Out with the Old Corruption

It is difficult to get a man to understand something, when his salary depends on his not understanding it - Upton Sinclair

If I were a cocky young rightwing contrarian, rather than the opposite of all of those things, I would write a book in favour of corruption. What's the problem? (I would ask.) Great Britain grew to be the most powerful nation on the planet while its political system was the very essence of corruption. China is now a superpower despite being immensely and institutionally corrupt. Nowhere has ever been more corrupt or more powerful than Ancient Rome. I would receive admiring reviews from my friends at the Spectator and the Telegraph. I would appear on television. I would probably, in doing so, demonstrate the proof of my own thesis.

Sometimes I think we hear too much about corruption. Not because I do, in fact, think it doesn't matter, but because it often appears in public thought and discussion as a proxy for something else - for the failure of systems, a failure in which corruption plays a part.

Of course one can have scandalous, murderous corruption, presidential palaces built amidst huge and quite unnecessary poverty: in that kind of instance you can simply point to the money spent on the personal luxury of the rich. But in truth, more often the pattern is more convoluted and obscure. It is not that the money siphoned off, into Swiss accounts and yachts and villas and expensive suits is of such magnitude and importance in itself. It is not that it matters much financially that Spanish political representatives insist on flying first-class (a fact that was causing a lot of hostile discussion here, before Xmas). What matters, about the perks, the privileges, and for that matter the genuine corruption, is first, that it cushions the beneficiaries against feeling the consequences of their failures. Second, it prevents those beneficiaries from seeing the failures in the first place.

Why was the crisis not foreseen by those who had the power to see it and to stop it? Because they had no interest in looking, and every interest in looking away. That's not corruption as we normally understand it. But it's a process to which corruption contributes - and the process is more damaging than corruption itself.

But people tend to point to corruption instead. Partly because corruption is real enough. Partly becauser it is easier to understand. It is easier to understand that such-and-such creamed off x millions for themselves, or gave contracts to somebody who had bribed them, than it is to grasp that the problem is less that the money has been stolen, and is hiding somewhere, than that when a bubble bursts, a lot of money ceases to exist and never, really, has existed. And that therefore everyone has massive debts that can't ever be paid. Not even if we tracked down every last cent of misappropriated cash.

So we blame, not without reason, los políticos. But of course, anybody can do this, and from any political viewpoint. And although political corruption can be, perhaps usually is, institutional, sometimes this involves not seeing the wider wood of institutional economic failure for the trees of political corruption. Which is convenient, in some ways, for some. Especially if their wellbeing, if not their salary, depends on not understanding that there is more to this than corruption.

I said this, in another place, some time ago:

Re: corruption, this always comes up whenever there's a free-market disaster. The simple reason is that there's always plenty of corruption and cronyism about in a boom, but because there’s a boom, nobody wants to say much about it, everybody’s making their wedge, who cares. Then there's a crash and all the free-market enthusasists cry that it isn't the free market that caused the problem, not low taxes, dear me no – it was the corruption! Which, as I say, is always there for all to see and blame.

I tell this story often, but it suits. A dozen years ago, when I found myself working in the library of a university which included a business school, there was this slew of books all lauding as an example for Europe the South Korean economic model, which was defined as consisting of free markets and flexible labour. This was a bit odd, since there had just been an enormous crash in South Korea. But, of course, the books had been commissioned and written before that happened, and nobody could possibly have anticpated a crash when the free market was working so well.

Anyway, there was a pause of a few months and then a new flood of South Korea books arrived for the business school. All of which recommended that Europe adopt an economic model based on free markets and flexible labour – and avoid at all costs the South Korean model, defined as consisting of cronyism and corruption.

You see the point. Provided that your salary doesn't depend on your not seeing it.

Paul Mason made a film about the Spanish crisis, which was on the BBC the other day. It's pretty good.

One could of course quibble with this or that, and naturally if I made a similar film it would have less emphasis on the Spain of beaches and summer tourism. I would have shown more of northern Spain than a couple of shots of Asturian miners firing homemade rockets at the police. But this is not important. In fact, concentrating on Valencia had its merits, not least that it riled the mayor of Valencia, Rita Barberà, who complained about the image that the programme gave of her city.

Barberà might have been better off keeping her mouth shut and thanking the God, in whom the Partido Popular of Valencia fervently believes, that the programme merely used Valencia as an example to illustrate Spanish problems rather than go more closely into the Valencian administration itself and its particular quirks (which included fielding, at the last regional election, a sizeable number of candidates on its party list despite their being under investigation for corruption).

Although Mason makes reference to corrupt, or potentially corrupt relations between the banks and politicians - well illustrated here - he doesn't mention, for instance, the Gürtel Case, the network of corruption which has characterised the Valencian PP. Nor does he mention the name Francisco Camps, though that well-dressed gentleman can be seen in the clip that shows the opening of Castellón Airport.

Rodrigo Rato is another name that is not heard on the commentary, though he too appears in the footage. Head of Bankia, the bank which was formed in order to turn a number of chronically ailing Spanish regional banks into a huge chronically ailing national bank, Rato has, this past month, been testifying in court, accused of false accounting, a case which does not seem to have been, so far, widely reported abroad. This surprises me, given the normal, high degree of international interest in the legal adventures of former presidents of the IMF.

Come to that, Gerardo Díaz Ferrán is also facing trial, and unusually for a rich man, is actually in prison while awaiting his hearing. Who is Díaz Ferrán? He was head of the Spanish equivalent of the CBI.

So you can see why Spanish people talk about corruption: that's the head of the employers' organiastion, the head of the country's biggest bank, two former ministers (Rato and Jaume Matas) of Aznar's government, and for that matter a large number of other high-level politicians and businesspeople, all facing trial, under suspicion or already convicted of serious financial crime. This corruption is not trivial, nor unsystematic.

And yet, as Mason said in a blog post written while working on his Spanish film:

It is facile to search for "national" sources of corruption.

He went on:

Corruption happens in a market economy everywhere it is allowed to.

It's been rife, as we now know, in the London and New York financial systems; it was present in the German car industry; it is present across the Italian system of government.

Of course. But part of the problem with the "corruption" narrative is that it does tend to produce that "national" perspective. People do tend to "search for 'national' sources of corruption". Hence, for instance, the way the concentration on corruption as the source of the Greek crisis has enabled Greeks, and all Greeks at that, to be portrayed as the problem, as if it had nothing to do with anybody else and the whole of the international financial community had been helpless and innocent victims of a corrupt network of Greeks. That perspective has been crucial in turning a crisis into an absolute disaster.

But it can be portrayed like that from outside, so it is. Moreover it can feel like that from inside, too, since people are rightly angry about corruption, and rightly or wrongly, inclined to look, first, at home for the people on whom to blame the crisis. But to me, the involvement of a figure like Rato goes to show what an international affair the crisis has been. The corruption, the speculation, the recklessness - these were all international in nature. European banks and institutions had no secrets hidden from them that were known to Spaniards on the street. They knew. Their man was in charge.

But in 2013 Spain will ask for a rescate and from that point onwards, it will, I think, essentially assume national responsibility for an crisis which has international roots. Spain will be at fault, and the spending of Spanish state institutions, rather than international financial institutions, will be identified as the source of the crisis. Those institutions will be dictating the terms by which they try, at the expense of ordinary Spaniards, to pay for a crisis for which they, the institutions, were largely responsible. There is something corrupt, in one sense or another, about that.

[Thanks to doctorfive]