Why politicians are such couch potatoes when it comes to corruption

 

HELLO AND GOODBYE    

This is going to be my last newsletter for a while because I need to focus on writing my next book (about the fight against money laundering), so I’d like to start by thanking you for reading my weary and cynical thoughts every week, and to apologize for the fact I’m not going to keep sending them out.

Looking back at the last couple of years, I see that one of the key themes that I’ve been banging on about is the question of why Western governments fail to do anything (much) about corruption, despite the clear and obvious evidence that it makes all bad things worse. Is it incompetence — or corruption? Is the problem just too hard for honest people to solve? Are politicians themselves on the take, and thus personally invested in perpetuating the situation?

Or is it both of the above, plus something else entirely? 

I had a meeting recently with a think tank employee who was tasked with coming up with some policy ideas for a senior British politician to announce at a party conference. As you are no doubt aware, Britain has a bit of a dirty money problem, so I was delighted to sit down with them. For anyone who’s read this newsletter before, you’ll have noticed that I regularly talk about the need to adequately resource law enforcement, so that’s what I led with. I described how ordinary police forces can’t investigate fraud because they lack trained officers, and how the national-level agencies fail to prosecute kleptocracy for the same reasons. If the politician wanted Britain to stop being “butler to the world,” what they really needed to do was announce a vast increase in funding and pledge to maintain funding levels for the foreseeable future.

“That’s not going to get them any headlines though, is it?” the think tanker replied. “We need something new.”

I did try to suggest some legal changes, but my heart wasn’t really in it because I’d suddenly spotted what the problem was, and it seemed to have resonance far beyond the U.K.

Our governments are like couch potatoes who are determined to get fit. They are unhealthy, they know it, and they know what the solution is: exercise. In furtherance of that strategy, they buy a treadmill. This gets them a good headline, and they like it. So they buy more fitness equipment: a stationary bicyclea StairMastera rowing machinea pair of running shoes that will improve performanceathleisure wear that wicks away sweatsome of those leg warmers that Jane Fonda wore in her workout videos, and so on. Every time they buy something, they say that it’s proof of their commitment to get fit, and headline writers praise them for it.

But at some point, they’ve got enough fitness equipment. That’s when they need to start exercising, but that’s also when the whole calculation changes. Because exercise is difficult and it’s not going to win any positive coverage. In fact, it could well do the opposite: If enforcement agencies bring the kind of long and complex prosecutions required to combat financial crime, they’re likely to make mistakes, and then the politicians will get criticized, and that’s no fun at all. It’s far safer to announce a new legislative initiative, and leave the sweating to someone else at some point in the ever-receding future.

Is there a word for this? Short-termism isn’t right, but I can’t think of another term for a feedback loop that actively militates against long-term action being taken. I am, however, an optimist (even when pessimists win, they lose, as someone probably once said) and intend to remain one. Financial crime is a tax on our societies, enriching criminals and immiserating everyone else. Corruption is a force multiplier for kleptocrats. Tax evasion is weakening our public services. It is so obvious that tackling these linked curses should be a priority that, at some point, even politicians will realize it.

CRYPTO

Last week, I interviewed journalist Zeke Faux about his new book, “Number Go Up,” which is a very good account of the mirror dimension that is the crypto-verse. He was every bit as amusing as his book, and I recommend it to you. One particularly entertaining point that he made was how when he first pitched the idea of the book to publishers, cryptocurrencies had not yet suffered the so-called crypto winter. As a result, he was relying on the collapse happening while he researched the book. Spoiler: It did.

  • “Faux demonstrates his incisive grasp of the story with the very first words of his prologue: ‘“I’m not going to lie,” Sam Bankman-Fried told me,’ he writes. ‘That was a lie,’” as this entertaining Los Angeles Times review puts it.

It’s always nerve-wracking researching a book about current affairs because of the concern that whatever phenomenon you’re describing will be solved by the time you’ve finished writing it. When I was researching “Moneyland,” I was convinced the problems I’d identified were so pressing that politicians would resolve them long before I made it to print. Funnily enough, Nick Shaxson has told me that he felt the same thing when he wrote his own book about offshore finance — “Treasure Islands” — which was published seven years earlier.

So when I say I’m an optimist, do I mean that I think money laundering will be solved by the time my book is finished and the world will be better? Or do I mean that it won’t and people will therefore want to read my book? Good question. Thanks.

RISKS

What might get in the way of the problem of money laundering being solved? A long answer to that question would take up an entire book (perhaps I should write it), but the short answer is just two words: Donald Trump. That’s not to say progress in tackling the mechanisms of corruption is impossible if Trump is reelected. After all, the Corporate Transparency Act was passed by Congress in January 2021 — although, admittedly, with a veto-proof majority — when he was still president, opening the way for U.S. shell companies to become less opaque.

The significance of his reelection for the global fight against kleptocracy is different: Tackling financial crime will be a complex, laborious, lengthy effort, with multiple countries having to be charmed, cajoled and bullied into taking part. The only country capable of leading that effort is the U.S., and Trump is utterly incapable as both a politician and a human being of making that happen.

The European Union is currently poised halfway between making corporate ownership data public or leaving it private. Any U.S. backtracking would embolden European enemies of the plan, thus fatally weakening attempts to create a global standard.

  • “Thanks to the decades of secrecy that such opaque entities have provided, unscrupulous individuals from across the world were able to find safe haven in the EU – circumventing sanctions, evading accountability and committing further crimes with impunity,” said this open letter to the European Commission from earlier this year.

Fighting financial crime should not be a party-political point, in that all democratic states should be dedicated to keeping their economies and societies free of dirty money. However, there is a world of difference between Trump’s incoherent mess of an approach, and that of Joe Biden’s White House, with its careful anti-corruption strategy.

This thoughtful article from Charles G. Davidson and Ben Judah makes clear how corruption is also a threat to democracy, which depends not just on the system being fair, but also on everyone believing that the system is fair.

  • “Financial secrecy has swollen in recent years as elites have abandoned their duty to pay their fair share. A metastasizing culture of tax avoidance by corporations and the wealthy has weakened national values, institutions, and goals across the West while fueling levels of inequality that wreck national cohesion, drive spiraling resentment, and stoke anger. This is empowering the enemies of democracy at home and abroad,” Davidson and Judah conclude.

Transparency is necessary but not sufficient, and passing laws is not enough, as is evident here in the U.K. An immediate response to the Russian assault on Kyiv last year was the passage of a law making public the owners of shell companies that hold U.K. property, with the aim of ending a loophole long enjoyed by the oligarchs that have invested in London mansions. More than half of such properties in the London borough of Kensington and Chelsea still do not reveal their owners, and there is no sign of enforcement action being taken against them.

  • “There is no point building a dam halfway across a river. These gaps are threatening the efficacy of the entire Register,” said Andy Summers, associate professor at the London School of Economics Law School.

Nowhere, of course, is this of greater significance than in Ukraine, where long-term victory over Russia is a tall order in the best of circumstances. Without ending corruption, it will be all but impossible, not least because corruption allegations would make Western aid harder to justify.

REASONS TO BE OPTIMISTIC

I’ve just been in Texas for a few weeks, reading documents relating to the creation of the Bank Secrecy Act, which was passed in 1970 as the world’s first anti-money laundering legislation. At the time of its passage, Richard Nixon — hardly a paragon of cleanliness in public office — was president. After its passage, banks fought against its implementation all the way to the U.S. Supreme Court. Police agencies lacked enthusiasm for it and took years to actually get around to using it. And yet it survived and went on to become the cornerstone of federal and global attempts to clean up the financial system.

The lesson I took from my days with the boxes upon boxes of papers — among them memos between participants, scribbled notes from members of Congress, transcripts of committee hearings, letters from grateful constituents — is that careful, thorough, well-intentioned efforts change the world. They may not earn headlines like the purchase of a new piece of fitness equipment does, but all they require is for a sufficient number of people to be prepared to put the hours in, and they will come to pass.

And that reminds of what Daria Kaleniuk, the tireless Ukrainian activist, said years ago when I asked her how she kept going in her battle to end corruption despite ceaseless official obstruction (and worse). The aim isn’t to make the world perfect — just to make it better.

  • “I don’t think about ending corruption completely. We are currently at 4% of where I want us to be, and my ambition is to get to 5,” Kaleniuk said.

WHAT I’VE BEEN READING

Speaking of tireless activists, I really enjoyed Naomi Klein’s “Doppelganger,” which is as passionate and thoughtful as you’d expect one of her books to be. It starts from the rather slight observation that she kept being confused with Naomi Wolf, before exploring the weird synthesis between the far right and the New Age left that has taken place since the pandemic. 

Apart from that, I was late to Lea Ypi’s “Free,” but I highly recommend it as a funny, fresh and thoughtful take on politics, growing up and Marxism.

I hope to revive this newsletter when my book is done, but until then, thanks for reading.