industries they’re supposed to be watching.

The result is that Corporate America does more than merely fend for itself on Capitol Hill. Its efforts amount to state capture, even if subtle in form, and that has a measurable impact.

In my book, I discuss what forensic economists—the CSIs of the dismal science, people who follow economic clues to unearth crimes—have to tell us about the relationship between corporate profits and the political fortunes of the politicians close to those companies.

In their book Corruption, Violence, and the Poverty of Nations, scholars Raymond Fishman and Edward Miguel noted that forensic economists look carefully at how ups and downs in the careers of government officials impact the stock prices of firms to which they’re connected. They consider it to be among the more methodologically sound ways of rooting out government corruption.

In an article for Foreign Policy magazine, Fishman and Miguel laid out the rationale behind the approach:

Whether through hefty campaign contributions or cushy jobs for former politicians, corporations are constantly accused of trying to profit through political ties. (Just think Halliburton or Russia’s Gazprom.) But what’s the real value of these companies’ connections? If you ask politicians or investors, you’re likely to hear a lot of denials. To get the truth, we could ask insiders to put some money where their mouths are, making them bet some of their own cash on whether particular companies are making back-alley deals with politicians to increase their profits. In this political betting pool, raw financial self-interest would lead bettors in the know to reveal their true beliefs about corruption. 

That betting pool is, of course, the stock market. The scholars wrote, “If connections buy tax breaks, valuable licenses, and advantages in bidding for government contracts, then strengthening political ties should boost profits. These higher profits translate directly into higher stock prices, and conversely, removing those ties should send profits—and stock prices—tumbling.”

Purdue University economist Mara Faccio studied those ties in every country that had a functional stock market. Not surprisingly, Faccio found strong connections between business and government across the board, but she also noted that the value of those connections in terms of stock prices varied greatly. In the United Kingdom, for example, stock prices don’t move at all when a firm’s political ties wax or wane. When Rolls-Royce chairman John Moore was appointed to the House of Lords, Rolls-Royce’s stock price remained unchanged. But in Italy, the picture is quite different. When Fiat chief Giovanni Agnelli was appointed to the Italian Senate, the automaker’s stock soared by 3.4 percent, adding millions of dollars in value to the company in a single day.

We’re a lot closer to Italy’s infamous level of public corruption than we are to that of our British cousins. And, as Fishman and Miguel noted, that’s already been pretty well established in this country:

Numerous studies have found that the economic fortunes of well-connected U.S. companies mirror the political fortunes of their connections. When U.S. Sen. Jim Jeffords defected from the Republican Party and handed Senate Democrats a slim majority in 2001, Democratically connected companies benefited in the immediate aftermath. Similarly, the stock value of companies with former Republican lawmakers on their boards increased an average of 4 percent when the Supreme Court handed the 2000 election to George W. Bush, while companies with former Democratic politicians on their boards declined.

All of this represents the most significant structural barrier to passing progressive policies, even those with extensive popular support. It explains why a Congress and White House controlled by Democrats were unable to fulfill a number of the party's key campaign promises – while those with a “D” next to their names enjoyed a majority in 2009 and 2010, it was the “Money Party,” as David Sirota calls it, that maintained a numerical advantage throughout.


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