The balance between personal interest and common good is deeply flawed
A quest for freedom and dignity withheld by a corrupted social order.
(Ron Powers, Mark Twain: A Life)
A society of corporate economic misadventure and crime will not usefully survive and serve.
(J.K. Galbraith, The Economics of Innocent Fraud)
Writing about economics is supposed to be cold and distant, with strong pretense to objectivity. Gunnar Myrdal, famous for his study on racism in the United States, The American Dilemma, wrote an important essay on Objectivity in Social Research. His main argument was that instead of pretending an absence of underlying values, which we all have, it is much better, for objectivity’s and the reader’s sake, to clearly state them. Thus, the underlying a priori values that sustain the arguments become transparent. A huge amount of pseudo-science, built on weak, or false, but, in any case, hidden assumptions, can be set aside. Economics, more than other social sciences, is awash with strong arguments built on absurd assumptions. The building looks strong, the arguments are sophisticated, but it is all built on mud. Extensive use of complex mathematical models has helped economics to get away with outright fraud, trusting the difficulty readers would have to follow the arguments.
Economics is not a science, it is a complex mixture of arguments corresponding to different, and frequently excluding, interests. Cui bono is the question we have to ask whenever we pick up a book on economics, because we are essentially speaking of politics in disguise: more than objective analysis, what we mostly find is justification, or what we presently have called ‘narratives,’ destined to convince the reader that what coincides with a particular interest is in fact good for everyone. The issue here is to make the different stakeholders, which means ourselves, comfortable with the idea that serving a corporation and earning our salaries or bonuses is good not only for ourselves, but also for the common good. We can sleep soundly.
John Kenneth Galbraith describes this self-delusion in The Economics of Innocent Fraud, an essay on “the enjoyment (that) can be found in identifying self-serving belief and contrived nonsense”. We have thus been sold an idea of an impersonal mechanism, “the markets,” which spares us the trouble of identifying who is generating the social, environmental and economic chaos we are facing. “No individual firm, no individual capitalist, is now thought to have power; that the market is subject to skilled and comprehensive management is unmentioned even in most economic teaching. Here is the fraud. Another name for the system does come persuasively to the eye and ear: the ‘Corporate System’. None can doubt that the modern corporation is a dominant force in the present-day economy, and certainly so in the United States. Nonetheless, allusions to it are used with caution or not at all. Sensitive friends and beneficiaries of the system do not wish to assign definitive authority to the corporation. Better the benign reference to the market.”
Once we go beyond the abstract façade of ‘the markets’ we have real corporations, with their huge money and political power, and practically no regulation. How does a person working for these corporations feel? Does he understand the systemic impact of what he is contributing to? Luyendijk, who studied how people consider their activities in the financial speculative environment in the City of London, presents a keen view of how people try to conciliate their personal interests with what they cannot fail to know about the consequences. “Why would a risk manager or compliance officer in such an environment sound the alarm? Why not screw your client given that it is all perfectly legal and you are under immense pressure to ‘perform’?”
This is the key issue, we are millions throughout the world carrying corporate interests on our backs, generating profits which are deepening financial, social, environmental and political crises. How are the employees, and particularly professionals, frequently highly trained and having full understanding of what they are doing, feeling in this deep divorce between the legitimate aspiration to ensure a comfortable and dignified life for his family, and knowing that the interests he serves are generating a social disaster?
The dramas are too obvious to be ignored. We presently know how the BP disaster in the Gulf of Mexico was generated, how the maritime corporations wash their contaminated tanks in the high seas, how wide-spread is overfishing throughout the world oceans, how big pharma medicine fraud has become general, we understand the financial scam that led to the student-debt disaster, the Libor fraud involving practically all major banks, Enron creating over 1,500 fake companies to cover-up losses, Volkswagen information fraud on vehicle emissions — this list could go on for hundreds of pages. It is enough to write the name of any big corporation together with the word ‘settlements’ in the internet to see how deep the corporate world is in illegality, and much more so in illegitimate activities on the very border of legality.
With the settlement paid, the corporation does not have to admit guilt, and business goes on. Heard of Oxycodone? How long did it take for the tobacco industry to admit it knew about the link to cancer? Did the corporations not know about climate change impacts? Or about the long-term impact of plastic? The contamination of rivers and aquifers? The obesity calamity resulting from unhealthy food? The 900 million people going hungry in the world (roughly 25% of them children) because of food mismanagement? Brazil has 55% of its population in food insecurity, while producing over 3 kgs of grain per person per day. Do we not know where so much food is going, for example providing ‘clean fuel’ for cars?
We can understand the dilution of responsibility in the context of high-frequency trading, with computers in the asset-management industry feeding money to where the return is maximized, no matter what the Environment, Social and Governance issues are, because money, the way it is managed, simply flows to where returns are maximized, and the management models are built to maximize return on investment (ROI), not social return on investment. The size of the resulting planetary disaster is presently known with so many reports, and all big corporations proclaim their ESG commitment, but we are stalled in a self-propelling race to the bottom. The Glasgow COP26 Conference did recommend a $100 billion dollar support for the climate challenge, but this is 200 times less than the $20 trillion dollars The Economist estimates corporations have in tax-havens. Do the professionals in all these corporations not know what they are contributing to? How far can dilution of responsibility go?
We have good intentions, but apparently no grip on the real-world workings of corporate interests. John Gerard Ruggie, after years of negotiating with corporations for them to adopt a basic human-rights respect commitment, shows the real corporate decision-making process in his 2013 book, Just Business: multinational corporations and human rights. These world disasters are brought about by people who are perfectly informed about the impact of their decisions. Jean Ziegler shocked the well-thinking Swiss when he wrote La Suisse lave plus blanc, a report on how Swiss banks organize large scale money laundering. Are the Colombian or Mexican cartel lords the only guilty?
Shoshana Zuboff wrote a detailed analysis on The Age of Surveillance Capitalism, showing how corporations drain, organize and sell private information, leading to a society “in which capitalism does not function as a means to inclusive economic or political institutions. Instead, surveillance capitalism must be reckoned as a profoundly antidemocratic social force.” There is no place to hide, and the few whistle-blowers who dared to denounce the illegalities are detained or hiding. The whistle-blowers, not the perpetrators of illegalities. The compliance departments are precisely what the corporations expect them to be: compliant. All these corporations are managed by highly qualified and informed professionals.
Carolyn Nordstrom, on her study on The Global Outlaws, shows how ill-defined are the borders between crime and more sophisticated, and also much more spread, quasi-legal activities. “It is much more clear now, after Enron, WorldCom, Xerox (as well as a host of other large corporations such as Adelphia Communications, Qwest Communications, Peregrine Systems, Dynegy, Imclone, Tyco International, Global Crossings), how unlawful practices can permeate the most respected of economic institutions. In my experience, few people see themselves as morally compromised. From torturers to criminals, from corrupt elites to wildcat profiteers, people devise explanations that smooth their actions into acceptability.” She quotes Joseph Stiglitz on “the abilities that American corporate capitalism has demonstrated so amply recently: corruption on an almost unfathomable scale. They put to shame those petty governmental bureaucrats who stole a few thousand or even a few million. The numbers bandied about in the Enron, WorldCom and other scandals are in the billions, greater than the GNP of many countries.”
John Perkins, in his Confessions of an Economic Hit-man, shows in detail how he negotiated international contracts on fake numbers, contributing to huge profits for the likes of Halliburton and other giants, while breaking financial balance in developing countries. How far does ‘just business’ go? The surging financial fortunes of billionaires during the Covid19 pandemic certainly play a central role in the systemic deformation of capitalism, but we have to consider the whole decision process, deformed solidarity, one hand washing the other, shrugging off responsibility since there are so many shoulders. An excellent series you can find on Netflix, Dirty Money, by Alex Gibney, candidly shows how so many scams are built by frontline household names such as Wells Fargo and so many others.
People are slowly learning to place responsibilities where they really are. Feeling the heat, corporations have been proclaiming their adherence to ESG principles, as in the 2018 Business Round Table letter signed by 181 major American corporations, stating that “while each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders” to “foster diversity and inclusion, dignity and respect” as well as “supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.” That so many corporations need to assert the obvious for any citizen, not to speak businesses, to respect, gives a good measure on how far we have gone. Over 100 hundred banks have signed a similar declaration. You can consult them in my paper A Derailed Economy. And we have seen Glasgow, 2021: just talk.
As we have shown in other papers here, our problem is not a lack of resources. World GDP divided by the population shows we presently produce the equivalent of $3,800 US dollars per month per four-member family. A very moderate reduction of inequality would be sufficient to ensure everyone has enough to live a dignified and comfortable life. It is not charity, it is a floor to enable people to have a chance to build their lives. We have the financial resources, the technology, we know what has to be done, and we do have some moral principles. Are the six-something million children dying of hunger every year responsible for this system? Who is responsible?
How long will we economists, engineers, lawyers, architects, administrators and so many other professionals go along with the use of our technical expertise for stupid, if lucrative, aims? There is no necessary contradiction between a reasonable salary and a peaceful conscience. The system is rigged.
1 J.K. Galbraith. The Economics of Innocent Fraud. Houghton Mifflin, Boston, 2004.
2 John Perkins. Confessions of an economic hit-man. Berrett-Koehler, New York, 2004.
3 Joris Luyendijk. Swimming with Sharks: my journey into the world of the bankers. Guardian Books, London, 2015.
4 John Gerard Ruggie. Just Business: multinational corporations and human rights. W. W. Norton, New York, 2013.
5 Carolyn Nordstrom. Global outlaws: crime, money and power in the contemporary world. University of California Press, Berkeley, 2007.
6 Shoshana Zuboff. The Age of Surveillance Capitalism: the fight for a human future at the new frontier of power. PublicAffairs, News York, 2019.
7 Ladislau Dowbor. A Derailed Economy. 2020.