How Corruption is Becoming America’s Operating System

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Yves here. I suspect this discussion of corruption will strike a chord with many readers, particularly the shout out to Bill Black.

Perhaps it’s in the book, but Chayes’ discussion of interlocking networks at the top is consistent with a classic book on power in the US, Janine Wedel’s The Shadow Elite. I think Wedel was loath to use the “corruption” word, in part because she’s a sociologist and it’s verboten in her profession to moralize. But her comparison of the US to Poland when the USSR was crumbling set up connecting those dots.

By Lynn Parramore, Senior Research Analyst at the Institute for New Economic Thinking. Originally published at the Institute for New Economic Thinking website

Author Sarah Chayes, known for her analysis of corruption, has spent decades studying the ways of corrupt networks in countries around the world. In 2016, she caught a radio program about the Supreme Court overturning a conviction of Virginia’s former governor Bob McDonnell, found guilty of corruption by lower courts. The sort of thing Chayes had long observed in places like Afghanistan and Nigeria was now showing up in the United States. Her latest book, On Corruption in America And What Is At Stake, is a sobering look at the deep roots of corruption and why we can’t afford to let it flourish. In the following conversation, she shares her insights with the Institute for New Economic Thinking.

Lynn Parramore: Tell us what motivated you to write this book after studying corruption in places as far-flung as Nigeria, Afghanistan, Uzbekistan, and Nepal.

Sarah Chayes: When I was writing my 2015 book, Thieves of State: Why Corruption Threatens Global Security, I realized we are on the same spectrum as those other countries. I just did not yet realize exactly how relevant that analysis was to the U.S., and how swiftly the calamities would come.

On Corruption in America begins with the 2016 decision in McDonnell v U.S., in which the corruption conviction of a former Virginia governor was overturned by a unanimous Supreme Court. What stunned me was the divergence between ordinary people’s understanding of corruption — basically, if it quacks like a duck… — and the unanimous view of elites across the political divide that corruption is something of minor consequence, beneath notice. The opinion, accepted by all eight justices, including the late Ruth Bader Ginsberg, warned that America was in more danger from the fight against corruption than from corruption itself.

I knew we were in for very serious trouble.

LP: What kind of trouble, exactly?

SC: I had been looking at countries with systemic corruption and no civic means of redress. These kinds of conditions led to violent explosions, ideological insurgencies, a massive movement that erupted across the Arab world, peaceful civic protests that in a couple of cases spiraled into world-shaking civil wars, mass migrations out of those regions, and what have you.

In the places I’ve studied, there tended to be not so much a veer toward the extreme, but a jolt. That’s the kind of trouble I saw ahead for the U.S. I think we already experienced it to some extent in 2016, and I suspect it’s not over.

LP: Your book looks at networks of people who exploit political and economic systems to increase their wealth by working across private and public sectors. Help us understand this in a historical context. What is new or distinct with corruption in America today? What are some of its features?

SC: I looked at the Gilded Age in particular — understood broadly, from about 1870-1935 — and here’s the shocker: almost nothing is different today. Then, as now, intertwined, even intermarried, networks of billionaire-equivalents seized the main levers of power and bent them to their own objectives.

They wove themselves into incredibly resilient webs, which included business magnates, top government officials (or sometimes people serving in the two capacities at once), and even outright criminals. Often, they traded places in these various sectors, working in business for a while, then government, then back in business, and so on. They bent and distorted public institutions and laws, or eviscerated them. They physically crushed resistance. They brilliantly divided the egalitarian coalition against itself, across class and especially racial lines. They veiled themselves in secrecy. They bought people off.

Then, as now, their chief revenue streams were public procurement, finance, energy, and high-end real estate. Pharma/processed foods and the tech sector might be today’s most significant additions.

LP: You note that both political parties are intertwined with corrupt networks. How does this manifest in the current election cycle? Some hope a Biden presidency would be a blow to corruption. What’s your take?

SC: This is one of the most difficult aspects of this book — for me, and doubtless for readers. Americans so crave a good-guy-bad-guy story, now more than ever. We’re desperate for some sense of redemption. In the broad “blue” camp, what people want to hear is unadulterated Trump-loathing, and almost nothing else. But in the Biden-Harris ticket, I’m afraid I see a bit of a fantasy: that we can just wake up from this nightmare and it’s 2015, and none of this ever happened. But this book asks readers to see how 2015 and the prior two decades or so delivered the nightmare. And it highlights the role of many Democrats in creating the conditions. That is, Trump is not the lone villain in these pages, and all other sins are not wiped away before the sole objective of removing him from the office he is unfit to hold.

The next problem here, of course, is false equivalency. I do not mean and am not saying that all sides are equally corrupt. There is a small coalition of uberwealthy Americans that, since the late 1970s, has been systematically working to dismantle the institutions and practices that promote citizens’ well-being. Few if any of them are Democrats. But, on the “blue” side of the house, we have witnessed mass infection with what I call the “Midas disease” (see below) and consequently, an opportunistic validation of the radical moves made by that coalition of the rich.

Biden and many of those around him are among those validators. Among Democrats, we’ve seen the glorification of the “financial industry,” the avid participation not just in pay-to-play politics but in the influence-peddling economy that delivered us Joe Biden’s son Hunter serving on the board of a Ukrainian energy company. There was the Clinton Foundation before that.

We’ve also witnessed the wanton sabotage of regulatory safeguards that protected Americans from the worst abuses of profit-seeking corporations. All this has ratified the program of the largely Republican cabal I just mentioned. That is, what could have been isolated after the Reagan Administration as a radical project that violated every American principle of government to benefit the governed has instead been turned into bipartisan orthodoxy. No wonder half the American electorate doesn’t vote.

So, obviously, the naked project to turn the United States into the personal property of the Trump family and its acolytes, with the billionaires clinging to the bandwagon, must be stopped. But a Biden/Harris administration will not in and of itself deliver serious anti-corruption reform. You just have to look at the Wall Street folks clustered around the campaign, the McKinsey and such consultants to see that. Or look at who Harris did and did not choose to prosecute as California’s Attorney General.

Which means, it’s up to us to hold their feet to the fire. Get them elected — and even more daunting, do whatever it takes to get to January and get them into office — and then stay girded for the long battle ahead, for meaningful reform.

LP: You reference the work of white-collar criminologist Bill Black, a central figure in investigating criminal bankers during the Savings and Loan Crisis. He wrote a book, wonderfully titled, The Best Way to Rob a Bank is to Own One. How about robbing a country by running it? Does President Trump fit that pattern?

SC: I love it, Lynn. And Black makes two further points. One is we’re not talking lone brigands, here. The S & L executives he was writing about wove networks that included appraisers, contractors, real estate agents, and other bankers. They were corrupt — and corrupting. The second key point is that the S&L banks did not survive. The business model was bankruptcy for profit. The execs walked away hands in their pockets jangling the lucre, but the banks collapsed. Now apply that principle to Trump and our nation.

LP: The nation collapses, and members of the Trump network walk away enriched.

SC: That’s how it worked then…

LP: I did not expect to open a book about corruption in today’s America and be plunged into a discussion of King Midas of Phrygia – he of the golden touch. Or read a probing analysis of Jesus’s cleansing of the temple. Why do you weave these stories through this book?

SC: “Myth,” these days, is a word of contempt — meaning something patently untrue. But real myths are profoundly true. They are how our species has been examining itself and its way in the world for tens of thousands of years. When I witnessed the doings of our outsize public figures — caricatures, really — I found myself thinking: ‘We have turned our back on our cultural wisdom, and so we are condemned to live our myths.”

There’s a lot of wisdom in mythology. A grateful god offered Midas a single gift. “Gold!” he cried. It took about seven seconds till the king’s delight transformed to despair. He reaches for an apple to crunch on; it’s gold. He pours out some wine and can’t drink it. Hawthorn wrote a version of the tale, giving Midas a daughter, the light of his eyes, who at his kiss is transfigured into a statue. This is a story about the “Midas disease” — the compulsion to reduce irreplaceable values down to lifeless metal. Or, these days, to zeroes: in bank accounts. Today, the Midas disease is pandemic.

While researching the origins of this myth, I was dumbfounded to discover that Midas was real and ruled in Phrygia — approximately where and when money originated. The Midas myth is about money. This innovation was an entirely new way of storing value, which may have plenty of upsides, but when societies turn it into a yardstick for measuring social worth, there’s no getting enough. So, everything of value is game for being reduced into zeroes. If you put people sick with the Midas disease in charge of your society, devastation will ensue.

Jesus spills money all over the temple floor, throws the furniture around, a whip in his hand. Quite a dramatic action for the Prince of Peace! Did you know the temple of Jerusalem in his day was the most magnificent building complex east of Rome? I didn’t. The walls were gold-plated like President Trump’s bathrooms! The high court sat there, the main bank and money exchange. You could say Jesus took on a combination of Washington DC, Wall St., the Vatican, and the military base in Qatar.

At the top of this edifice was a tight-knit coalition of the wealthy and powerful — in today’s parlance, the billionaires. And it was at that moment, according to all four gospels, that this cabal “started looking for a way to kill him.” That is, the billionaires murdered Jesus. Not the “Jews” — who were, in fact, his own community. Interestingly, it couldn’t be done just then, because he was surrounded by a cross-cutting coalition of that community. You might call it the broad-based egalitarian coalition.

There is a lot to learn here: Billionaires in charge of a community’s most sacred values, and the public trust, will ruin their society. The only chance of curbing them is to join together in a broad-based coalition, crisscrossing all identity divides – what Jesus was getting at with “love thy neighbor” — and to relentlessly keep the focus trained on the corruption of that ruling clique. We can’t get distracted by manipulative efforts to divide us.

LP: What function do journalism and foundations that purport to be watchdogs play in curbing corruption? Or are they enabling it?

SC: A corrupt system requires a lot of support and assistance from people who may not be full-blown members of the networks. There’s one group you might call active facilitators. They sell their services for a fee: certain bankers and money-managers, real estate agents, registered agents who set up shell companies, certain lawyers, and whatnot.

There’s another, more nebulous, group you might call enablers: foundations and think tanks, many universities, most media outlets to one degree or another (excepting, of course, the media outlets that are owned and controlled by the network. That’s something else.) These institutions, starved of public funds, take kleptocratic networks’ money, largely in the form of advertising and, especially, “philanthropic” donations that are tax advantaged.

While they may stand by all their precepts of academic and editorial independence, they do huge services to the networks in return for the money. First, they validate them, provide a veneer of respectability. The names of network-affiliated individuals and institutions get lots of play as benefactors of what is presented as reasoned research or reporting in the public interest. Second, the media and research organizations offer access to their personnel, for recruitment. And third, they self-censor. While ostensibly working on topics that might be uncomfortable to the corrupt — telling truth to power — they do so in ways that don’t ultimately challenge the system at all. It’s more like box-checking. A doze of an anti-corruption and compliance course is offered. Policy-papers presenting “tool-boxes” for “achievable” fixes are churned out. Investigative reporters are subjected to crushing burdens of proof, or are encouraged to focus only on one side of the divide (political, gender, racial, what have you), making it impossible for a cross-cutting coalition ever to come together. Whereas, that’s the only thing that can bring the system down.

LP: You’ve mentioned cultural or identity group divides a couple of times. How do those divides mask cooperation at the top over corruption? How can we understand the current wave of protests in the U.S. in this context?

SC: In 2017, I conducted a study of half a dozen major anti-corruption uprisings on as many continents. I looked at how the various kleptocratic networks fought back against the sudden challenge. The single most effective countermove was to play on the identity-group tensions dividing the population. That is, to shatter the broad-based egalitarian coalition, the only force capable of outmatching the networks. Note: those networks, including here in the U.S., tend to span the very divides they manipulate so artfully.

I’m afraid I see this tactic working all too well here. And again, though his behavior is egregious, it’s not just Trump. The various shades of blue are constantly falling for his bait, and have now made extreme virtue-signaling on cultural issues a kind of litmus. That’s especially race and gender, but also, for example, unquestioned adulation of medical expertise — though it was those same white-coated doctors, along with the pharmaceutical giants, who helped give us the opioid epidemic. Elites on both sides are actively dividing us up along identity lines.

In this context, I find the current protest movement — as important as the issues it’s raising are — a bit disappointing. The subjugation of non-whites in this country is part and parcel of the kleptocratic design on its political and economic systems. Again, don’t get me wrong: if you expand beyond slavery to include the attempted genocide of Native Americans, it is the unspeakable crime at the root of our democracy. However, though certainly critical to enforcing it over the decades, the police are not the architects of this crime. They’re just the pointy end of the spear. So, I find the emphasis on policing a bit misplaced. In other countries, in fact, I have seen kleptocratic networks under serious challenge willing to sacrifice the police. Witness highly touted police reform programs in Georgia and Honduras. A supporting data point for my thinking more broadly is the swiftness with which business elites have joined blue-leaning political elites in espousing the Black Lives Matter cause. The alacrity is suspect — it suggests we’re being distracted.

LP: Extreme conspiracy theories, such as those associated with QAnon, focus on the idea of a secret cabal of elites wreaking havoc on the world. How does what you describe differ from this kind of perspective, even though you aretalking about havoc-wreaking elite networks?

SC: Looking at something like the Koch network – the galaxy of interlocking organizations that have been spawned and supported and cultivated by the Koch brothers — the structure, organization, and practices have more conspiratorial features than even I would wish to have found. The Kochs deployed elaborate secrecy measures, including strict internal rules, constantly shifting corporate names to mask the operations and goals of a deliberate campaign that was therefore able to fly under the radar for nearly twenty years.

What I’m not talking about, though, is some unitary, all-seeing and all-powerful global entity out of the Marvel Comics, responding in lock-step to the dictates of some mastermind. What we are confronted with is sets of overlapping, interwoven, but dynamic and shifting networks that ally, while often simultaneously being rivals. A good analogy might be mafia families, which are structured and organized, which do have specific practices, and which often, when operating in the same territory, make deals: you get the waterfront and I have the casino neighborhood over by the hillside. But they’re still shooting each other and there’s still a lot of internal dynamics and turbulence. That’s more or less what we’re looking at, bearing in mind that, like the Mafia, these networks may be anchored in a given place, but are transnational. The features, the structure and dynamics, the favored revenue streams, may differ from country to country, and may evolve over time.

LP: How do you see such networks seizing opportunities to increase wealth in the Covid crisis?

SC: Let me count the ways! Start with straight-up fingers in the cookie jar stuff, like self-dealing contracts or loans under the Paycheck Protection Program that went to entities that were directly linked to people making the decisions — for example Foremost, the Chinese shipping company that belongs to the father of Transportation Secretary Elaine Chao, whose husband is Senator Mitch McConnell. That whole network gets us from aluminum in Kentucky to Russian oligarchs to Chinese state-run banks and shipping companies and shipping manufacturers. It’s the sort of political-economic version of the Jeffrey Epstein network, it is so intertwined and frightening in terms of how directly it leads to the kleptocratic networks of China and Russia. Foremost getting a PPP loan – you know, that’s just the poster child for corruption. Or there are the Warp Speed contracts, stripped of normal oversight mechanisms, that are going to some of the same pharmaceutical behemoths who gave us the opioid crisis – and which have long been well-wired in with leaders on both sides of the aisle in Washington.

Also, obviously, there’s a lot of jerking around with medical realities in ways that affect the networks economically and financially. But I think more overlooked is the half a trillion in Treasury money to undergird the printing of trillions, or, more accurately, the creating of trillions worth of zeros in its ledgers – you don’t even have to print money any more. So, with half a trillion in taxpayer money, you get another multi-trillion dollars in public money that is funneled directly into the stock market, in particular, corporate bonds, which are traded by private equity companies which are overrepresented in this administration and represent a giant shadow economy with basically no oversight.

So, one wonders why, until the last couple of weeks, the stock market has been booming in spite of economic devastation that we’re living through. That’s why! If you’d pump trillions of dollars into state and local governments, you’d have a decent Covid response. But that’s not where the money is going.

LP: You note how the calamities leading up to WWII, from financial crises to wars to pandemics, finally resulted in what you call a “disaster-survivor” ethos, a more public-minded set of values that challenged the more materialistic, me-first, corruption-tolerant ethos that had held sway. Following the “Greed is Good” era of the 80s and 90s, the 21stcentury has brought on some pretty intense calamities — financial collapses, political instability, climate change, and now, a terrible pandemic. Do you see the generations following Gen X as possibly moving towards a new ethos, a new sense of connection and solidarity?

SC: Sadly, I don’t see it. Ironically, I think that this pandemic has been the kind of disaster least fitted to generating that disaster solidarity, because it forces us physically apart from each other. Disaster solidarity emerges when you’re suddenly thrown together, eating around the same table, in the same little skiff saving people off their roof, huddled in a fallout shelter. That kind of physical proximity hasn’t been generated in this pandemic.

Here’s what causes me the most fear: I look at the level of calamity that it took in the 20th century to create a new ethos: two world wars, entailing two genocides, mass starvation in Europe, and the nuclear bomb, plus a pandemic that put this one to shame, plus a global economic meltdown. and I think, what is the 21st century version of that much calamity? I hardly want to think about it. So the question for anyone alive today – the urgent question is: Can we generate the moral equivalent of this kind of a disaster survivor mentality and apply it to warding the calamities off? To making the changes that need to be made?

LP: And what kind of changes do we need to take back our political and economic systems? How do we do it?

SC: I turned the epilogue of the book into a bit of a kitchen sink for this. As much as I believe in the kind of planning and strategizing that a network like the Kochs were able to do, I also believe in Johnny Appleseed. I’m sure this fight needs every single one of us contributing all of our diverse and sometimes off-beat gifts. But I’m not sure what exact combination of all of those efforts will produce the results we need. And I’m not sure that’s knowable. So I went comprehensive. There is as close to something for everyone in that epilogue as I could manage.

But here are a couple of principles, not spelled out there. I would say that we need to shed the reflex of according blind respect for some of the august institutions that claim a sort of blanket respectability. And especially we should keep an eye on vocabulary. We must not be intimidated by complex verbiage, which is just a tool used by the network to disempower ordinary people. We have to look behind the façade, take the trouble to Google the board of directors, for example, boil all those fancy words down to the underlying concepts, which usually prove to be dazzlingly simple.

Also, while we to need treat other ordinary people from different backgrounds — political, social, economic, etc. with courtesy and respect — at the same time we do not have to be afraid to raise a ruckus. We don’t have to get caught up in always being polite, especially when confronting individuals or institutions that are trying to overawe us.

I also think it is critical to make a distinction between the professional classes – scientists, academics, civil servants – and the kleptocratic networks I’m talking about. The professional classes are by no means blameless. They have treated ordinary people with contempt. They have supported and been used by the corrupt. But they are not the architects of this system. And too much energy blaming them can distract us from those real players.

Keep your eye riveted on the very top.

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