CRIME NETWORKS AND PUBLIC SECTOR CORRUPTION

I have to confess that I do not have any connections to crime or to its study. My only experience is that I was nearly mugged in the streets of Moscow, almost a year ago. Due, however, to another vice of mine, namely reading thrillers, I recognized timely the ploy and I aborted it.

It is a common trend of our days to blame globalization for almost everything. Globalization’s fault is for example the fact that the poor in many parts of the world are getting poorer. The fact however that governments in most of those countries keep the reigns of their economies close at breast and the free flow of goods is almost prohibited, is not always taken into consideration. Former socialist countries are facing tremendous economic hardships. Nevertheless, it is the free market regime always to blame. Why so? It is never explained.

Poor families working in agriculture in the third world are suffering from the subsidies enjoyed by protected farmers in Europe and the USA. It is, however, globalization that French farmers are blaming for hunger in the third world. They also blame neoliberalism in the EU and in their own country for their localized problems. Neoliberalism and the French economy!! Where the state controls more than 60% of economic activity. If this is not the shortest joke!!

While globalization is accused of being responsible for the condition of the earth’s poor, it is again globalization, that enabled hundreds of millions in India and China to enter the consuming world, who is responsible for global food crisis!

Misha Glenny is right of course to blame globalization, and indirectly the free market, for the world wide spread of crime. The fact that governments control less of economic transactions obviously allows for illicit cross-border activities and the development of regional gang conglomerates. However, the mafia in the lands of the former Soviet Union is not exclusively a post-communist phenomenon.

Corruption, which is a typical by product of heavy government controls and extensive state intervention in the economy, was omnipresent during soviet times. Frequently, criminal networks were established operating beyond the borders of a single republic. The CVs of some prominent Russian oligarchs with obscure backgrounds illuminating their economic origins prove the point. Likewise, many a shipping fortune in Greece was built on illegal cigarette trafficking – before the era of globalization.

The most extensively organized crime that one encounters in modern polities is the one aiming at pillaging state coffers. And this does not relate to globalization or to the free market. At times, the exact opposite may be true. Allowing public officials to disperse public funds for the purpose of allegedly promoting the common good is a sure path to fraud and corruption. Whenever the state has the ability to decide who may become rich and who is destined to stay poor, under the table economic transactions foster. And fraud blossoms. Measures to curtail such corruption always ends in producing new government agencies. Some of whose members, in certain countries al least, again profit handsomely in attempting to control the controllers.

The less able the state – and public officials of course – is to allocate funds and operate as a business enterprise the less possible corruption is.

I heard many participants to the Seminar blame market failures for most of the evils embracing our societies today. However, serious market advocates, or fundamentalists, as neoliberals are usually labeled by their critics, do not insist that markets are flawless. Or that they operate without sometimes grave downturns. What they purport is that, if they are left without state intervention, there will, inevitably, some kind of balance will emerge. If, for example, firms pay their executives billions of dollars as compensation it is not of my concern. My involvement starts when this same business goes bankrupt and the government decides to spend my hard earned dollars to salvage it. This is intervention, statism and corruption.

The market welcomes profit. At the same time considers bankruptcy a normal occurrence. It is governments that enter a state of denial. By excluding busted business insolvency they introduce corruption. Under various guises. Stupidity is not a product of globalization. Averting the consequences of stupid choices is however an artifact of regulation and heavy state intervention. With motives far from innocent, usually.

Here in Greece we are in the middle of one of our regularly concurring scandals. The German electronics giant Siemens has been discovered – by none other than the hated American stock exchange – to be up to its neck in illicit dealings. The German so-called social market economic system never discovered anything faulty in Siemens’s behavior. Neither did the Greek compassionate neoliberalism – detesting regime. Greek politicians are now accused of accepting bribes to award contracts. Would it concern me if Siemens was bribing private contractors to earn their business’s procurements? Of course not. Now of course, due to state intervention in the economy and extensive public procurement, I am directly involved. Because I have been overcharged and my tax money rest in a public figure’s pockets – or are embodied in the costs of his newly acquired swimming pool.

The government however is reluctant to penalize Siemens for its outlandish behavior. Arguing that this may lead to the closure of its factory in northern Greece. And to many workers becoming redundant. Social considerations get in the way of catharsis. Government political cost evaluations breed corruption. The same was true when similar arguments mobilized the Greek Confederation of Labor in favor of awarding without a public bid electronics contracts to Siemens and another Greek company in the early 90’s. Because of that development, I decided to abandon politics altogether. The contracts of course were awarded. Now the scandal has exploded. Were there not social considerations a major paragon in encouraging corruption?

The Greek system of electing parliament members I believe plays a role in accommodating corruption. MPs are elected on the basis of choices among candidates of the same party. Clientelism id the result. The public gets accustomed to personal dealings with politicians. “Facilitate me in this respect to vote for you”. The distance is not great from the “give me this job to pay something to you”.

Corruption and fraud are not new in the political sphere. What is different today is the explosive emergence of the electronic mass media. Who devour news and personalities for gaining viewing rates. In the past similar processes were under way. They simply did not hit the headlines. When governments, under heavily interventionist economic regimes, were awarding exclusive rights and monopoly powers to selected captains of industry were there no “private deals” involved? We simply did not know about them. It has recently been disclosed by his then lawyer, that Onassis was dictating to the then government of the day, the legal arrangements that he required for his business interests. Many companies thrived in the past in Europe by having public procurements taylor made to their efficiency and capabilities.

Corruption is endemic as long as the public administration is called upon to disperse funds, to award contracts, to accommodate business conglomerates and to take initiatives that violate pure and open competition.

To fight therefore the wide ranging crime of corruption you need to curtail the powers of governments to handle funds and play the game of business. And also establish strict rules for harsh penalties, irrespective of the actors involved or of the social consequences threatened.