Posts tagged with: Political corruption

ForbesAlejandro Chafuen, president and chief executive officer of Atlas Economic Research Foundation and board member of the Acton Institute, recently wrote a piece for about crony capitalism.

Chafuen used to spend his summers in Argentina, so he begins his article with a story about a friend from Argentina. Enrique Piana, known to his friends as “Quique,” was heir to “Argentina’s oldest and most respected trophy and medals companies.”

During part of the ’90s, the government of President Carlos Menem, and then-Minister Domingo Cavallo, had a policy for the importation of gold and exports of gold fabrications that amounted to a major subsidy for exporters. Attracted by the incentives, Quique, who had become CEO of his company, became a key player in a scheme whereby exporting overvalued gold-plated products netted them 30 million in subsidies for fake transactions. As it seems that none of the medals were sold at artificial value to true customers, the only victims here ended up being the Argentine tax-payers.

The scheme involved a “business” in the United States. As there is still substantial respect for rule of law in the United States, Quique was indicted, captured, and—after some months in a U.S. jail—extradited to Argentina. In his book, he lists the government officials who he claims knew about the scheme and who received bribes for his fraudulent activities. I will not mention them here. None of them were sentenced to jail. (more…)

Blog author: ehilton
Monday, December 10, 2012

Perhaps one of the biggest obstacles to wealth creation in the developing world is corruption. Bribery, rigging of the political process, theft, lack of accountability: all of these lead to instability, bureaucracy, and a lack of incentive to invest. The United Nations has declared today International Anti-Corruption Day in an effort to bring light to this topic and work to prevent it.

George Ayittey, Ghanaian economist, explains how massive a problem corruption is for Africa:

Imagine, Africa has a begging bowl and that into this begging bowl comes… foreign aid. But this bowl has holes in it, so it leaks. There’s a massive hole here through which corruption alone cost Africa $148 billion dollars. That’s a massive leak. What should be done first – plugging the leaks or putting more aid money in? Now this is something which even an elementary school student should be able to answer. I mean, you pouring more and more and more into the bowl and then it leaks. Defining insanity: as doing the same thing over and over and over and again and expecting different results—makes no sense.

Osvaldo Schenone and Samuel Gregg share their thoughts on corruption and its scourge in the Acton Institute monograph A Theory of Corruption. The monograph explores the political and international ramifications of corruption, but also its moral implications. (more…)

“It’s helpful to look at the track record of this bipartisan idea that government is smarter and better at picking winners and losers in the marketplace,” said House Budget Committee Chairman Paul Ryan at a recent hearing on efforts to combat cronyism and promote upward mobility. “What we have learned from this bipartisan approach is that corruption does occur, cronyism does occur, and what ends up happening is those who are connected, those who have established connections, those who know the ways of Washington end up usually getting the benefits.”

Director of Research Samuel Gregg’s thoughts on the debate are up at The Corner. He sees a parallel between the Italian crisis unfolding across the ocean and the problems facing the United States — particularly in Michigan, where this debate was held. The collapse of Italy would certainly be a dramatic illustration of the shortcomings of crony capitalism, and Gregg thinks a candidate could find a majority of voters who don’t want that to happen.

With the Italian-flavored shadow of the European Union’s ongoing financial implosion overhanging the United States, it was expected that America’s own fragile economic state would be front-and-center at this debate.

This time, however, there was less argument among the GOP candidates. Instead, there were far more direct critiques of (1) President Obama and (2) the pattern of crony capitalism with which more and more Americans are visibly losing patience. The debate’s setting — the state of Michigan — is a living exemplar of all the fallacies of bailouts and business-union collusion, as well as a failure to promote the type of innovation that produces wealth but that also threatens businesses (like the Detroit car companies) that don’t like competition.

Also noticeable was the increased willingness of the candidates to advocate market solutions to any number of problems, the most prominent being America’s ongoing mortgage farce, the looming crisis of student debt, and the inexorable rise in health-care costs. That’s a welcome development. If this trend keeps up, maybe one of them will make the dismantling of crony capitalism a central plank of his platform. That won’t please the likes of General Electric and the City of Chicago, but there are surely votes there.

Wang Yue

On The American Spectator, Acton Research Director Samuel Gregg looks at the death of Wang Yue, a Chinese toddler run over — twice — in a public market while passersby continued on their way.


Accidents happen. But what made little Wang Yue’s death a matter for intense public discussion was the fact that nearly 20 people simply walked by and ignored her plight as she lay bleeding in the gutter.

What, hundreds of Chinese websites, newspapers and even state media outlets are asking, does this say about Chinese society? Have Chinese people lost all sense of concern for others in the midst of the scramble for wealth unleashed by China’s long march away from economic collectivism? One local official summarized the collective angst by stating: “We should look into the ugliness in ourselves with a dagger of conscience and bite the soul-searching bullet.”

Gregg points to widespread business-government corruption as a major contributor to China’s moral crisis:

The problem, from the perspective of China’s party-government-military elites, is such soul-searching may lead increasing numbers of Chinese to conclude that the circumstances surrounding Wang Yue’s death are symptomatic of deeper public morality problems confronting China, some of which could significantly impede its economic development.

One such challenge is widespread corruption. By definition, corruption doesn’t easily lend itself to close study. Its perpetrators are rarely interested in anyone studying their activities. Few question, however, that there’s a high correlation between corruption and widespread and direct government involvement in the economy. The more regulations and “state-business” partnerships you have (and China has millions of the former and thousands of the latter), the greater the opportunities for government cadres to extract their personal pound of flesh as the price of doing business.

Read “China’s Morally Hollow Economy” on the website of The American Spectator.

In a new essay for Public Discourse, Acton Research Director Samuel Gregg explains why we shouldn’t only focus on public sector unions as examples of organizations that seek government power and taxpayer dollars to advance their ends. “A considerable portion of the business community is equally culpable,” Gregg writes. Excerpt:

The attractions of business-government collusion are enhanced when the state’s involvement in the economy grows. This is partly a question of incentives. The larger the scope of government economic intervention, the more businesses are incentivized to cultivate politicians in much the same way that public sector unions have.

As a result, consumers become displaced as the focus of business activity. Nor do the incentives for people of an entrepreneurial bent lie with creating something that the entrepreneur thinks consumers will value.

Instead the incentives become increasingly aligned with successful political entrepreneurship. Competition becomes less about a company’s ability to offer new and better products for consumers at lower prices. Instead, it become a struggle among businesses to secure state subsidies, to lobby legislators to establish tariffs that stack the deck against foreign competition, or to persuade governments to provide one company with exemptions from regulations that apply to every other company in the same industry.

It’s a form of soft corruption that produces higher prices for consumers, undermines value creation in the marketplace, and facilitates unwholesome relationships between politicians and businesses. It also represents the gradual subversion of the market economy by mercantilist arrangements. Smith identified the core of the problem in his Wealth of Nations (1776): “in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and consumption.”

In the end, however, everyone loses.

Read Samuel Gregg’s “Business vs. the Market” on the Public Discourse website.

With the country insolvent, and streets filled with violent protests, the Church of Greece is now pointing fingers at the country’s political leadership and international “creditors” (who have just ponied up another 2.5 billion euros for the bailout). Yet Greece, the Holy Synod says, is “under occupation” by lenders, who have moved in because the politicians “undermined the real interests of the country and its people.”

Here’s a report from the Athens Now site, which attributed the statement to the Holy Synod of the Church of Greece. (more…)