Ethical Receivership

I read an amusing short story by Peter De Vries* about a man who wanted to run out on his wife. He decided to declare moral bankruptcy. He declared to his family and all his friends that he was unable to meet society’s moral obligations, and that he would pay up at the scale of ten cents on the dollar. It all backfires on him, of course.

Still, the concept of moral bankruptcy as a parallel to financial bankruptcy is an interesting analogy. It relates to corporate malfeasance and the possibility of revoking corporate charters. A number of people are advocating the strengthening and rigorous enforcing of laws concerning corporate charters and the public good.

This is an appealing prospect, given that

1) The piddling fines demanded of corporations by the government are considered by said corporations as merely the cost of doing business, and
2) Corporations seem to be competing for some kind of anti-Nobel Prize in fraud, environmental destruction, and political corruption.

The problem with the death of a corporation, however deserving, is that it is group punishment for the actions of a few.

Remember the flaming Ford Pinto? Ford executives did some cold-blooded calculations and decided that it was cheaper to pay off the families of a few dozen human sacrifices than to recall the model and replace the fuel tank bracket. It was the moral equivalent of firing a gun blindly into a crowd, but the corporate being of Ford remained at large, building cars and making profits. What if the corporate charter had been revoked? The stock would have been rendered worthless, the assets sold off, and tens of thousands of people thrown out of work. Therein lies the problem. The people stitching the upholstery on the bucket seats weren’t guilty of anything. Likewise 99% of the Ford employees, and all the employees of the subcontractors and other businesses that benefited from the operations of Ford Motor company.

That is where moral bankruptcy comes in. A company that can’t meet its financial obligations can be forced into bankruptcy. In cases of criminal behavior or gross mismanagement, control of the company is surrendered to a government trustee. The company goes through a regulated process of financial restructuring to put it back on a sustainable fiscal path. Why not create the same process for corporations that are unable to meet their moral obligations to society?

When a corporation accumulates enough points on its license, so to speak, it would be subject to a legal proceeding and declared morally bankrupt. The Moral Bankruptcy Court would axe offending management and associated henchmen, minus golden parachutes, and prosecute them. Trustees would take over the operation of the company and put in place policies to promote future lawful behavior. The company would be subject to ethical audits on a regular basis for a designated period of years. Meanwhile, the company would manufacture products, employ people, and contribute to the economy. Just like financial bankruptcy, there would be a period of years where another bankruptcy proceeding would not be allowed. During this period the corporate charter would be on the line.

Moral bankruptcy laws would fill the gap between fines as a cost of doing business and the complete destruction of an economic engine. It would keep C-level executives looking over their shoulders as they make the economic calculations that drive corporate policy. It could gain us corporate accountability without the injustice of punishing line employees. It would also make for amusing headlines: “XYZ Corp declared morally bankrupt.”

*The story is titled "Forever Panting," written for the New Yorker in 1963. I recommend that you find it in the excellent book "Fierce Pajamas," an anthology of humor writing from the New Yorker.

Ding, dong, the witch is dead.....ok, indicted

I don't want to make a habit of "me too" posting, but this bit of news, from Jason Leopold at Truthout, is worth a post and a little dance around the room, pumping one's fist in the air. It seems that Karl Rove has finally been served his papers by Patrick Fitzgerald, on charges of perjury and lying to investigators.

The effect of this on the Bush administration and the GOP will be considerable. The White House will take a PR hit on multiple fronts -

Another criminal in their midst
Another bit of evidence that they knew they were lying about Iraq
Another indication that they care more about politics than national security
Another distraction from their agenda

On the functional front, Rove will be too busy trying to save his buttocks from the mighty boots of Patrick Fitzgerald to pay much attention to the GOP "Dirty Tricks in 2006" campaign.

The third PR point, politics vs. national security, hasn't been emphasized enough. Follow down the chain of events from the outing of covert CIA operative Valerie Plame, and the damage looks substantial. She was NOC, non-official cover, meaning that she was posing as a private citizen, meaning that she had no diplomatic passport to protect her if she got in trouble. Ok, so she was at home at the time, but the company that served as her cover was still out there doing business, possibly with another NOC operative working there. She had spent more than a decade building up the cover and the confidence of her contacts in the Middle East. All of that investment is down the tubes.

Looking to the future, the CIA will have much more trouble recruiting sources. If these potential sources think that the White House might vindictively out the person trying to sign them up, would they bite? It's a simple progression: The operative is outed, then the host business is suspect, then anybody who made contact with anybody at the business is suspect, then the local source finds himself in the basement of the local police station receiving non-therapeutic electroshock.

This from an administration and a party that have been staking their decaying reputations on the concept that they can protect us better than the Democrats.

So, getting back to Rove, "Turdblossom" should consider himself lucky to be facing only perjury charges. Considering that Fitzgerald is reputed to consider perjury as not just a serious crime, but also a personal insult, maybe not so lucky.

First Things First: The Money Filter

Are you "Pro-Choice" or "Pro-Life"? For or against gun control? Hip to affirmative action, or not? Is the environment a concern for you, or an annoyance? No matter what your stance on the hot-button issues, you probably believe that this country should be governed by a representative democracy, with equal political rights for all.

Too bad.

About one out of every 800 of us has political influence so great that it amounts to veto power over the other 799. This is the power of campaign donations. Call it the money filter.

Just to get started in a primary, an aspiring congressperson or senator needs to raise hundreds of thousands of dollars. The candidate who spends the most money in a congressional primary is almost guaranteed a win. According to recent Public Interest Research Group studies, the high spender has a 90% chance, and generally outspends the competition 4 to 1. One could consider this the financial manifestation of the popular vote, except for the fact of who actually donates.

90% of these “hard money” donations come from people who can afford to donate a sum between $500 and the legal limit of $1000. These people constitute the 0.12% of voting age Americans at the top of the economic ladder, with incomes ranging from hundreds of thousands to millions. Many are corporate executives who bundle their $1,000 donations with colleagues and donate strategically to influence legislation.

What this means is that potential candidates with opinions that appeal to wealthy people in general and corporate executives in particular can raise that essential few hundred thousand in $1,000 increments. Often this involves no more than a few days in a room with a phone, an assistant, and a stack of donor profiles. Potential candidates with opinions that offend wealthy people will have to raise that amount in small donations, perhaps $20 at a time, from people who need that money for groceries. The more a candidate's opinions favor the wealthy, the faster and easer the fundraising. Go back to those 9 out of 10 odds for the high spender and consider the probability that the second and third place spenders were also dependent upon large donations. This economic imperative is an effective filter, virtually ensuring that anyone who ends up on a ballot will promote policies at least acceptable to the economic elite.

On the other end, staying in office requires equal mountains of cash. Mounting a successful campaign for an incumbent Senator in a large state means raising about 20 million dollars. That means a fundraising average of $9,100 a day over six years. That also means maintaining a pleasant relationship with those thousand dollar donors.

What should we do about this? First, we need to get a bill through congress that lowers the limit for all political contributions to something that virtually all Americans can afford. $50 comes to mind, roughly ten hours at the federal minimum wage. This should apply to all political contributions; to candidates, political parties, PACs, 527's, and any other entity that participates in the electoral process. (Apologies to MoveOn.com and its ilk, but face it, you are being outspent a hundred to one.) Second, we need a matching fund process that multiplies these small donations, so that candidates will actually have enough money to buy airtime and hire staff. Third, we need a low ceiling on the amount of personal money a candidate can spend. Otherwise we will have a handful of multi-millionaires doing what they do now: buying their way into races with tens of millions of dollars. Someone else will have to believe in them to get their candidacies off the ground.

An obvious question is how much this public financing will cost. If we financed every federal race, replacing all the private money now donated, it would be roughly four billion dollars per election cycle. Think of it as the cost of a handful of those B-2 bombers that the Air Force didn't want, but got ordered up anyway. Compare it to our $500 billion-plus military budget, the roughly $70 billion that the IRS fails to collect from wealthy individuals each year, or the $160 billion we hand out yearly in corporate welfare. Buying back our government will be cheap compared to the cost of letting a few CEO's choose like-minded policy makers.

In Vermont, we have campaign finance rules that could be a pattern for wider use. One feature is that candidates can get $225,000 in public funds for a statewide race by raising $35,000 in donations smaller than $50. A measure like this, on a national level, would make candidates dependent upon the favor of the many, not the wealthy few, and give populist challengers a path into the system.

Of course, the people who would have to pass this legislation are all creatures of the present system. The big money game has worked well for them. That is why we need a political movement that crosses many of the usual political boundaries. It would be a political equality movement analogous to the Civil Rights movement, but money, not race, would be the issue. Other issues should be put on the back burner. The promotion of policies in the general public interest is virtually useless at this point, given the stacked deck on Capitol Hill. We must all become single-issue voters and campaigners for a couple of election cycles. We must tell our elected representatives that if they don't absolutely toe the line on campaign finance reform, we'll vote for someone, anyone, who will. Even if a set of single-issue representatives passed one real campaign finance bill and idled for the rest of the term, they would be more useful than the economically filtered group now in place.

This isn’t about liberal vs. conservative, or pro-choice vs. pro-life, or anti this vs. anti that. It’s about real democracy vs. window dressing. It’s about creating a system of government where Bill Gates and the guy who mows his lawn are political equals, as promised in our constitution.

The elimination of big money from our political system won't completely reform our political process. Instant runoff voting would open the field to third party candidates, and rational, uniform requirements for getting on state ballots would reduce the staying power of incumbents. We need to simply outlaw electronic voting and vote counting. Still, removing the money filter is the necessary step, before all other steps, to move this country towards a real democracy.

The Next Saddam

I have this question nagging at me: who will be the next Saddam Hussein?

Wait a sec, you say, we haven't finished with this one.

True, but let's be prepared next time.

And how can we be prepared? Life was just going along, and suddenly the guy invaded Kuwait. What can you do about that?

Plenty.

The missing element in all the reporting about Iraq, Saddam Hussein, and the first Gulf War was any critical look at pre-war Iraq. From the decline of Soviet influence up until the tanks rolled across the border, Saddam was our ally. Yes, Saddam Hussein was violently suppressing internal dissent, and in general running a bloody-handed operation, but we can't expect the highest standards of morality from an oil state, can we? And think of all the Iranians he slaughtered. The U.S. doesn't like Iran because the Iranian fundamentalists pitched out the Shah, and the Shah was our ally. Yes, the Shah was violently suppressing internal dissent and in general running a bloody-handed operation, but we can't expect the highest standards of morality.....hey, wait a minute.

If you look back to 1963 - 1968, in the case of Iraq, and 1953, in the case of Iran, you will find that we launched both of these guys. It was covert foreign policy, courtesy of the CIA. Iraq’s General Kassem leaned towards the Soviets, so we plotted with the Baathists to topple him. In ’68, the CIA promoted the internal Baathist revolt that paved the way for Saddam. President Mossadeg in Iran intended to nationalize the Iranian oilfields, to the benefit of Iranians and the detriment of U.S. big oil, so he got whacked.

We got, respectively, twenty and twenty-five years for our money before the situation went bad. Bad for us, I mean. The bulk of Iraqis and Iranians didn't enjoy those decades very much, and the years since each respective blowup haven't been a stroll in the park, either. The Shah got old and sick, and his fed-up population revolted under the guidance of the Ayatollah Khomeini. In the case of Iraq, we suckered our strategy-impaired ally across the Kuwaiti border. April Glaspie, our ambassador to Iraq, told Saddam the whopper, “Your Arab-Arab conflicts are of no interest to us,” and he believed her. (She could have said, “One boot across the border and we’ll send half a million troops and a thousand planes to blast you to dust,” and history would be different.) Why did “Poppy” Bush do this? Perhaps he needed a popularity boost, or perhaps the Pentagon needed a new enemy to justify the budget. I suppose the real reason doesn't matter much to the Kurds or the Marsh Arabs.

The decades come and go, and our pocket dictators drop, one by one. In each case, we helped install them. In each case, we ignored their domestic brutality and thievery. In each case, they eventually got booted by their people or got independent ideas and we booted them. Or, in Saddam's case, we left the man in place while we starved his country, and then booted him. Noriega, Marcos, Pinochet, Somoza, Mobutu, all gone, all left messes on the carpet.

And who's next? Are there any others out there, seemingly stable despots, torturing those pesky democracy-freaks and desperately trying to hide the cracks in the foundation? How are the Saudis? How about the Kuwaitis who stayed behind and fought the Iraqis while the Kuwaiti royalty ran away? How do they feel about being shoved aside when the big cheeses came home? There are probably some third-world countries we haven't thought about in years, slowly crumbling under fresh coats of paint.

My favorite candidate is Islam Karimov, the president of Uzbekistan. He is a shameless thug, rigging elections, suppressing dissent, and torturing and killing political opponents. His masterpiece of evil was literally boiling two men to death. The U.S. government found Uzbekistan useful as a location for military bases and as a potential source of oil, so we backed him for years. Karimov got money, weapons, training, intelligence, and advice from us, and used it to strengthen his stranglehold on the miserable prison he rules. Uzbekistan gets high marks for regional instability, economic hardship, and a violently oppressed Islamic population. Karimov came to power in 1989, so he’s 16 years in, with an assassination attempt in 1999, and probably 4 to 9 years left on the clock. If Karimov was a publicly traded company, I’d start thinking about selling.

We should give our whole dictator/monarchy/president for life portfolio the once-over. I'd like to see a little preventative medicine, a little house cleaning. The old Truman policy of "Sure he's an s.o.b., but he's our s.o.b.!" is morally and pragmatically wrong. Eventually enough people die, enough disappear, enough are tortured, enough live their lives in hopeless poverty, so that a revolution comes. We orchestrated the misery so we end up as the bad guys. We keep mistaking a time bomb for a household appliance. It buys us some cheap oil, farm products and consumer goods in the meantime, but cheap at what price? Our reputation? Our tax dollars? Our manufacturing jobs? Our sons and daughters in uniform? Our souls?

Free markets, free trade, and the Tooth Fairy

I don’t believe in free trade, or free markets, or the tooth fairy, all for the same reason. None of these entities actually exist. None of them ever existed. I confidently predict that none of them will ever exist. All three are myths told to gullible individuals to facilitate an unfair financial transaction. The myth of the tooth fairy differs in that the person being lied to gets the better part of the deal. The tooth fairy also differs in merely being a myth, and not a logical impossibility.

Merriam Webster defines a market as: “a formal organized system enabling the transaction of business between buyers and sellers of commodities” Think about the three words “formal organized system” and the five words that follow them, “enabling the transaction of business.” The transaction of business requires rules. Consider the New York Stock Exchange, supposedly a bastion of free market principles. In reality, the NYSE is controlled by a welter of laws and a bureaucracy empowered to enforce those laws. Stock trading would be impossible without the confidence created by these laws and enforcers. When the laws or enforcers fail, catastrophic events such as the Enron collapse are the result.

Trade, in general, is the business of buying and selling commodities. In the expression “free trade,” it generally refers to trade across national borders. Therein lies the problem. The definition of a national border includes the control of what goes across it. International trade is defined by national borders, which are, by definition, not free.

So, if markets are, by definition, not free, and international trade, by definition, is not free, then what are the free market and free trade advocates actually talking about? They are talking about “lowering trade barriers,” “streamlining regulatory processes,” and “opening markets.” At least, that’s the jargon. They are really talking about reshaping the rules to reduce control by nations and the people of those nations over their own economies. “Let the free market rule” is the slogan, but the proper translation is, “Let the CEOs rule.” This transfer of sovereignty inevitably maximizes the profit of a particular class of businesses.

It’s a kind of economic heat transfer. Take two bricks, one hot and one cold, and press them together. Heat will travel from the hot brick to the cold one till they are both the same temperature. The bigger the difference in temperature, the faster the heat flows. Put insulation in between them and the heat flows more slowly. It is the same with countries and trade. Open certain trade conduits between a rich country with a poor one, and the manufacturing jobs and cash flow from rich to poor. More accurately, from the ordinary people in the rich country to the rich company with factories in the poor country. The cash flow continues until the rich country is almost as poor as its trading partner. The rules that govern trade can facilitate this process, or insulate against it.

In China today, as in the U.S. fifty years ago, protectionism is the key to economic expansion. It is an irony completely lost on the so-called “free trade” advocates that the fastest growing economy in the world is state controlled and highly protectionist. In contrast, Argentina succumbed to the lie of “free trade” and had its economy crushed. The United States has embraced “free trade” and has lost a huge percentage of its decent manufacturing jobs. We are on our way to economic parity with the third world. As a joker once said, “All we need now are colorful ethnic costumes.”

The practicalities of economics aside, I’d like to make a request for accuracy in writing and speaking. At the very least, I’d like journalists, pundits, politicians and economists to avoid the use of oxymorons. Let’s expunge the expressions “free market” and “free trade” from the public vocabulary. No glib alternative comes to mind, but then accuracy doesn’t generally lend itself to sloganeering. “Poorly regulated market” and “trade rules that infringe on national sovereignty” would be accurate, but wouldn’t serve the interests of those promoting the concepts.

The next time you read or hear the expressions “free trade” or “free market”, I encourage you to respond with a hearty use of the expression “bull shit!” It is less refined than “logical impossibility” or “financially motivated lie”, but it is accurate and it rolls off the tongue.