Category: Corruption

Loud thunder, little rain: China’s new leaders target corruption

by Kenneth Chern

China’s new leaders are aware of the danger that corruption poses to the nation’s social stability and economic development.

But entrenched corruption at the local and national levels, including among the families and friends of those very leaders, will make it difficult for them to break the link between money and power that frustrates the masses but sustains the power of a Communist Party that long ago abandoned political belief for economic gain.

A 2007 report of the Carnegie Endowment for International Peace by Minxin Pei called the level of Chinese corruption “astonishing,” noting that it cost $US86 billion a year, more than China’s annual education budget. Things have not gotten any better. The Bo Xilai affair – Bo’s wiretapping of other top Chinese leaders, his son’s privileged lifestyle abroad, and his wife’s murder conviction — was but the most lurid case of rampant corruption that has shaken the trust of the Chinese people in their government.

Other high-profile cases have left the public seething: the melamine-laced milk that poisoned hundreds of infants; the Wenchuan earthquake that toppled “tofu schoolhouses” onto pupils while government buildings stood firm; the bullet train crash in Wenzhou that disgraced railway czar Liu Zhijun; and the sale by Wukan officials of prized farmland to real estate developers that triggered villager demonstrations and violence.

In his speech to the 18th Party Congress last week, outgoing President Hu Jintao stressed the need to fight corruption, warning that if the issue is not addressed, “it could prove fatal to the party, and even cause the collapse of the party and the fall of the state.” Significantly, he warned leading officials to “strengthen education and discipline over their family and staff.” Along the same lines, incoming Party general secretary Xi Jinping in 2004 instructed, “Rein in your spouses, children, relatives, friends and staff, and vow not to use power for personal gain.”

But Chinese leaders have made similar warnings for years without making serious headway. That’s because of what Kenneth Lieberthal of the Brookings Institution terms the “marriage of wealth and political power” which supports an economic strategy based on rewards to local officials for “producing rapid GDP growth while keeping a lid on social unrest.” Put another way, the breakneck speed of Chinese economic development provides wealth that is distributed as patronage and provides support for the Party’s continued political monopoly. And campaigns against corruption evoke the Chinese proverb, “Loud thunder, little rain.”

More specifically, Minxin Pei cites two characteristics of corruption — the corruption of local state institutions through the purchase and sale of government appointments, and “collusion among local ruling elites” or “groups of local officials who cooperate and protect each other.” These practices drain the economy and feed public cynicism but they nurture the political and economic ambitions of entrepreneurs and government officials who thrive in a poorly defined regulatory and policy environment.

This is the social context in which Chinese leaders and their families operate, which is why the calls of Hu Jintao and Xi Jinping for discipline of families and staff is so interesting. Politicians, their relatives, staff, and friends use their political clout to build businesses and line their pockets. The average wealth of the richest 70 members of the National People’s Congress in 2011 was over US$1 billion. China’s central bank reportedly has evidence that up to 18,000 officials and employees of state-owned firms have fled China since the mid-1990s, taking $127 billion with them.

And recent reports have shown how relatives of top Chinese officials have grown wealthy. Xi himself reportedly has sisters and brothers-in-law with “huge interests in China’s real estate, minerals and telecommunications sectors.” And the family of Premier Wen Jiabao, perhaps the strongest reform advocate of all China’s top leaders, has been reported by the New York Times to have US$2.7 billion in wealth.

The reality is that Chinese leaders, even those who call for (and may sincerely believe in) reform and a crackdown on corruption, find themselves in a social web of political influence and enrichment that sustains the status quo. That reality will make it just as hard for the new leaders as it was for their predecessors to make a serious tilt at corruption.

Corruption and influence peddling are as old as the Chinese nation, and as old as human history. What is new is the demand of poor farmers, workers, and China’s growing middle class for a level playing field and a fairer chance for opportunity. Growing social tensions and environmental stresses make the current system unsustainable for the long term.

How Ji Xinping and the new Politburo meet that test will determine history’s verdict on whether they are authentic leaders with the courage to take the needed steps for the common good of the Chinese people and the welfare of the Chinese nation.

Kenneth Chern is Professor of Asian Policy at the Swinburne University of Technology and Executive Director of the Swinburne Leadership Institute.

This article was first published at www.theconversation.edu.au

 

Media, unions and political parties seen as Australia’s most corrupt institutions

by Sunanda Creagh

The media, trade unions and political parties are seen as Australia’s most corrupt institutions but fewer than 1% of people have had recent direct experience of graft, a new poll shows.

The survey, titled Perceptions of corruption and ethical conduct and produced by the Australian National University’s Research School of Social Sciences, surveyed 2020 people aged 18 years and over by phone between August and September this year, with a response rate of 43%. The results were adjusted to represent the national population.

“Satisfaction with democracy in Australia remains high by international standards, although it is lower in 2012 than at any time since 1998,” the study said, with most concerns related to the quality of government.

“There is a widespread perception that corruption in Australia has increased, with 43% taking this view and 41% seeing corruption as having remained the same,” the report said.

The police and armed forces were seen as most trustworthy while the media, trade unions and political parties were seen as most corrupt.

“The media one is interesting because it confirms a finding across 25 EU countries earlier this year about the pillars of integrity in our community – the media again came down near the bottom,” said study author, Professor Adam Graycar.

“We’ve seen a number of media stories recently globally — the Murdoch scandal in the UK. There have been issues with talk back radio and the cash for comment allegations. This poll was done before the latest talk back controversy. But it’s a global phenomenon and the implications are important because of the very important role the media has in transparency,” he said.

While less than 1% of respondents said they or a relative had experienced corruption directly, “where corruption exists, it does have a serious and deleterious effect on government, on the delivery of our services and infrastructure,” said Prof Graycar.

While political parties were seen as corrupt, more than half of respondents see ‘almost none’ or ‘a few’ federal politicians as being corrupt and public scepticism of politicians’ motives has been stable since the 1990s, the study said.

Professor Mark Findlay, Deputy Director of the University of Sydney’s Institute of Criminology, said public perceptions on crime “often have very little to do either with personal experience or factual knowledge.”

“It is particularly interesting that police corruption is no longer viewed in the serious end (when, in fact, instances of such corruption, particularly in some states such as Victoria, see no sign of abating),” he said.

“This may be explained by things as tangential as new series of ‘Underbelly’ in this viewing season, or in more concrete variables such as a desire to believe in our institutions of public security in a political climate of border protection and prevailing concerns about local and national security.”

The loss of confidence in politicians and trade unions is troubling but consistent with a worldwide disillusionment with conventional institutions of representative governance,“ Prof Findlay said.

“What is more troubling is the belief in media corruption when, in other circumstances, the media is relied upon to expose public sector corruption. Maybe all this could be put down to the recent political scandals and degenerating level of political debate, and the biased and irresponsible role of individual media personalities in fuelling this state of affairs.”

Overall, respondents were mostly satisfied with the direction Australia is headed in, with the economy, immigration and employment topping respondents list of most important issues and concern for the environment on the wane.

Respondents were only asked about perceptions of corruption in public institutions, not private businesses or corporations.

Darren Palmer, Associate Professor in Criminology at Deakin University said the poll showed anti-corruption agencies needed to boost their profile.

“One of the most interesting and also somewhat surprising results is that almost half of the respondents indicate they would report suspected corruption to police. This flies in the face of the major restructure of mechanisms for dealing with corruption, whereby all jurisdictions have invested heavily in various anti-corruption agencies, including those dealing with allegations or suspicion of police corruption,” he said.

“More needs to be done by these agencies to enhance public awareness and access to their complaints processes.”

Sunanda Creagh is the Editor of  The Conversation.   Additional reporting by Bella Counihan.

This article was first published by The Conversation at www.theconversation.edu.au

 

The Unrepentant And Unreformed Bankers

By Phil Angelides

Money laundering. Price fixing. Bid rigging. Securities fraud. Talking about the mob? No, unfortunately. Wall Street.

These days, the business sections of newspapers read like rap sheets. GE Capital, JPMorgan Chase, UBS, Wells Fargo and Bank of America [2] tied to a bid-rigging scheme to bilk cities and towns out of interest earnings. ING Direct , HSBC and Standard Chartered Bank  facing charges of money laundering. Barclays caught manipulating a key interest rate, costing savers and investors dearly, with a raft of other big banks also under investigation. Not to speak of the unprecedented wrongdoing that precipitated the financial crisis of 2008.

Evidence gathered by the Financial Crisis Inquiry Commission clearly demonstrated that the financial crisis was avoidable and due, in no small part, to recklessness and ethical breaches on Wall Street. Yet, it’s clear that the unrepentant and the unreformed are still all too present within our banking system.

A June survey of 500 senior financial services executives in the United States and Britain turned up stunning results. Some 24 percent said that they believed that financial services professionals may need to engage in illegal or unethical conduct to succeed, 26 percent said that they had observed or had firsthand knowledge of wrongdoing in the workplace, and 16 percent said they would engage in insider trading if they could get away with it.

That too much of Wall Street remains unchanged is not surprising. Simply stated, the banks and their leaders have paid no real economic, legal or political price for their wrongdoing and thus have not felt compelled to change.

On the economic front, the financial sector has rebounded nicely from its brush with death, thanks to an enormous taxpayer bailout. By 2010, compensation at publicly traded Wall Street firms had hit a record $135 billion.

Last year, the profits of the nation’s five biggest banks exceeded $51 billion, with their chief executives all enjoying pay increases. By 2011, the 10 biggest U.S. banks held 77 percent of the nation’s banking assets.

On the legal front, enforcement has been woefully inadequate. Federal criminal financial fraud prosecutions have fallen to a two-decade low. Violations are settled for pennies on the dollar – the mere cost of doing business, with no admission of wrongdoing and with the bill invariably picked up by insurers or shareholders. (When it’s shareholders, that’s not someone else far away, that’s your 401(k), pension fund or mutual fund.)

When Goldman Sachs was charged with failing to set policies to prevent insider trading, it was fined $22 million, an amount the bank collects in about seven hours of trading. Goldman’s record $550 million penalty for securities fraud in 2010 amounted to less than 2 percent of that year’s revenue.

On the political front, after a brief stint in the penalty box, the big banks have resumed the political muscling that got them two decades of deregulation.

To block reform, the financial industry has spent more than $317 million on lobbying in Washington over the past two years and more than $230 million in federal political contributions in the 2010 and 2012 election cycles.

It’s been to good effect. Two-thirds of the regulations called for in the financial reform law passed two years ago are still not in place. And the House Republicans, the banks’ sturdiest allies, have slashed at the budgets of the Securities and Exchange Commission and theCommodities Futures Trading Commission to impede their ability to investigate wrongdoing.

Clearly, the present order is unsustainable. We need to demand fundamental changes now, breaking up the big banks to snap their stranglehold on our markets and our democracy, ensuring that the newly minted financial reform laws are implemented, and wringing out rampant speculation.

But true reform can only occur if we root out the corruption that has distorted our banking system and undermined the productive work of the many good people in the financial sector.

The system of financial law enforcement is clearly broken. Think of it this way: If someone robbed a 7-Eleven of $1,000 but could settle a few days later for $25 and no admission of guilt, would they do it again?

Only enforcement with real consequences will work. That means vigorous pursuit of criminal cases against individuals involved in wrongdoing, the surest method to deter malfeasance.

It means enforcement agencies eschewing weak settlements in civil cases and seeking remedies with teeth such as civil penalties, restitution and executives forfeiting their jobs. And, it means tougher financial fraud laws. In that regard, the bipartisan proposal by Sens. Jack Reed, D-R.I., and Charles Grassley, R-Iowa, to increase fines for securities fraud is a place to start.

To make any of this a reality, the U.S. Department of Justice and the federal regulators must have the will and the resources to do the job. President Obama has asked for additional funds for the Department of Justice, the SEC and the Commodities Futures Trading Commission.

Giving these agencies the tools to detect and prosecute wrongdoing will more than pay for itself – the Commodities Futures Trading Commission’s fine against Barclays for interest rate manipulation alone will pay for almost an entire year of that agency’s budget.

None of these changes will come easily, but this much is clear: We cannot allow Wall Street to continually flout our sense of right and wrong, to erode faith in our legal and political systems, and to put our financial system and economy in jeopardy.

Originally published in The San Francisco Chronicle.

Political Corruption in New York: Low Comedy and High Cost

by Dan Collins

It’s possible, what with the rush of the holiday season, that you have neglected to pay close attention to the city’s latest political corruption trials. I must admit my own attention was wandering until this week, when a Brooklyn Assemblyman was indicted for attempting to solicit bribes so he could pay lawyers to defend from charges of taking bribes in a previous corruption trial.

The star of that saga is William Boyland Jr., who exemplifies all the reasons the words “state legislature” make New Yorkers want to beat their heads against the nearest flat surface.

He has a completely safe seat, which he inherited from his father, William Boyland Sr., who inherited it from his brother. Junior has had a totally undistinguished career in Albany, starring only in the narrow but competitive area of filling out expense forms. But back home he’s apparently been very active in a business loosely described as consulting.

In Albany, consulting is generally a euphemism for being paid to get somebody state money.

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Using the Colombia Model in Afghanistan

by Paul Wolfowitz and Michael O’Hanlon

Why the Colombia model — even if it means drug war and armed rebellion — is the best chance for U.S. success in Central Asia.

President Barack Obama made clear this week that the remaining troops will soon come home from Iraq. Some 10 years after the first troops landed in Afghanistan, we’re now nearly back to a one-front war. But where are we, really? It’s clear that both citizens and Washington alike are collectively weary of war and frustrated by this particular mission, with its interminable timelines and uncertain partners in Kabul and Islamabad, even if it has only been three to four years since the United States intensified its collective focus and resources on this mission. 

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