Bill Totten's Weblog

Thursday, July 07, 2005

The pot calling the kettle black

Bush: Africa must fight corruption

Reuters (July 06 2005)

US President George W Bush delivered a tough message for African nations hoping for more aid or debt relief, saying on Wednesday they had to abide by the rules of democracy and fight corruption.

Bush spoke ahead of a meeting of the Group of Eight (G8) leaders at Gleneagles in Scotland, where more aid for Africa as well as climate change will top the agenda.

"We will give aid and cancel debt, but we want to be assured that governments invest in their people ... and fight corruption", he told a news conference after talks with Danish Prime Minister Anders Fogh Rasmussen.

Bush said he could not look US taxpayers in the eye if countries which received aid did not meet the right standards of democracy. "We expect good governance", he said.


Anyone unfamiliar with English idioms should see


The monster within us all

Before accusing African leaders of being innately corrupt,
Westerners should clean up their act

by Will Hutton

The Observer (June 26 2005)

The one reliable prediction you can make about any group of human beings is that one or two will have a proclivity to cut corners, accept a bribe or be ready to pursue a dishonourable means to achieve their end. It comes with the territory of being human. Be sure there is always somebody ready to take the corrupt course of action. Certain financial reward today is, for some individuals, better than the uncertain reward of behaving properly and conforming to social norms.

Yet all round the world, adherence to the internal norms that hold back a drive to behave corruptly seem to be weakening. In the run-up to the G8 summit in Gleneagles, every commentator worth his or her salt has felt compelled to identify Africa as the hopeless centre of a corruption epidemic, challenging the case for debt relief made by Messrs Geldof and Brown. Generous Western aid only gets spent on a private jet or Swiss bank account, runs the argument. Unless Africa can clean up its act, we should be wary of aid and debt relief.

But the conviction for fraud last week of Dennis Kozlowski and Mark Swartz, former chiefs of US manufacturer Tyco International, was a salutary reminder that the West has its share of corruption.

In Britain, accountants BDO Stoy Hayward, in its annual FraudTrack Report, says that fraud - from identity theft to fiddling the books - doubled in 2004 and is rising exponentially.

No institution is safe. Last week, it emerged that the BBC's Toby Grosvenor, who was in charge of the technical wizardry of the recent Dr Who series, is being investigated for the suspected theft of GBP 330,000. Only last year, another BBC executive, Jeffrey Everard Taylor of BBC Worldwide, was imprisoned for twenty months in Hong Kong for accepting bribes to peddle particular companies' toys.

FraudTrack says that the impulse for fraud is simple greed and desire for lavish lifestyles, and the British are just getting greedier. But are there really twice as many greedy people in Britain as there were just twelve months ago?

A more likely explanation lies in the progressive breakdown of the norms that hold the greedy back. Once employees start to believe they are paid too little in relation to those above them, the corruption seed is sown. They are no less deserving, no less needy of the good material things in life and if they behave corruptly, the old social pressures to behave well are felt less keenly. Who is going to shame them, especially if there are no victims? Presented with the opportunity, they go for the money.

Joyti De-Laurey, the secretary to three executives in Goldman Sachs who was imprisoned last year for seven years for stealing GBP 4.4 million, offers a window into the mindset of the corrupt. Paid less than GBP 40,000 a year, she was simply stunned by the money made by the men and women she worked for. They nor the firm would miss a mere million or two, she reasoned. And for some time they didn't. She wrote to God pleading for more of 'what was mine' and for protection against her misdeeds. In her own mind, what she took was a reasonable return for her efficiency, small change beside the scale of reward her bosses made so effortlessly.

Joyti de-Laurey and Jeffrey Everard Taylor are presented as one-offs, bad apples of which Goldman Sachs and the BBC were the unlucky victims. I'm not so sure. Three preconditions need to exist for corruption to rise. The first is rapidly growing inequality that cannot be justified by merit, effort or performance and is, therefore, perceived to be the result of greed. The second is when an organisation's relationships become anonymous and based only on transactions, justifying the belief that the crime is victimless. The third is a wider culture which does not encourage a sense of shame in relation to dishonesty while, at the same time, celebrating wealth and celebrity.

Goldman Sachs and the BBC qualify on all three counts. As it has tried to compete with the explosion of incomes in private television, the BBC has widened its pay differentials remarkably over the last five years. At the same time, the glue of shared values that held it together as a public-service broadcaster has weakened.

As for Goldman Sachs, the financial returns made by partners of modest talent for small risk go beyond the dreams of avarice as it has become a faceless profit-making machine. Both organisations operate in the same broader culture that celebrates individualism and wealth. Neither should be surprised that some of its frailer and greedier employees succumb to temptation.

Goldman Sachs is the arch high priest of the investment banker's temple. It's an industry, argues Philip Augar in his important new book, The Greed Merchants, which can offer such disproportionate rewards only because the markets in which investment banks operate are rigged. There is nothing illegal in what they do and how much profit they make; it is just that the commission structures and invisible cartels that support them should not be allowed, but no government is prepared to take them on.

But when individuals of only modest talent make extraordinary fortunes for no worthwhile purpose, the consequent impact on the environment in which they operate is devastating. Very few of the mergers to which investment bankers are midwives or assets that they manage outperform the average. In fact, most do indifferently. But they are rewarded as if they did perform well. It's not just secretaries who are tempted to go on the take; the contagion spreads around the entire financial services sector.

City [of London] salaries have always been high. Now, they are absurd. In this atmosphere, the greedy, excluded from the feeding frenzy, fall prey to the temptation to break the rules and whether it's hedge funds, tax-avoidance schemes, private equity or buy-to-let companies, there is plenty of opportunity.

New York attorney general Eliot Spitzer has revealed the depth of the scams in New York's financial community; if he was unleashed in London, he would find no less fertile ground.

Philip Augar argues that Wall Street and the City have become world benchmarks for personal earnings against which Asian plutocrats and African dictators alike compare themselves, at the same time offering examples of how to rig markets and salt corrupt cash away. I'm not sure that's quite fair. China and India have as much homegrown corruption as Africa but there it's independent of practice in the West but with similar roots.

They never had strong norms to guard against corruption but with rapidly rising internal inequality, the temptation to commit what seem victimless crimes has become harder to resist. For those at the top, looking at what happens in the West stiffens their readiness and ability to cheat.

Let's not get too pious about African corruption; there's more than enough in our own backyard - and checking it is just as ineffective.

Guardian Unlimited. Copyright Guardian Newspapers Limited 2005,5673,1515071,00.html

Bill Totten


Post a Comment

<< Home