Corruption Is Another Sign Of A Failing Democracy
It is now pretty much a given among those who actually study the issue that American democracy is teetering on the verge of collapse. We have an electoral system that currently almost guarantees minority rule, abetted by the Senate filibuster which is yet another absurd relic of our country’s racist past. We have a Republican party that believes that any election a Democrat wins is, by definition, illegitimate. The GOP is now fully embracing the lie that the 2020 election was stolen, as well as pretending that the violent January 6th terrorist coup was actually a patriotic endeavor. Just this weekend, Chuck Grassley, the most senior Republican in the Senate, and Steve Scalise, the number two man on the GOP House leadership team, both implicitly and explicitly endorsed Trump’s stolen election claim, repeated once again at an Iowa rally. As Fiona Hill told Politico, “I feel like we’re at a really critical and very dangerous inflection point in our society, and if Trump…makes a successful return to the presidency in 2024, democracy’s done”.
Beyond our political dysfunction, yet another sign of our failing democracy is the apparently endemic and unpunished corruption that infects both our political and economic systems and which allows elites to abuse the system with impunity. As Transparency International notes, “Corruption chips away at democracy to produce a vicious cycle, where corruption undermines democratic institutions and, in turn, weak institutions are less able to control corruption”. The latest corruption index by that same organization showed that increasing corruption has led the US rating to fall to its lowest level in a decade, currently ranked 25th in the world. A Transparency International official attributed the United States’ decline to the “decay” of our political institutions in addition to “these series of really bombshell exposés by media outlets that are demonstrating how much dirty money is flowing into the United States’ financial system”.
The Supreme Court’s 2010 Citizens United decision has essentially legalized bribery of public officials. Despite the protestations of Justice Alito, the decision opened the door for foreign money to influence US elections. Citizens United is the reason why Exxon can have weekly meetings with Joe Manchin despite the company apparently only having 38 full-time workers employed in the state of West Virginia through its subsidiary XTO Energy. Needless to say, the Trump administration took public corruption to whole new level, from the 15 separate ethics and corruption investigations into Interior Department Secretary Ryan Zinke to the emoluments violations of Trump himself. Those violations included the 2018 undisclosed preferential treatment for Trump from Deutsche Bank involving a six year delay in paying the interest on the $170 million dollar loan used to by the Trump Hotel. By any standard, the Trump administration was the most corrupt administration America has seen in well over a century.
The corruption of our system of campaign finance has essentially sold public policy to the highest bidder. It may seem initially comforting to note that very few of America’s uber-rich, also known as oligarchs when they exist in other countries, appeared in the release of the Pandora Papers, which documents the abuse of offshore finance that allows the world’s wealthy to hide their billions from tax authorities and criminal investigations. But, as the Washington Post reports, “Financial experts said the uber-rich in the United States tend to pay such low tax rates that they have less incentive to seek offshore havens”. Those low effective tax rates for our oligarchs are a direct result of the corruption of our political processes.
Despite the existence of the STOCK Act, insider trading by members of Congress continues unabated, often unreported until uncovered by the press and carried out by members of both parties. Over one-quarter of the US Senate, 29 Senators in all coming from both parties, own stock in the fossil fuel industry, putting their will to actually tackle the climate crisis in question. Indeed, Joe Manchin, currently the chairman of the Senate Energy and Natural Resources Committee, receives nearly $500,000 a year from his investments in his family’s West Virginia coal firm.
This kind of brazen corruption has now extended to supposedly “independent” institutions in our government. At least three Federal Reserve governors recently engaged in trading seemingly timed with their decisions that would effect asset prices, with two of those governors choosing to retire early rather than endure an investigation. A recent Wall Street Journal investigation showed that 130 federal judges violated both the law and judicial ethics by hearing cases where they or their immediate family had a financial interest. At any one time, there are only around 870 federal judges in total, meaning that nearly 15% of current federal judges have violated the law. It should not surprise us that the single biggest offender comes from the Eastern District of Texas where he violated the law in an unfathomable 138 cases. And if this is the level of open corruption at the federal level, you can only imagine what is happening at the state and local level where scrutiny is greatly diminished, especially as the collapse of local media accelerates.
I’m pretty sure it would shock many Americans to know that for years the United States has been the biggest tax haven in the world. A 2016 report by Rothschild & Co. determined that the US “is effectively the biggest tax haven in the world…and lacks the resources to enforce foreign tax laws and has little appetite to do so”. States like Delaware, Wyoming, South Dakota, and Nevada have become havens because of the ease in which shell companies like LLCs or asset protection trusts can be set up which protect the real owner’s anonymity. That anonymity make a perfect vehicle for money laundering and other criminal endeavors. A recent report estimated that $2.3 billion was laundered through the US real estate market over the last five years. South Dakota has now become the premier tax haven in the world, with its secret trusts conservatively estimated to hold over $350 billion in assets compared to the state’s GDP of just $55 billion. As one tax haven specialist described it, “the US is giving financial criminals a safe harbour, and a really effective safe harbour – far more effective than anything they ever had in Jersey or the Bahamas or wherever”. And never forget that every one of these transactions generates revenue for those states as well as being facilitated by lawyers, bankers, and accountants, all of whom are complicit in what is essentially legalized corruption.
The rampant corruption on Wall Street led to the greatest financial collapse the world economies have seen since the Great Depression of the 1930s. Many of America’s banks serially violate laws by paying a slap-on-the-wrist fine and moving on to the next crime, with Wells Fargo being a poster child for that process. But the latest scandal with Ozy Media shows just how normalized corruption in the business world has become. In a brazen fraud, an Ozy executive impersonated a YouTube executive on a call where Ozy was trying to convince Goldman Sachs to provide it with financing. Goldman discovered the fraud but Ozy blamed the “problem” on a “mental health crisis” by the company’s executive. The Ozy board not only bought this explanation but also never even disciplined the executive in any way. In addition, Goldman apparently never reported the attempted fraud to any authority.
While attempted fraud would seem bad enough, what was even more shocking was the reaction in the business press. In the New York Times, Ben Smith wrote, “one nagging question in this era of spectacular booms and busts is where, exactly, the line is drawn between fake-it-til-you-make-it hype (Tesla!) and possible fraud (Theranos!). That line is often blurry and comes into focus only in retrospect. Early fluffery can be excused by later success”, before finally concluding that “Trying to fool the world’s most famous bank, even by the hype-ridden standards of the media business, is way over the line.” Our normalization of corruption is on full display when our elites are actually wondering whether brazen fraud crosses that blurry line into illegality.
Of course, Donald Trump’s whole career is the prime example of the normalization of corruption in the country over the last few decades. Continuous tax, bank, and insurance fraud has undergirded his businesses, which have resulted in six bankruptcies. He was impeached twice for basically subverting our democratic system in order to maintain power, but avoided conviction. He engaged in conspiracy to overthrow our own democratically elected government. He has continually refused to comply with lawful subpoenas and openly encourages others to defy them and other laws as well. And yet, we all know Trump will not be held to account, nor will all those who have abetted him. And the same applies to virtually everyone mentioned in the above paragraphs. At worst, they will have to leave their current jobs and then fail up to an even bigger grift.
Over the last few decades, we have already traveled a long way inside that vicious circle of corruption that weakens institutions and empowers further corruption. In so many areas, from campaign finance to insider trading to the gutting of anti-trust enforcement, this country has already essentially legalized corruption. That corruption has created our own version of Russian oligarchs and Trump is their Putin, prepared to put the final nail in the coffin of American democracy.