As the #OccupyWallStreet protests continue to grow, bankers must be held to account for their ill-gotten gains.
Published in the November 2011 issue of the New Internationalist.
It’s a favourite conservative ploy in the development debate: blame poverty on corruption.
When explaining why countries in the Global South face stark levels of inequality and deprivation, you just say it’s due to a common penchant for bribery and fraud. You treat it as a cultural deficiency.
Following this approach, institutions such as the World Bank trumpet their work in ‘good governance’ and anti-corruption. No need to examine the disastrous results of neoliberal policies such as privatization, deregulation and austerity. Nor do élites in wealthy countries have to acknowledge how foreign corporations have propagated kickbacks and cronyism. Instead, they can simply regard these as endemic to the darker continents.
In 2007, I saw Bolivian President Evo Morales give a speech in which he took on this issue. He agreed that corruption was a crippling problem. Then he turned the rhetoric on its head: it is corruption, he argued, when the people of a resource-rich country like Bolivia are made to live in poverty so that a business élite can thrive. It is corruption when those who labour in the fields, mines and factories are robbed of their just pay. It is corruption when multinational corporations expropriate vast profits and leave behind misery.
Whether you define corruption in narrow terms or, like Morales, view it as a more systemic issue, the problem should be addressed from the top down. An effort to clean up corruption should focus on its grand practitioners, not its penny-ante con men.
Those who have erected protest camps on Wall Street have found a great place to start. Since 2008, not a single senior executive in the US banking industry has faced jail time for fuelling one of the largest financial crises in history. In part, this is because financiers have succeeded in making much of their nefarious activity legal –spending decades removing checks on casino capitalism. (Today, the category of corporate criminal seems reserved for architects of outright Ponzi schemes, such as Bernie Madoff, who make the mistake of swindling other millionaires among their victims.)
Nevertheless, Wall Street institutions have tried hard to transgress even the lax standards that remain. Evidence of wanton insider trading, traffic in fraudulent securities and bookkeeping scams has amassed steadily since the collapse.
In most cases, the response from the government has only helped make these activities look like lucrative areas for corporate expansion. Economist Jeffrey Sachs argues, ‘When companies are fined for malfeasance, their shareholders, not their CEOs and managers, pay the price. The fines are always a tiny fraction of the ill-gotten gains, implying to Wall Street that corrupt practices have a solid rate of return.’
An April New York Times headline reading ‘In Financial Crisis, No Prosecutions of Top Figures’ was followed by one in July stating ‘As Wall St. Polices Itself, Prosecutors Use Softer Approach.’
The second story reported: ‘As the financial storm brewed in the summer of 2008… a bit of good news bubbled through large banks and the law firms that defend them.’ The government announced that it would expand its use of agreements to delay or cancel prosecution of companies that have vowed to investigate their own wrongdoing and have ‘promised to change their behaviour’.
This was ‘good news’ not only for banks, but also for regulators seeking to cash in by joining the private sector. Groups such as the Project on Government Oversight have documented that, when top officials at the US government’s main watchdogs do meet with the heads of Wall Street banks, it is often to interview for jobs.
The World Bank, in response to this revolving door, has yet to launch an initiative on good governance in the US financial industry. And so it has been left to a protest occupation to say it: Wall Street, a global symbol of wealth, has plenty to teach the world about corruption.