Trust

A World of Corruption

During an election cycle in which cynicism about politics is increasing among most Americans, it is quite disturbing to see several recent academic books claim that the entire global economic system is based on corruption. These books are based on serious research and journalism.

Since the Panama Papers (11.5 million global financial documents) were leaked, more than 400 journalists have been working in a consortium on the documents to unveil what is happening in the global financial system. Here’s the conclusion of one correspondent for The Guardian:

“Previously, we thought that the offshore world was a shadowy, but minor, part of our economic system. What we learned from the Panama Papers is that it is the economic system (The New York Review of Books, October 27, 2016, p. 33).

Hopefully that is an overstatement, but for anyone interested in learning more, we encourage you to read these independent-minded books: The Panama Papers, by Basitan Obermayer and Fredrick Obermaier; The Offshore World, by Ronen Palan, Cornell University Press; The Hidden Wealth of Nations, by Teresa Lavender Fagan, University of Chicago Press.

The books show how the increase of globalized corruption continues to wreak havoc on ordinary people. Here's just one example: According to a report by Global Financial Integrity in 2010, “total illicit outflows from the African continent were anywhere between $854 billion and $1.8 trillion.” The consequences for national economies, jobs, education and healthcare are devastating. In Liberia, where Ebola devastated the nation, the Council on Foreign Relations says that there is only one doctor for every 75,000 people.

Commerce, like all of life, is essentially relational. And trust is the foundation for all relationships. Political and economic corruption erodes the trust that is necessary for commerce to function, including on a global scale. Austan Goolsbee, writing in Foreign Affairs (January/February 2013, p. 170), put it succinctly: “Capital markets can function only when people trust the system.”