A Supreme court get out of jail free card

The highest court in the world of money just made securities fraud a whole lot easier.

Goodgod will we ever learn?

Global Integrity Report

The Global Integrity Report came out last week.

On a scale of Yemen to Finland how corrupt is your country?

click!

Or, alternatly, you could check out Transparency International's Global Corruption Perceptions Index.

Check 'em both out!

Shopping Can't Save the World

Over the previous 50 or so years we have seen the development of charities driven by classical capitalists. The Bill Gates' of the world, if you will. These magnates destroy take from the little guy with one hand give back to society with the other.

In a two action motion, they complete a viscous cycle. In the fist action they perpetuate the inequalities and injustices of the global capitalist system, they reinforce, and profit from the agreements and accords that keep poor people poor and ignorant. They profit big time. 

Then, in the second, they attempt to absolve themselves of the guilt that their business practice has brought upon them. They set up charities. And people forget. That they were ever bad in the first place is a secondary consideration. (I mean, they run charities, so how could they have done wrong in the past?)

Don'f forget! Microsoft is one of the most ruthless, dastardly and morally corrupt corporations in the world. They have abused so many people, from Namibian schools, to Danish programmers, it is remarkable. They are still malicious, even with a cherry on top. Of course, the same goes with many top companies in the States in particular, including Apple, Nike, Starbucks, Gap, etc...

These days, however, a new kind of business model has become the norm. One in which the two actions of destroying and deluding repairing society happen all at once. Its called brand aid and it's that same delusion we were used to, now it just happens all at once!

Should you feel better about buying a shirt you don't need from GAP because a portion goes to fighting aids? NO. Should the fact that Apple gives some tiny amount to fighting aids or feeding the poor forgive their abusive business practices NO!

These kinds of charity are merely promotional material. How could Old Navy or Microsoft get rich without poor people to abuse? Not as easily, that is for sure. It is in Starbucks best interest to keep the poor disenfranchised, but give them just a little help, so the public image of GAP changes so slightly, allowing the Nike to sell an extra million t-shirts/programs/anything.

Here's a little presentation from Lisa Ann Richey, the author of the upcoming book entitled Brand Aid: Shopping Well to Save the World. Please, please watch this Bono clip at 3:47. Ugh.

This is not to condemn projects that promote small business in impoverished nations, as Zizeck does in this great little video. There are thousands of products out there that are wonderful and worthy of your dollar. It is just to say that the odds are stacked against the poor. Big businesses enjoy it, and won't change anything. A little cash the flows straight to entrepreneurs in poor countries is a good thing. Indeed it is the least we can do, but it just won't solve anything.

It reminds me of the moral question my family sometimes asked itself when we lived in Kenya. Should we hire some more people? Should we help out more poor Kenyans, who most likely are over qualified for any position we can offer? Sure. But it won't solve anything.

That 1% goes to fight poverty in someway does not forgive overspending on silly things people don't need. That a handbag is made by a poor Ghanain woman does not make it good to buy fifty. It won't fix anything on the systemic level, therefore the moral penance it seems to afford is illusory, and by no means does it justify living beyond our means (as environmentalists). The best thing we can do for the poor is understand that the rules of capitalism are made by the WTO, the World bank and the OECD (and often local governments) and they are implicitly working against the poor by having the best interests of the rich at heart. And, even more important, we should strive to solve that. And how.

Hat tip to: Slavoj Zizek and Brand Aid

Harper is a very big problem

A couple of snippets about Harper:

• "Since 2006, Harper has cut funding for women’s advocacy by 43 per cent, shut 12 out of 16 Status of Women offices in Canada and eliminated funding of legal voices for women and minority groups, including the National Association of Women and the Law and the Courts Challenges Program. "

• "Harper decorated the government lobby in parliament with photos of just himself, instead of the traditional portraits of former Prime Ministers."

• Harper has tried (and failed) four times to create a law that would allow the government to obtain private information from internet providers without a warrant.

• "In 2007, Harper cut $1.2 Billion in spending for the establishment of quality national childcare. However, he never kept his promise to cut the $1.4 billion in tax breaks he gives to oil companies." 

• During the G20 summit in Toronto more than a thousand people were arrested. Less than a hundred were actually charged with a crime. The others.... well... they were just being pesky I guess.

• Herpy is tough on crime! He'll double the 5 billion dollars we spend on the prison system, despite the fact that crime in Canada is falling for a decade.

• Harpster reinterpreted the meaning of child soldier (he thinks they belong to their 'national military') so that Canada can no longer recognize the vast majority of child soldiers as being child soldiers.

• Harp has cut Canadian aid to Africa in half. Choosing instead to use aid as a tool for improving relations with middle income countries which now receive an 80% portion. But wait, he gets better, he actually froze all aid in 2010.

• There are close to 100 First Nations communities in Canada that have unsafe drinking water. Herpie doesn't think that clean water is a right, and did not allocate any new funding to solve the problem in the 2011 budget

• Harper is actually the love child of Dick Cheney and Karl Rove. They mixed their sperm together so they wouldn't know who the real father is and Gm'd their sperms to produce babies with no trace of the vestigial organ known as the human heart. (not intended to be a factual statement)

• Every spring Hearp prorogues parliament so he can retreat back to the prairies where he lays 2 million egg sacs beneath the soil. (not intended to be a factual statement)

Sources for (most of) these can be found at ShitHarperDid.ca

Good ol' Kenyan Politics

Ruto is a thug. He  has been embezzling, smuggling, illegally selling, lying, cheating and stealing his entire career as a Kenyan Politician. Then again, he is nothing out of the ordinary.


He was suspended as a Higher Eudcation minister on charges of corruption in October. He was acquitted just a few days ago and cleared of all charges. The half million US that disappeared out of the coffers of the Kenya Pipeline Company apparently didn't go directly into his pocket.

He is also one of the six men accused of inciting the post election violence in 2007/8. He has been trying his best to get the case deferred, even flying to the Hague this week to haggle, but has failed at every attempt

And, of course, he will be running for president.

In your country, would this man, if only accused of these crimes, run for office?

The horror of the 2007/8 election violence in Kenya

Herpy likes to keep the media at bay

Harpster has trouble with democracy and with names

It is a troubling time for Canadians. A federal election is upon us. It is the 4th election in seven years. Over the past five, Harper has lead a minority Conservative government who have been efficiently dismantling Canada's democracy, it's regard for the environment, and its reputation in the world for being a progressive and egalitarian nation. I am no expert on Canadian Politics, but I am aware that the situation is dire.

Over the past years Conservative scandals have been so numerous, it is hard to pick any in particular that stand out. Nonetheless, here are a few:

Harper has seen to it: that war resistors are offered no shelter in canada, that the choice of abortion be left off the G8 maternal health policy (even for rape victims), that parliament was prorogued not once, but twice.... and that is just the beginning of the list. He's been shutting down women's groups, limiting funding for grassroots organizations, blatantly appealing to particular special interest lobbies without regard for consequence (video) and limiting the media's ability to showcase his deception and deceit (video and video). He thinks that the Canadian people don't care that he broke the law by deliberately misleading parliament about the cost of fighter jets he proposed Canada purchase:




Allow me to go into a little more detail about the two prorogations. They were both for the explicit purpose of avoiding a motion of no confidence. The likelyhood of losing that vote came about in 2009 because Herpie tried to limit civil servants rights to strike, eliminate the dollar 95 that political parties garner for each vote they receive in an election, and tried to limit the recourse that women have for pay equity issues; things he's still trying to do.

The second prorogation was as blatantly undemocratic as the first. Even the Economist had a dig: "Mr Harper’s move looks like naked self-interest" His efforts to shut down parliament amidst the controversy of the Afghan detainees affair succeeded.

Now, all of this is broad strokes, so more research/attention is needed to do any justice to how terrible this government really is. If you have anything to add or correct, please do!

Even now there are great little scandals to pay attention to. For example:

Why does Harpy have trouble with his own party member's name?




 Because he is conniving bastard.

 What a tool.

(Apologies for the overly dense linking!)

American blinders on?

Do people still believe that the US is the champion of democracy in the world even after learning that the US has supported Mubarak with 2 billion dollars every year (including 1.3 billion in military support)?

Do people still believe the US is promoting good governance even after learning that they support the current corrupt and oppressive (to varying degrees) regimes in Saudi Arabia, Yemen, Israel, Algeria and Bahrain?

Do people still believe the US helps to promote smooth transitions to democracy after learning that they supported military coups in Tunisia, (recently reversed!) Algeria, and oversaw the transition of power from father (who was assassinated) to son in Lebanon?

(And we haven't even started to talk historically, or to mention Iraq or Iran.)

Hell, the US even started giving money to Gaddafi in 2009!

Surely the truth must be coming out now. I refuse to believe that someone could credit the US's involvement in the Middle East for the peoples' uprisings these days.

It is also quite clear (if you check this graph) that the US has and will continue to use more military funding to bolster tis to autocratic regimes, than it has to back up the clamor you always hear about liberalization and democracy:

FMF = Foreign Military Funding

And yes, I do mean the Gaddafi: the madman, the tyrant, the Berlusconi of the Middle East (if Berlusconi were a little more prone to pogrom):

Then again, there is nothing like a good ol' virgin female bodyguard troope eh boys?

Website of the Week - Transparency International

Transparency International is 'the global civil society organisation leading the fight against corruption.' Their most famous publication is the Corruption Perceptions Barometer. This report has been criticised much for the same reason I criticised Daniel Kaufmann's corruption paper just yesterday. It is a survey, so people must volunteer information about corruption. If different people have different incentives to lie, or not lie, about corruption the whole survey is moot.

So long as we are aware of this limitation, I think the report can still offer some interesting information. Here are the most corrupt nations on earth according to the citizens of those nations:

Afghanistan, Myanmar, Iraq, Sudan and Somalia were the lowest-ranked while New Zealand was the highest, with last year's winner Denmark as runner-up and Singapore in third. None are too surprising. The scale ranges from 1.1 in Somalia to 9.4 in New Zealand. The vast majority of countries score below 5. Corruption is rampant. Clear legal frameworks and fair, effective enforcement of the law continue to be a great challenge for the vast majority of nations around the world.

Beyond that report, TI also publishes a Global Bribe Payers Index as well as a Global Corruption Barometer.

TI is fighting the good fight against corruption by strengthening and supporting watchdog agencies both national and international. It is present in about 100 countries and works to foster freedom of information around the world. It also produces extensive reports on corruption in these countries.

I love this organization. I think that bringing corruption to the forefront of the global struggle against poverty is exactly what needs to happen. More than anything, it is corruption that keeps poor people poor.

TI also has a nice little section of their website devoted to news about corruption around the globe. For this little section, as well as for their expansive documentation of global corruption, they get website of the week.

Rambling on about Corruption

Imagine a customs agent sitting at his/her desk in at a boarder between two impoverished nations. They pull you over and ask to examine your papers. You have a visa, and all the documents you thought you needed. The agent solicits a bribe from you, you give in and pay the equivalent of 20 USD. How do you feel? Cheated?

What if that agent can't afford to pay for school for his/her children on the less than meagre salary they receive without your bribe? Would you feel any different? What if that bribe went to something less noble like fuelling his/her alcohol addiction? Different still?

How is a tax diffferent from this bribe? Is the guise that all taxes fund happy social programs what legitimizes them? Isn't it just as likely that the inflated yet legitimate salary of a high ranking civil servant will go to booze? And still isn't it more efficient for a customs agent to gain his/her salary on the spot by extorting cash from travellers?

I have too many questions.

One of my favorite economists who is concerned with corruption is Daniel Kaufmann. He answers some of my questions quite well. Here he shows that corruption does not 'grease the wheels' of growth. He claims that "if bureaucrats have control in determining the extent of regulatory burden and red tape delay so to extract bribes" the efficiency of the system falls. He surveys thousands of multinational firms and finds that the ones that say no to bribery deal with less red tape.

Trouble with this study begins at the fact that it is a survey and firms must volunteer their information. I wonder what incentives the firms had to lie about their practices. Cue the old paradox of believing someone who admits to lying.

"I lied"
"You did?"
"Nope"

In any case I believe his conclusion. Even if it were more efficient in terms of overhead, or red tape, more corruption is bad for business simply because it is the powerless that ultimately suffer. The powerless lose power to corruption.

Ah, the intricacies of corruption. I imagine a spectrum of corruption where on one side lies the powerful that abuse their power to gain money but ultimately function as they would normally his/her job (such as our border friend). On the other side lies the powerful who change the outcome of their work on account of their illicit gains. Can you slide across the spectrum on stolen ice skates or are you fixed by your moral compass? Is the greasy palm of a customs agent always likely to stop illicit goods from entering?

To get an idea of how vast, pervasive and serious corruption is, here is a nice graph that ill just throw in for fun from Global Financial Integrity:

More money flows out of impoverished nations because of corruption than flow in because of charity tourism and remittances:

Just to clarify: "The term, illicit financial flows, pertains to the cross-border movement of money that is illegally earned, transferred, or utilized. Illicit financial flows generally involve the transfer of money earned through illegal activities such as corruption, transactions involving contraband goods, criminal activities, and efforts to shelter wealth from a country’s tax authorities."

No Failure for Organized Bribery

FP's Failed State Index belies important social realities that rely upon cvil society, not on strong government as I have argued before. Here is a quote From Rachel Strohm at Economic Geographies where she demonstrates what I mean. A failed state, such as the DRC in this example, is not in complete bedlam. Here Ms. Strohm tells us how the police in Kin do not solicit bribes for no reason, though they could well do, they only take bribes in the correct social context.

Bribe-seeking is technically illegal & unregulated behavior, and can look rather chaotic to the first-time observer. If you’re wealthy enough to be traveling by car in downtown Kin, you may rest assured that the roulage will be looking for any pretext to stop you and ask for payment of an imagined fine. (In the situation leading up to the photo above, a friend had parked quite legally in a designated parking spot outside my apartment – after which we were surrounded by police & escorted to the station on claims that we were blocking the road.) Interestingly, though, the key word here is pretext. I never saw any interaction between the police & drivers that did not involve some sort of legalistic claim to the driver’s money, even if both parties knew that the accusation was false. By contrast, white foreigners probably look just as wealthy walking down the street as they do when in cars, but the same police officer who stopped us morning after morning whilst we were driving to work scrupulously ignored me when I walked past him on my way to lunch. Imagined moving violations are presumably easier to justify than imagined walking violations, and the group norm specified that bribery in this particular location had to have a legal pretext.

Social order can be found even within the indicators of state failure!

Dear Kenya, GM Tastes Bad

After years of praising food in Kenya for being fresh, nutritious and delicious, I despair at the news of President Mwai Kibaki deciding to degrade Kenya's food supply and allow GM crops.

It is a bad idea for many reasons in addition to the fact that GM food is often less nutritious almost always tastes worse. Kenya does not have the technology to cope with the complications that GM crops bring with them. Issues like pest control, nutrient leakage, and cross pollination will all threaten Kenya's biosphere. Kenyan farmers will find themselves in the pocket of biotech companies that have a history of extortion. (I don't even need to provide you with links for that claim.) Big deals like this one only reinforce the structure of Kenyan politics and the rampancy of corruption.

Earlier this month Hatian farmers rose up against Monsanto. Powerful stuff. If only Kenyans could see this!






HT: Structurally Maladjusted

War, Rent Seekers, Dutch Diseases, Elite Capture, and One Trillion More Problems in Afghanistan

The NYT today reported that one (1) trillion (a thousand billion) USD worth of mineral deposits have been found across Afghanistan. For a country with a GDP of 21 billion (neighbours Iran make 778 billion, Pakistan 421, Uzbekistan 72), this could be a real boon.

We could go off and discuss how GDP isn't a good measure because of differences in populations,  inequality, the black market, non-market transactions, the non-monetary economy, environmental considerations and externalities, but that is for another time. For now, we can tell there is a trillion dollars sitting underneath one of the most war-torn nations on the planet! What could possibly go wrong?

For decades natural wealth has been discovered in dozens of developing countries, but rarely has it translated into anything beneficial for the average citizen. Why? What becomes of all that wealth?

The most obvious outcome in this case will be an intensified struggle for ownership/control of the land. For details on this I would advise reading someone familiar with the conflict (you know who you are). I will gloss over the civil conflict side for now and simply predict more terrorism and more war. Instead of dwelling on the war as we probably should, let us suppose ISAF is able to gain and keep control over large areas of land to allow for the extraction of these minerals (Ok, a huge leap, I know), what else will go wrong?

The Afghanistan government will likely hand over the rights to mining companies in the US or China for a little cash in the back pocket. Whose back pocket would benefit is not exactly clear. Elites will have to battle for it. In any case, one group - be it the central government or otherwise - will sell off the stuff quickly to seek a little rent. Whats wrong with that?

Finding a great source of wealth outside the (marginally) taxable labour of citizens of their nation and rife with corruption already, the Afghanistan government will allow elite capture of the mineral wealth and ignore their obligations to infrastructure, institutions (ie. health and education) and people. Well, I suppose they won't be worse off than they were before, right?

The natural course of action for a government that has found a revenue stream is to develop that stream. Investment will pour into resource extraction at the expense of other public investments. Any large endeavours into any other economic activity will be sidelined and currently active sectors will eventually crumble. This is a concept known as the Dutch Disease.

If the investment into extractive industries is wildly successful, at best a dubious proposition given the security situation, then Afghanistan has the potential to export a massive amount of minerals. If they export enough to influence the world price then their terms of trade could fall and they could experience immiserizing growth. Given the elite capture of revenue, the rent seeking and the disease from the dutch, a fall in the terms of trade could outweigh the gains from growth.

 All of these perils of extractive industries (and I haven't even mentioned environmental degradation) are general and applicable to any economy. Afghanistan is a special and complicated case where America (and others) are at war with the Taliban. For Afghans only one thing is certain, bringing that money to the surface will only cause more trouble.

Calling Out Quiet Corruption (or Cultural Imperialism?)

"In Uganda, teachers in public primary schools are absent 27 percent of the time. In Chad, less than one percent of the non-wage recurrent expenditures reaches primary health clinics.  In West Africa, about half the fertilizer is diluted before it reaches the farmer. " - Shanta Devrajan, World Bank Chief Economist for Africa


The World Bank this year has focused their African Development Indicators on a concept called 'Quiet Corruption'.

According to the WB this form of corruption, the likes of which Dr. Devrajan discusses on his blog, quitely stifles the chances for growth and prosperity among the poorest people in the world. This type of corruption, they say, is very different from the headline-grabbing corruption scandals that indict morally depraved people for heinous crimes involving some transfer of wealth. Instead of overtly breaking the law for personal monetary gain, perpetrators of quiet corruption may simply not show up for work <=. This notion is broad enough to include all actions that deviate from what is normally expected, such as putting in a lower level of effort than expected, or bending the rules for some people and not for others. 


If we can define this term so broadly it could include what Nicholas Kris(jerk)off wrote in the NYT about the choices that poor people make. Poor people put in less effort to provide for their children than he expects. (Ok, perhaps that is stretching the term, but I just had to mention that terrible article. I won't quote it or deal directly with the problems with it - too annoyed - so you'll have to click on the links.)  


While we cannot deny the facts he quotes, what we can do is find the reasons why quiet corruption is so rampant and why poor fathers blow all their cash on beer (as he should have instead of perpetuating ignorance). If there is a ribbon that ties these concepts together it is the notion of 'role models'. Who are the role models in society? The richest, most powerful and most famous people in many developing countries are the corrupt political elite. They are also, unfortunately, the most emulated. If the people at the top made it there by being corrupt, and they are now above the law, wouldn't that pervert most peoples incentives for honest work? If it appeared that the only way to get ahead would be to cheat, lie and steal then I might also drown my conscience in beer. I might also not show up for work as often. 


But Dr. Devrajan is right: incentives need to change. Work could be more piecemeal, police and regulatory bodies should be better funded, and perhaps most important, the voices of the informed critics must be heard. 


But wait, in light of my contempt for Mr. Kristof, aren't we being a little bit one sided on this issue? I mean, life just doesn't work the same way in all places and we can't expect it to. Here in the UAE, as my neighbour once told me, "It's not a task based life, it's a person based life." Things almost always work differently in person than they do on paper. Some things In the UAE are expected to take more time then they would in the West, and meetings are a good token. Should I demand that this meeting - that I should be in right now - start on time? Should it think of this as corruption that we are expected to be in a meeting, getting paid as if we are, but really we are chinwagging the hours away (or in my case writing blog posts) ? No, that would be rude, people are just getting to know each other before the meeting starts, and that is part of this culture.


So when is it 'quiet corruption' and when is it just an acceptable part of culture? Perhaps the context of rampant poverty makes a difference?