Full transcript of the video “On Economic Corruption,
Political Corruption and Financial Crisis”: https://www.youtube.com/watch?v=4kot_GHdIMU (Excerpt
from “The financial crisis, guilt of the market or the State?” -full video in
Spanish-, discussion organized by Dante A. Urbina in the course of
Macroeconomics II, Faculty of Economic Sciences of the Major National
University of San Marcos (Lima - Peru) on November 28, 2013).
It is said that the State is a
conglomeration of individual interests. Precisely there is a theory about this,
which is the Public Choice Theory. Well, in this context it is assumed that
each person is the best judge of his own welfare. The point is this: we realize
that if each person is an agent seeking to maximize their welfare and may even
be involved in corruption in order to maximize this welfare... if that is true
regarding the State, why would automatically false regarding the market? Is
there no corruption in the market? Or rather: is there not a systemic
relationship between corruption in the market and corruption in the State? Are
separate phenomena?
It was mentioned that some people in
the State who had some particular economic interests had also important
positions. But what is the problem here: the State itself, the institution
itself, or rather the corrupt economic environment which dominates the State,
the State capture?
It is said: “Banks take riskier
positions because the State allows it”. Correct. But why the State allows it?
The State allows it, for example in the U.S., because the lobby is legal. What
is the lobby? It means that companies can “solve” their problems by giving
money to Congress members so that they promote certain types of policies. And
the same occurs in the Executive. When the crisis emerged there was a general
problem of moral hazard. I mean, is not as simple as that the State is saying
“Give me money, give me money to do what you want”. There is not only someone
behind the door waiting for money to carry out corrupt actions but also there
are also lots of private companies knocking on the door in order to corrupt.
Where corruption exists there must be corrupt and corrupting people.
Someone might say: “Well, but why
governments are not honest? Why don’t they stop the corruption?”. The issue is:
the market is not an abstract entity; the market also exists in a set of power
relations. Individuals who manage the big banks may also have control over
media. If they have power over media, have the power to show the image of the
governments to the people and, in a democratic system, as the people is
ultimately who vote, this allows them to manipulate the image of the
government. If the government behaves well with respect to their economic
interests, their media will say that this government does things right, whereas
if the government begins to contradict their economic interests, their media
(in which they are the owners) could show the government in a negative way.
It was also mentioned that President
Carter supported to leftists and forced the banks to give loans to insolvent
people. But if we see a documentary like, for example, “Capitalism: A Love
Story” by Michael Moore, we will find that the process of the current crisis
can be understood from the deregulation which came in the 80s with Reagan,
which was not supported by leftists but rather by rightists. He gave the banks
free rein to do whatever they want.
The point is that government officials
are also people who have been working on these big banks. Henry Paulson, the
Secretary of the U.S. Treasury, was CEO of Goldman Sachs and, moreover, the
President Reagan's chief economic adviser was Chairman of Merrill Lynch.
Well, then it’s very important
understanding that exist an interrelationship between corruption in market and
state corruption, they are not separate phenomena.
