Category Archives: Obtaining income through the government – rent seeking – corruption

Various terms have been used to describe obtaining income through the government that does not provide a good or service.  One of them is corruption.  This typically refers to acts that people consider corrupt, such as government officials taking government money that is not theirs.  People or firms not in the government can also obtain favorable treatment from the government.  Taxes can be avoided, for example.  This is sometimes called corruption and sometimes not.  Rent-seeking is a more neutral term used by standard economics.

Coronavirus relief package

Caption: Through the Primary Market Corporate Credit Facility, the Federal Reserve will provide $500 billion to companies by buying bonds, but the companies will not be required to retain employees or limit executive pay. See accompanying story below. Credit: Public Domain

Federal assistance during the coronavirus pandemic is crucial. This page will look at ways in which allocation of these resources is directed not to those who most need it, but to large corporations, the wealthy, and the financial sector, as well as basic information about the federal assistance.

This Treasury official Is running the bailout. It’s been great for his family. Justin Elliott, Lydia DePillis and Robert Faturechi ProPublica June 2, 2020

‘Lining up at the trough’: Federal Reserve to offer corporations $500 billion no-strings-attached bailout loophole Julia Conley Common Dreams April 28, 2020

Large, troubled companies got bailout money in small-business loan program Jessica Silver-Greenberg, David Enrich, Jesse Drucker and Stacy Cowley New York Times April 28, 2020
This article describes how companies which would be thought not qualified for a small-business loan program did in fact receive one. Of the $349 billion in low-interest loans for small businesses more than 200 publicly traded [= not-small] companies have disclosed receiving a total of more than $750 million in bailout loans.

The tax-break bonanza inside the economic rescue package Jesse Drucker New York Times April 24, 2020
As small businesses and individuals struggle to obtain federal aid, the wealthiest are poised to reap tens of billions of dollars in tax savings.

Failing to help those who need it most Editorial Board New York Times April 24, 2020 (Opinion)

House passes $484 billion bill with money for small businesses, hospitals and testing to battle coronavirus Erica Werner Washington Post April 23, 2020

Banks gave richest clients ‘concierge treatment’ for pandemic aid Emily Flitter and Stacy Cowley New York Times April 22, 2020
Some businesses seeking coronavirus loans got to avoid flaky online portals or backed-up queues. Many other small businesses couldn’t get their loan requests submitted before the money dried up.

Starve the beast, feed the depression Paul Krugman New York Times April 16, 2020 (Opinion)
Anti-government ideology is crippling pandemic policy.

How the government pulls coronavirus relief money out of thin air Matt Phillips New York Times April 15, 2020
Once-fringe ideas in economic theory are now nearly official policy as government borrowing surges and the Federal Reserve signals it could buy unlimited debt.

Failure to help those that need it the most Editorial Board New York Times April 15, 2020
The distribution of coronavirus bailout funds requires more attention.

Here’s what’s in the $2 trillion virus stimulus package John Harney / Bloomberg Washington Post March 27, 2020 IRS has paid out over $218 billion in stimulus checks Andrew Keshner MarketWatch May 11, 2020

How the Fed’s magic money machine will turn $454 billion into $4 trillion Jeanna Smialek New York Times March 26, 2020
The central bank takes Treasury Department loan guarantees and uses them to stand up huge programs. Here’s how that works.

$29,000,000,000,000: A detailed look at the Fed’s bailout by funding facility and recipient James Felkerson Levi Economics Institute November, 2011 Original and important research detailing the financial sector bailout undertaken by the Federal Reserve during the 2007-09 financial crisis, showing that it was much larger than previously understood. Very helpful for understanding what the Fed is doing now, on what will be an even larger bailout.

Bribery and money-laundering by Switzerland and Nordic countries

CPI 2019: Trouble at the top Transparency International January 20, 2020
Top scoring countries on the Corruption Perceptions Index (CPI) like Denmark, Switzerland and Iceland are not immune to corruption. Multiple scandals in 2019 demonstrated that transnational corruption is often facilitated, enabled and perpetuated by seemingly clean Switzerland and Nordic countries.

An Icelandic fishing company bribed officials in Namibia and used Norway’s largest bank to transfer 70 million dollars to a tax haven Ingi Freyr Vilhjálmsson Studin November 12, 2019

Image: Corruption Perceptions Index 2019. Credit Transparency International

Corruption Perceptions Index 2019

Berlin, 23 January 2020 – More than two-thirds of countries – along with many of the world’s most advanced economies – are stagnating or showing signs of backsliding in their anti-corruption efforts, according to the 2019 Corruption Perceptions Index (CPI) released today by Transparency International.

Countries in which elections and political party financing are open to undue influence from vested interests are less able to combat corruption, analysis of the results finds.
“Frustration with government corruption and lack of trust in institutions speaks to a need for greater political integrity,” said Delia Ferreira Rubio, Chair of Transparency International. “Governments must urgently address the corrupting role of big money in political party financing and the undue influence it exerts on our political systems.”

CPI Highlights

The CPI ranks 180 countries and territories by their perceived levels of public sector corruption, drawing on 13 expert assessments and surveys of business executives. It uses a scale of zero (highly corrupt) to 100 (very clean).

[Transparency International defines corruption as the abuse of entrusted power for private gain. This definition encompasses corrupt practices in both the public and private sectors. The Corruption Perceptions Index (CPI) ranks countries according to the perception of corruption in the public sector. ]

More than two-thirds of countries score below 50, with an average score of only 43. Since 2012, only 22 countries have significantly improved their scores, including Estonia, Greece and Guyana. Twenty-one have significantly declined, including Australia, Canada and Nicaragua.

Our research shows several of the most advanced economies cannot afford to be complacent if they are to keep up their anti-corruption momentum. Four G7 countries score lower than last year: Canada (-4), France (-3), the UK (-3) and the US (-2). Germany and Japan have seen no improvement, while Italy gained one point.

Corruption and Political Integrity

Analysis shows that countries that perform well on the CPI also have stronger enforcement of campaign finance regulations and broader range of political consultation.

Countries where campaign finance regulations are comprehensive and systematically enforced have an average score of 70 on the CPI, whereas countries where such regulations either don’t exist or are poorly enforced score an average of just 34 and 35 respectively.

Sixty per cent of the countries that significantly improved their CPI scores since 2012 also strengthened regulations around campaign donations.

“The lack of real progress against corruption in most countries is disappointing and has profound negative effects on citizens around the world,” said Patricia Moreira, Managing Director of Transparency International. “To have any chance of ending corruption and improving peoples’ lives, we must tackle the relationship between politics and big money. All citizens must be represented in decision making.”

Countries with broader and more open consultation processes score an average of 61 on the CPI. By contrast, where there is little to no consultation, the average score is just 32.

A vast majority of countries that significantly decreased their CPI scores since 2012 do not engage the most relevant political, social and business actors in political decision-making.

Recommendations

To reduce corruption and restore trust in politics, Transparency International recommends that governments:

  • Reinforce checks and balances and promote separation of powers.
  • Tackle preferential treatment to ensure budgets and public services aren’t driven by personal connections or biased towards special interests;
  • Control political financing to prevent excessive money and influence in politics;
  • Manage conflicts of interest and address “revolving doors”;
  • Regulate lobbying activities by promoting open and meaningful access to decision-making;
  • Strengthen electoral integrity and prevent and sanction misinformation campaigns;
  • Empower citizens and protect activists, whistleblowers and journalists;

For a full list of recommendations, go to: www.transparency.org/cpi2019

Image: Corruption Perceptions Index 2019. Credit Transparency International

Oppression and Exploitation News April 23 – 29

Harm through the government 2020

Large, troubled companies got bailout money in small-business loan program Jessica Silver-Greenberg, David Enrich, Jesse Drucker and Stacy Cowley New York Times
This article describes how companies which would be thought not qualified for a small-business loan program did in fact receive one. Of the $349 billion in low-interest loans for small businesses more than 200 publicly traded companies have disclosed receiving a total of more than $750 million in bailout loans.

The tax-break bonanza inside the economic rescue package Jesse Drucker New York Times April 24, 2020
As small businesses and individuals struggle to obtain federal aid, the wealthiest are poised to reap tens of billions of dollars in tax savings.

Banks gave richest clients ‘concierge treatment’ for pandemic aid Emily Flitter and Stacy Cowley New York Times April 22, 2020
Some businesses seeking coronavirus loans got to avoid flaky online portals or backed-up queues. Many other small businesses couldn’t get their loan requests submitted before the money dried up.

Struggle for control – staying in power 2020

Health department official says doubts on hydroxychloroquine led to his ouster Michael D. Shear and Maggie Haberman New York Times April 22, 2020 Rick Bright was abruptly dismissed this week as the director of the Department of Health and Human Services’ Biomedical Advanced Research and Development Authority. The official who led the federal agency involved in developing a coronavirus vaccine said on Wednesday that he was removed from his post after he pressed for rigorous vetting of hydroxychloroquine, an anti-malaria drug embraced by President Trump as a coronavirus treatment, and that the administration had put “politics and cronyism ahead of science.”

Image: The U.S. has fallen below its traditional democratic peers.

Freedom in the World 2020 finds established democracies are in decline

Freedom House March 4, 2020. Despite mass protests in every region, world suffers 14th consecutive year of deterioration in political rights and civil liberties.

Democracy is under assault around the globe, and the effects are evident not just in authoritarian states like China, Russia, and Iran, but also in countries with a long track record of upholding basic rights and freedoms. While protest movements in every region have illustrated widespread popular demand for better governance, they have yet to reverse the overall pattern of declining freedom, according to Freedom in the World 2020, the latest edition of the annual country-by-country assessment of political rights and civil liberties, released today by Freedom House.

Countries that suffered setbacks in 2019 outnumbered those making gains by nearly two to one, marking the 14th consecutive year of deterioration in global freedom. During this period, 25 of the world’s 41 established democracies experienced net losses.

The report also found an alarming global erosion in governments’ commitment to pluralism, a defining feature of liberal democracy. Ethnic, religious, and other minority groups have borne the brunt of recent state abuses in both democracies and authoritarian countries. Left unchecked, such violations threaten the freedom of entire societies.

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