Tag Archives: greed

Idea Soup

Hyperlinks of Hypocrisy: Money, Power and Corruption

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The extraordinary and very welcome leak of over 11 million files — collectively known as the Panama Papers — from one of the world’s largest offshore law firms, Mossack Fonseca, shows three very simple things. First, power corrupts. Second, the super-rich will continue to get richer. Third, the very rich live by different rules to the rest of the global population.

None of the preceding is, of course, of any surprise.

What fascinates me is to see this common thread of brash hypocrisy and self-aggrandizement links politicians of all stripes in democracies, with business leaders in totalitarian states, with so-called “communist” dictators, and holier-than-thou celebrities.

This tangled web of tax-avoiders and wealth-obfuscators links oligarchs with royals; it links Christians and Muslims; it links atheists with the pious; it links military dictators with socialists; it links criminals and bankers (too many, one and the same) and drug lords; it links sanctions-busters with sanctions-enforcers; it links the Saudis with the Iranians; it links footballers with cello players.

Avarice and greed knows no boundaries and transcends all political systems.

This, of course, shouldn’t come as any surprise either.

From the International Consortium of Investigative Journalists:

A massive leak of documents exposes the offshore holdings of 12 current and former world leaders and reveals how associates of Russian President Vladimir Putin secretly shuffled as much as $2 billion through banks and shadow companies.

The leak also provides details of the hidden financial dealings of 128 more politicians and public officials around the world.

The cache of 11.5 million records shows how a global industry of law firms and big banks sells financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sports stars.

These are among the findings of a yearlong investigation by the International Consortium of Investigative Journalists, German newspaper Süddeutsche Zeitung and more than 100 other news organizations.

The files expose offshore companies controlled by the prime ministers of Iceland and Pakistan, the king of Saudi Arabia and the children of the president of Azerbaijan.

They also include at least 33 people and companies blacklisted by the U.S. government because of evidence that they’d been involved in wrongdoing, such as doing business with Mexican drug lords, terrorist organizations like Hezbollah or rogue nations like North Korea and Iran.

One of those companies supplied fuel for the aircraft that the Syrian government used to bomb and kill thousands of its own citizens, U.S. authorities have charged.

“These findings show how deeply ingrained harmful practices and criminality are in the offshore world,” said Gabriel Zucman, an economist at the University of California, Berkeley and author of “The Hidden Wealth of Nations: The Scourge of Tax Havens.” Zucman, who was briefed on the media partners’ investigation, said the release of the leaked documents should prompt governments to seek “concrete sanctions” against jurisdictions and institutions that peddle offshore secrecy.

World leaders who have embraced anti-corruption platforms feature in the leaked documents. The files reveal offshore companies linked to the family of China’s top leader, Xi Jinping, who has vowed to fight “armies of corruption,” as well as Ukrainian President Petro Poroshenko, who has positioned himself as a reformer in a country shaken by corruption scandals. The files also contain new details of offshore dealings by the late father of British Prime Minister David Cameron, a leader in the push for tax-haven reform.

The leaked data covers nearly 40 years, from 1977 through the end of 2015. It allows a never-before-seen view inside the offshore world — providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues.

Read the entire story here.

Video: The Panama Papers: Victims of Offshore. Courtesy: International Consortium of Investigative Journalists (ICIJ).

Environs, Idea Soup

The Vicious Cycle of Stuff

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Many of us in the West, and now increasingly in developing nations, are the guilty perpetrators of the seemingly never-ending cycle of consumption and accumulation. Yet for all the talk of sustainability, down-sizing, and responsible consumption we continue to gather, hoard and surround ourselves with more and more stuff.

From the Guardian:

The personal storage industry rakes in $22bn each year, and it’s only getting bigger. Why?

I’ll give you a hint: it’s not because vast nations of hoarders have finally decided to get their acts together and clean out the hall closet.

It’s also not because we’re short on space. In 1950 the average size of a home in the US was 983 square feet. Compare that to 2011, when American houses ballooned to an average size of 2,480 square feet – almost triple the size.

And finally, it’s not because of our growing families. This will no doubt come as a great relief to our helpful commenters who each week kindly suggest that for maximum environmental impact we simply stop procreating altogether: family sizes in the western world are steadily shrinking, from an average of 3.37 people in 1950 to just 2.6 today.

So, if our houses have tripled in size while the number of people living in them has shrunk, what, exactly, are we doing with all of this extra space? And why the billions of dollars tossed to an industry that was virtually nonexistent a generation or two ago?

Well, friends, it’s because of our stuff. What kind of stuff? Who cares! Whatever fits! Furniture, clothing, children’s toys (for those not fans of deprivation, that is), games, kitchen gadgets and darling tchotchkes that don’t do anything but take up space and look pretty for a season or two before being replaced by other, newer things – equally pretty and equally useless.

The simple truth is this: you can read all the books and buy all the cute cubbies and baskets and chalkboard labels, even master the life-changing magic of cleaning up – but if you have more stuff than you do space to easily store it, your life will be spent a slave to your possessions.

We shop because we’re bored, anxious, depressed or angry, and we make the mistake of buying material goods and thinking they are treats which will fill the hole, soothe the wound, make us feel better. The problem is, they’re not treats, they’re responsibilities and what we own very quickly begins to own us.

The second you open your wallet to buy something, it costs you – and in more ways than you might think. Yes, of course there’s the price tag and the corresponding amount of time it took you to earn that amount of money, but possessions also cost you space in your home and time spent cleaning and maintaining them. And as the token environmentalist in the room, I’d be remiss if I didn’t remind you that when you buy something, you’re also taking on the task of disposing of it (responsibly or not) when you’re done with it. Our addiction to consumption is a vicious one, and it’s stressing us out.

I know this because I’ve experienced it, having lived in everything from a four-bedroom house to my current one-bedroom flat I share with my daughter – but I’m also bringing some cold, hard science to the table.

A study published by UCLA showed that women’s stress hormones peaked during the times they were dealing with their possessions and material goods. Anyone who parks on the street because they can’t fit their car into the garage, or has stared down a crammed closet, can relate.

Our addiction to consuming is a vicious one, and it’s having a markedly negative impact on virtually every aspect of our lives.

Read the entire story here.

Image courtesy of Google Search.

Idea Soup

The 75 Percent Versus 1 Percent

Stop the presses! Hold your horses! There seems to be some hope for humanity after all — and I was just about to seek a misanthropic-approved cave in which to hide.

A recent study by Common Cause shows that three-quarters of one thousand people surveyed identify more closely with unselfish values (altruism, forgiveness, honesty) than selfish ones (money, fame, power). But, as George Monbiot points out those in the 1 percent who run the globe tend to be the selfish ones. Also, he’s quite right to propose that we’d all be better served if the media apparatchik’s who fawn upon the 1 percent spent more time delving into the stories of those who give, rather than take.

From the Guardian:

Do you find yourself thrashing against the tide of human indifference and selfishness? Are you oppressed by the sense that while you care, others don’t? That, because of humankind’s callousness, civilisation and the rest of life on Earth are basically stuffed? If so, you are not alone. But neither are you right.

A study by the Common Cause Foundation, due to be published next month, reveals two transformative findings. The first is that a large majority of the 1,000 people they surveyed – 74% – identifies more strongly with unselfish values than with selfish values. This means that they are more interested in helpfulness, honesty, forgiveness and justice than in money, fame, status and power. The second is that a similar majority – 78% – believes others to be more selfish than they really are. In other words, we have made a terrible mistake about other people’s minds.

The revelation that humanity’s dominant characteristic is, er, humanity will come as no surprise to those who have followed recent developments in behavioural and social sciences. People, these findings suggest, are basically and inherently nice.

A review article in the journal Frontiers in Psychology points out that our behaviour towards unrelated members of our species is “spectacularly unusual when compared to other animals”. While chimpanzees might share food with members of their own group, though usually only after being plagued by aggressive begging, they tend to react violently towards strangers. Chimpanzees, the authors note, behave more like the homo economicus of neoliberal mythology than people do.

Humans, by contrast, are ultrasocial: possessed of an enhanced capacity for empathy, an unparalleled sensitivity to the needs of others, a unique level of concern about their welfare, and an ability to create moral norms that generalise and enforce these tendencies.

Such traits emerge so early in our lives that they appear to be innate. In other words, it seems that we have evolved to be this way. By the age of 14 months, children begin to help each other, for example by handing over objects another child can’t reach. By the time they are two, they start sharing things they value. By the age of three, they start to protest against other people’s violation of moral norms.

A fascinating paper in the journal Infancy reveals that reward has nothing to do with it. Three- to five-year-olds are less likely to help someone a second time if they have been rewarded for doing it the first time. In other words, extrinsic rewards appear to undermine the intrinsic desire to help. (Parents, economists and government ministers, please note.) The study also discovered that children of this age are more inclined to help people if they perceive them to be suffering, and that they want to see someone helped whether or not they do it themselves. This suggests that they are motivated by a genuine concern for other people’s welfare, rather than by a desire to look good.

Why? How would the hard logic of evolution produce such outcomes? This is the subject of heated debate. One school of thought contends that altruism is a logical response to living in small groups of closely related people, and evolution has failed to catch up with the fact that we now live in large groups, mostly composed of strangers.

Another argues that large groups containing high numbers of altruists will outcompete large groups which contain high numbers of selfish people. A third hypothesis insists that a tendency towards collaboration enhances your own survival, regardless of the group in which you might find yourself. Whatever the mechanism might be, the outcome should be a cause of celebration.

So why do we retain such a dim view of human nature? Partly, perhaps, for historical reasons. Philosophers from Hobbes to Rousseau, Malthus to Schopenhauer, whose understanding of human evolution was limited to the Book of Genesis, produced persuasive, influential and catastrophically mistaken accounts of “the state of nature” (our innate, ancestral characteristics). Their speculations on this subject should long ago have been parked on a high shelf marked “historical curiosities”. But somehow they still seem to exert a grip on our minds.

Another problem is that – almost by definition – many of those who dominate public life have a peculiar fixation on fame, money and power. Their extreme self-centredness places them in a small minority, but, because we see them everywhere, we assume that they are representative of humanity.

The media worships wealth and power, and sometimes launches furious attacks on people who behave altruistically. In the Daily Mail last month, Richard Littlejohn described Yvette Cooper’s decision to open her home to refugees as proof that “noisy emoting has replaced quiet intelligence” (quiet intelligence being one of his defining qualities). “It’s all about political opportunism and humanitarian posturing,” he theorised, before boasting that he doesn’t “give a damn” about the suffering of people fleeing Syria. I note with interest the platform given to people who speak and write as if they are psychopaths.

Read the entire story here.

Idea Soup

Sharing Only Goes So Far

Let’s face it humans are an avaricious lot. We stash, hoard, accumulate and collect. We’ve stored and saved ever since our ancient ancestors figured out the benefits of delayed gratification — usually to stave off the existential threat of starvation. But, we also learned to acquire and amass stuff because it increasingly conveyed status and social rank — presumably the more we had the more attractive we would be to a potential mate.

And, so the internet-enabled sharing economy presents a certain, counter-cultural dilemma: how much will be truly share? The answer is probably not as much as Airbnb, DogVacay, Snapgoods, Zipcar and TaskRabbit would have us believe. Dare I say it, but I have to believe that it’s more about disposable convenience than it is altruism.

From the Independent:

Rental services like Airbnb and Zipcar may have captured the public imagination but the so-called “sharing economy” will never become widespread because people have a strong psychological desire to own material goods, according to new research

The internet has led to the emergence of numerous sites that allow people to rent, borrow, lend, swap and share products rather than buying new ones.

However, such schemes will never replace purchase capitalism because people are culturally programmed to amass as many possessions as possible, says a new report by Nottingham Trent University, published in the Journal of Cleaner Production.

“The sharing economy is a credible way to help tackle today’s consumer society,” said Laura Piscicelli, a researcher at the university. “What we’ve identified in this study, though, is that people’s individual values may prevent ‘collaborative consumption’ from becoming mainstream,” she added.

Ms Piscicelli said ride-sharing and clothes swapping were on the increase, and some renting and second-hand retail websites had been successful. Other sites, like TaskRabbit, have enjoyed some success by allowing people to outsource household chores.

But the researcher said that most “sharing economy” websites had failed due to lack of interest – because they failed to satisfy out cultural craving to possess objects.

People’s psychological programming is not the only problem, according to co-researcher Professor Tim Cooper. He blamed manufacturers for opting to build disposable products – rather than long-lasting alternatives which could be rented or shared by many different customers.

“Most people want to own a washing machine so they don’t last as long as they ought to. The average machine lasts around 10 years – but you could easily make one these days that lasts 15 or 20 years,” Professor Cooper said. “But they don’t. And the reason for that is that companies are locked into this replacement cycle – they need the replacements to make money.

“One way to change that is to get people to rent it rather than buy it,” he said, adding that a whole range of “utilitarian” goods which lack a fashion element could be managed in that way.

“The problem at the moment is that the whole renting market is about appealing to a very narrow segment – people who can’t afford to buy, who aren’t credit worthy, paying ridiculous prices. No one in their right mind will rent unless they have to. So the market’s got to be transformed,” he says.

Read the entire article here.

Idea Soup

The Sandwich of Corporate Exploitation

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If ever you needed a vivid example of corporate exploitation of the most vulnerable, this is it. So-called free-marketeers will sneer at any suggestion of corporate over-reach — they will chant that it’s just the free market at work. But, the rules of this market,
as are many others, are written and enforced by the patricians and well-stacked against the plebs.

From NYT:

If you are a chief executive of a large company, you very likely have a noncompete clause in your contract, preventing you from jumping ship to a competitor until some period has elapsed. Likewise if you are a top engineer or product designer, holding your company’s most valuable intellectual property between your ears.

And you also probably have a noncompete agreement if you assemble sandwiches at Jimmy John’s sub sandwich chain for a living.

But what’s most startling about that information, first reported by The Huffington Post, is that it really isn’t all that uncommon. As my colleague Steven Greenhouse reported this year, employers are now insisting that workers in a surprising variety of relatively low- and moderate-paid jobs sign noncompete agreements.

Indeed, while HuffPo has no evidence that Jimmy John’s, a 2,000-location sandwich chain, ever tried to enforce the agreement to prevent some $8-an-hour sandwich maker or delivery driver from taking a job at the Blimpie down the road, there are other cases where low-paid or entry-level workers have had an employer try to restrict their employability elsewhere. The Times article tells of a camp counselor and a hair stylist who faced such restrictions.

American businesses are paying out a historically low proportion of their income in the form of wages and salaries. But the Jimmy John’s employment agreement is one small piece of evidence that workers, especially those without advanced skills, are also facing various practices and procedures that leave them worse off, even apart from what their official hourly pay might be. Collectively they tilt the playing field toward the owners of businesses and away from the workers who staff them.

You see it in disputes like the one heading to the Supreme Court over whether workers at an Amazon warehouse in Nevada must be paid for the time they wait to be screened at the end of the workday to ensure they have no stolen goods on them.

It’s evident in continuing lawsuits against Federal Express claiming that its “independent contractors” who deliver packages are in fact employees who are entitled to benefits and reimbursements of costs they incur.

And it is shown in the way many retailers assign hourly workers inconvenient schedules that can change at the last minute, giving them little ability to plan their lives (my colleague Jodi Kantor wrote memorably about the human effects of those policies on a Starbucks coffee worker in August, and Starbucks rapidly said it would end many of them).

These stories all expose the subtle ways that employers extract more value from their entry-level workers, at the cost of their quality of life (or, in the case of the noncompete agreements, freedom to leave for a more lucrative offer).

What’s striking about some of these labor practices is the absence of reciprocity. When a top executive agrees to a noncompete clause in a contract, it is typically the product of a negotiation in which there is some symmetry: The executive isn’t allowed to quit for a competitor, but he or she is guaranteed to be paid for the length of the contract even if fired.

Read the entire story here.

Image courtesy of Google Search.

Idea Soup, tD

Corporate Corruption: Greed, Lies and Nothing New

The last couple of decades has seen some remarkable cases of corporate excess and corruption. The deep-rooted human inclinations toward greed, telling falsehoods and exhibiting questionable ethics can probably be traced to the dawn of bipedalism. However, in more recent times we have seen misdeeds particularly in the business world grow in their daring, scale and impact.

We’ve seen Worldcom overstate its cashflows, Parmalat falsifying accounts, Lehman Brothers (and other investment banks) hiding critical information from investors, Enron cooking all their books, Bernard Madoff marketing his immense Ponzi scheme, Halliburton overcharging government contracts, Tyco executives looting their own company, Wells Fargo and other retail banks robo-signing contracts, investment banks selling questionable products to investors and then betting against them, and now ever more recently, Barclays and other big banks manipulating interest rates.

These tales of gluttony and wrongdoing are a dream for social scientists; and for the public in general, well, we tend to let the fat cats just get fatter and nastier. And, where are the regulators, legislators and enforcers of the law? Well, they are generally asleep at the wheel or in bed, so to speak, with their corporate donors. No wonder we all yawn at the latest scandal. However, some suggest this undermines the very foundations of western capitalism.

[div class=attrib]From the New York Times:[end-div]

Perhaps the most surprising aspect of the Libor scandal is how familiar it seems. Sure, for some of the world’s leading banks to try to manipulate one of the most important interest rates in contemporary finance is clearly egregious. But is that worse than packaging billions of dollars worth of dubious mortgages into a bond and having it stamped with a Triple-A rating to sell to some dupe down the road while betting against it? Or how about forging documents on an industrial scale to foreclose fraudulently on countless homeowners?

The misconduct of the financial industry no longer surprises most Americans. Only about one in five has much trust in banks, according to Gallup polls, about half the level in 2007. And it’s not just banks that are frowned upon. Trust in big business overall is declining. Sixty-two percent of Americans believe corruption is widespread across corporate America. According to Transparency International, an anticorruption watchdog, nearly three in four Americans believe that corruption has increased over the last three years.

We should be alarmed that corporate wrongdoing has come to be seen as such a routine occurrence. Capitalism cannot function without trust. As the Nobel laureate Kenneth Arrow observed, “Virtually every commercial transaction has within itself an element of trust.”

The parade of financiers accused of misdeeds, booted from the executive suite and even occasionally jailed, is undermining this essential element. Have corporations lost whatever ethical compass they once had? Or does it just look that way because we are paying more attention than we used to?

This is hard to answer because fraud and corruption are impossible to measure precisely. Perpetrators understandably do their best to hide the dirty deeds from public view. And public perceptions of fraud and corruption are often colored by people’s sense of dissatisfaction with their lives.

Last year, the economists Justin Wolfers and Betsey Stevenson from the University of Pennsylvania published a study suggesting that trust in government and business falls when unemployment rises. “Much of the recent decline in confidence — particularly in the financial sector — may simply be a standard response to a cyclical downturn,” they wrote.

And waves of mistrust can spread broadly. After years of dismal employment prospects, Americans are losing trust in a broad range of institutions, including Congress, the Supreme Court, the presidency, public schools, labor unions and the church.

Corporate wrongdoing may be cyclical, too. Fraud is probably more lucrative, as well as easier to hide, amid the general prosperity of economic booms. And the temptation to bend the rules is probably highest toward the end of an economic upswing, when executives must be the most creative to keep the stream of profits rolling in.

The most toxic, no-doc, reverse amortization, liar loans flourished toward the end of the housing bubble. And we typically discover fraud only after the booms have turned to bust. As Warren Buffett famously said, “You only find out who is swimming naked when the tide goes out.”

Company executives are paid to maximize profits, not to behave ethically. Evidence suggests that they behave as corruptly as they can, within whatever constraints are imposed by law and reputation. In 1977, the United States Congress passed the Foreign Corrupt Practices Act, to stop the rampant practice of bribing foreign officials. Business by American multinationals in the most corrupt countries dropped. But they didn’t stop bribing. And American companies have been lobbying against the law ever since.

Extrapolating from frauds that were uncovered during and after the dot-com bubble, the economists Luigi Zingales and Adair Morse of the University of Chicago and Alexander Dyck of the University of Toronto estimated conservatively that in any given year a fraud was being committed by 11 to 13 percent of the large companies in the country.

[div class=attrib]Read the entire article after the jump.[end-div]

[div class=attrib]Image: Mug shot of Charles Ponzi (March 3, 1882 – January 18, 1949). Charles Ponzi was born in Italy and became known as a swindler for his money scheme. His aliases include Charles Ponei, Charles P. Bianchi, Carl and Carlo.. Courtesy of Wikipedia.[end-div]