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Corruption: The Root of Much Human Evil

Decent nations appear helpless against the spread of corruption. Their own elites keep promoting the racket.

December 22, 2017

Decent nations appear helpless against the spread of corruption. Their own elites keep promoting the racket.

The collapse of the Soviet Union generated enormous hopes for a world of freedom. Instead, over the last quarter century, we have witnessed a gradual undermining of democratic institutions in scores of countries – and the momentum is accelerating.

Now, abuses of human rights are expanding, vast environmental damage is being wrought (illicit deforestation alone accounts for almost $30 billion per year), and the scale of human slavery and trafficking now stands at a record of over 35 million.

I blame these developments, above all, on corruption – the abuse of power for private gain.

From Egypt to Myanmar, from Venezuela to Zimbabwe, from Iran to China, military leaders have built enormous business empires and boosted their formidable political power.

Meanwhile, so-called official “anti-corruption” campaigns have been the very opposite of what that term suggests. From China to Saudi Arabia, they were used to arrest political opponents as ruthless leaders use the “corruption card” to consolidate their own political power.

In the United States, the U.S. Congress is about to pass legislation, 100% backed and encouraged by Trump, that will make the Trump family far richer, alongside so many people of enormous wealth.

President Donald Trump and his family see political power as a tool for self-enrichment. They have ignored national ethics rules, violated conflict-of-interest standards and placed business cronies across the U.S. government.

Whitewashing evil

Reasonable guesses suggest that illicit funds amounting to an annual $1.5 trillion to $2.0 trillion flow across national borders to find safe investment havens. These are the proceeds, above all, of three cash channels – the earnings of organized crime; the proceeds of tax evasion; and the theft by public officials and politicians of funds from their own national treasuries.

Vast networks of transnational organized crime, involving Chinese, Mexicans, Afghans and so many more, only succeed in the sale of illicit pharmaceuticals and fertilizers, in massive deforestation, trade in ivory and arms and so much more, because of their “skill” in bribing public officials.

Aiding and abetting crooks

In many cases, these funds simply flow into banks in Switzerland, Luxembourg, Austria and a few other places where few questions are asked about the sources of such fortunes. The funds are then placed in so-called secret accounts and invested by bankers in vast inventories of U.S. Treasury bonds and other safe and secure assets, from gold bars to corporate bonds.

Then, further staggering sums – perhaps the bulk of the illicit cash – flow to bank accounts in Cyprus and Liechtenstein and other centers where few questions are asked.

They are then transferred by “offshore” holding companies registered in the British Virgin Islands and other similar “no-questions-ever-asked” places, into investments in the world’s leading safe financial markets.

Cynicism rules

The “investors” (aka crooks) know that their cash is never safe in their home countries of Mexico, Afghanistan, Russia, Sudan and other such places if ever there is a change in governments. So they are determined to invest in the largest and most sophisticated Western markets.

Their guidelines for their investments are clear: The ownership of the assets must be anonymous, the safety of the assets must be protected by Western legal systems, the funds must be reasonably liquid and the assets must be sound and possibly offer value appreciation.

Perhaps as much as half of these funds end in assets in the world’s largest investment market, the United States.

The system works

For the kleptocrats, the system works. Their secretive cash owns vast tracts of high-rise, extravagantly expensive, luxury apartments along London’s River Thames, around Central Park in New York, fronting the Mediterranean in Monte Carlo, smiling at the Atlantic from new towers in and around Miami and from shimmering Chinese-owned towers in Hong Kong and Vancouver.

The inflows of funds to Western financial markets are so substantial that battalions of bankers, consultants, accountants, lawyers and real estate brokers are delighted to enable the transactions. To ensure that they can keep feathering their own nest, they lobby politically to preserve the system.

If, by chance, regulations and laws do get approved in some jurisdictions to curb investments in one sector, then the financial intermediaries will be swift to find new channels for the cash. The most recent escape hatch, according to the U.S. FBI, is investing in “crypto-currencies” such as Bitcoin.

Russia’s racket

At the core of the rising wealth and power of the kleptocrats are the manipulation of justice systems that provide them with impunity, and their skills in mixing money and politics.

The kleptocrats have taken control of the main channels of mass media communications. They have either used government funds to sabotage party political funding, or called big corporations to do this instead.

The West is not immune. The largest banks have been forced to pay banking authorities and justice departments more than $340 billion in fines for money laundering and other wrong-doing since the 2008 financial crisis.

At the same time, not a single top banker has been personally prosecuted. Their impunity has encouraged them politically. No wonder the Trump Administration’s top ranks are full of powerful former bankers and their former wealthy clients.

To top it all off, President Putin – both protector of the Russian racket and apparently also its chief beneficiary – has just announced he will again stand for the top office in the 2018 Russian “elections.” He and his army of sycophants, all rich on the Kremlin gravy train, have already ensured there is no serious opposition.

And the activists?

Anti-corruption activists are not silent and their efforts to mobilize public protests have never been more visible and vigorous. Together with investigative journalists, they have greatly increased public awareness of corruption, which has led to new international conventions, new national laws, thousands of projects that have improved the lives of many people.

But progress to counter ever more visible rampant greed by top political office-holders has not been keeping pace in recent years with their new schemes and innovative battalions of advisors. Perhaps 2018, will see the pendulum swing back towards justice and freedom.

Takeaways

Decent nations appear helpless against the spread of corruption. Their own elites keep promoting the racket.

Reasonable guesses suggest that illicit funds amounting to an annual $1.5 trillion to $2.0 trillion flow across national borders to find safe investment havens.

The rising wealth and power of the kleptocrats are enabled by the manipulation of justice systems that provide them with impunity, and their skills in mixing money and politics.

Anti-corruption activists are not silent and their efforts to mobilize public protests have never been more visible and vigorous.