Why Nations Fail
From The American Conservative; By Ron Unz | April 18, 2012; Original Article.
When parasitic elites govern a society along "extractive" lines, a central feature is the massive upward flow of extracted wealth, regardless of any contrary laws or regulations. Certainly America has experienced an enormous growth of officially tolerated corruption as our political system has increasingly consolidated into a one-party state controlled by a unified media-plutocracy.
Consider the late 2011 collapse of MF Global, a midsize but highly reputable brokerage firm. Although this debacle was far smaller than the Lehman bankruptcy or the Enron fraud, it effectively illustrates the incestuous activities of America’s overlapping elites.
Just a year earlier, Jon Corzine had been installed as CEO, following his terms as Democratic governor and U.S. senator from New Jersey and his previous career as CEO of Goldman Sachs. Perhaps no other American had such a combination of stellar political and financial credentials on his resume.
Soon after taking the reins, Corzine decided to boost his company’s profits by betting its entire capital and more against the possibility that any European countries might default on their national debts. When he lost that bet, his multi-billion-dollar firm tumbled into bankruptcy.
At this point, the story moves from a commonplace tale of Wall Street arrogance and greed into something out of the Twilight Zone, or perhaps Monty Python.
The major newspapers began reporting that customer funds, eventually said to total $1.6 billion, had mysteriously disappeared during the collapse, and no one could determine what had become of them, a very strange claim in our age of massively computerized financial records.
Weeks and eventually months passed, tens of millions of dollars were spent on armies of investigators and forensic accountants, but all those customer funds stayed "missing," while the elite media covered this bizarre situation in the most gingerly possible fashion.
As an example, a front page Wall Street Journal story on February 23, 2012 suggested that after so many months, there seemed little likelihood that the disappeared customer funds might ever reappear, but also emphasized that absolutely no one was being accused of any wrongdoing.
Presumably the journalists were suggesting that the $1.6 billion dollars of customer money had simply walked out the door on its own two feet.
Stories like this give the lie to the endless boasts of our politicians and business pundits that America’s financial system is the most transparent and least corrupt in today’s world.
Certainly America is not unique in the existence of long-term corporate fraud, as was recently shown in the fall of Japan’s Olympus Corporation following the discovery of more than a billion dollars in long-hidden investment losses.
But when we consider the largest corporate collapses of the last decade that were substantially due to fraud, nearly all the names are American: WorldCom, Enron, Tyco, Global Crossing, and Adelphia.
And this list leaves out all the American financial institutions destroyed by the financial meltdown - such as Lehman, Bear Stearns, Merrill Lynch, Washington Mutual, and Wachovia - and the many trillions of dollars in American homeowner equity and top-rated MBS securities which evaporated during that process.
Meanwhile, the largest and longest Ponzi Scheme in world history, that of Bernie Madoff, had survived for decades under the very nose of the SEC, despite a long series of detailed warnings and complaints. The second largest such fraud, that of Allen R. Stanford, also bears the label "Made in the USA."
Some of the sources of Chinese success and American decay are not entirely mysterious. As it happens, the typical professional background of a member of China’s political elite is engineering; they were taught to build things. Meanwhile, a remarkable fraction of America’s political leadership class attended law school, where they were trained to argue effectively and to manipulate.
Thus, we should not be greatly surprised that while China’s leaders tend to build, America’s leaders seem to prefer endless manipulation, whether of words, money, or people.
How corrupt is the American society fashioned by our current ruling elites? That question is perhaps more ambiguous than it might seem. According to the standard world rankings produced by Transparency International, the United States is a reasonably clean country, with corruption being considerably higher than in the nations of Northern Europe or elsewhere in the Anglosphere, but much lower than in most of the rest of the world, including China.
But I suspect that this one-dimensional metric fails to capture some of the central anomalies of America’s current social dilemma. Unlike the situation in many Third World countries, American teachers and tax inspectors very rarely solicit bribes, and there is little overlap in personnel between our local police and the criminals whom they pursue.
Most ordinary Americans are generally honest. So by these basic measures of day-to-day corruption, America is quite clean, not too different from Germany or Japan.
By contrast, local village authorities in China have a notorious tendency to seize public land and sell it to real estate developers for huge personal profits. This sort of daily misbehavior has produced an annual Chinese total of up to 90,000 so-called "mass incidents" - public strikes, protests, or riots - usually directed against corrupt local officials or businessmen.
However, although American micro-corruption is rare, we seem to suffer from appalling levels of macro-corruption, situations in which our various ruling elites squander or misappropriate tens or even hundreds of billions of dollars of our national wealth, sometimes doing so just barely on one side of technical legality and sometimes on the other.
Sweden is among the cleanest societies in Europe, while Sicily is perhaps the most corrupt. But suppose a large clan of ruthless Sicilian Mafiosi moved to Sweden and somehow managed to gain control of its government. On a day-to-day basis, little would change, with Swedish traffic policemen and building inspectors performing their duties with the same sort of incorruptible efficiency as before, and I suspect that Sweden’s Transparency International rankings would scarcely decline.
But meanwhile, a large fraction of Sweden’s accumulated national wealth might gradually be stolen and transferred to secret Cayman Islands bank accounts, or invested in Latin American drug cartels, and eventually the entire plundered economy would collapse.
Ordinary Americans who work hard and seek to earn an honest living for themselves and their families appear to be suffering the ill effects of exactly this same sort of elite-driven economic pillage. The roots of our national decline will be found at the very top of our society, among the One Percent, or more likely the 0.1 percent.
Thus, the ideas presented in Why Nations Fail seem both true and false. The claim that harmful political institutions and corrupt elites can inflict huge economic damage upon a society seems absolutely correct.
But while the authors turn a harsh eye toward elite misbehavior across time and space - from ancient Rome to Czarist Russia to rising China - their vision seems to turn rosy-tinted when they consider present-day America, the society in which they themselves live and whose ruling elites lavishly fund the academic institutions with which they are affiliated.
Given the American realities of the last dozen years, it is quite remarkable that the scholars who wrote a book entitled Why Nations Fail never glanced outside their own office windows.
A similar dangerous reticence may afflict most of our media, which appears much more eager to focus on self-inflicted disasters in foreign countries than on those here at home.
Presented below is a companion case-study, "Chinese Melamine and American Vioxx: A Comparison," in which I point out that while the American media a few years ago joined its Chinese counterparts in devoting enormous coverage to the deaths of a few Chinese children from tainted infant formula, it paid relatively little attention to a somewhat similar domestic public-health disaster that killed many tens or even hundreds of thousands of Americans.
A society’s media and academic organs constitute the sensory apparatus and central nervous system of its body politic, and if the information these provide is seriously misleading, looming dangers may fester and grow.
A media and academy that are highly corrupt or dishonest constitute a deadly national peril. And although the political leadership of undemocratic China might dearly wish to hide all its major mistakes, its crude propaganda machinery often fails at this self-destructive task.
But America’s own societal information system is vastly more skilled and experienced in shaping reality to meet the needs of business and government leaders, and this very success does tremendous damage to our country.
Perhaps Americans really do prefer that their broadcasters provide Happy News and that their political campaigns constitute amusing reality shows. Certainly the cheering coliseum crowds of the Roman Empire favored their bread and circuses over the difficult and dangerous tasks that their ancestors had undertaken during Rome’s rise to world greatness.
And so long as we can continue to trade bits of printed paper carrying presidential portraits for flat-screen TVs from Chinese factories, perhaps all is well and no one need be too concerned about the apparent course of our national trajectory, least of all our political leadership class.
But if so, then we must admit that Richard Lynn, a prominent British scholar, has been correct in predicting for a decade or longer that the global dominance of the European-derived peoples is rapidly drawing to its end and within the foreseeable future the torch of human progress and world leadership will inevitably pass into Chinese hands.
Sidebar: Chinese Melamine and American Vioxx: A Comparison.
Ron Unz is publisher of The American Conservative and founder of Unz.org.
This is a six-part article:
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