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Explaining California “lifers,” or why people stay in a failed state.

November 13, 2012 3 comments

I have been a resident of several states across the United States, but two in particular stand out. One is California, to which I moved when I was ten, left at fifteen, and returned to for college. The other is Minnesota, where I was born, but to which I did not return until after college.

Just recently, my total time spent as a Minnesota resident surpassed my time as a Californian, capturing a plurality of my life’s years. Many have found it remarkable that I left a tropical paradise like California for the frigid tundra of Minnesota, but if you can look past the weather, California simply isn’t a great place to live. As I have been saying for years, “it’s a nice place to visit, but I don’t want to die there.”

Many of my friends disagree with me. One has spent nearly 70 years (aside from higher education back east) in the same beach community. Another calls himself a California “lifer,” which I find eerily similar to how prisoners with life sentences describe themselves.

In any case, while California has many things acting in its favor, it is nevertheless a failed state that I simply cannot find attractive as a home. To be fair, Minnesota is also heading in the wrong direction, but if California is just about to break the tape, Minnesota is still putting its running shoes on.

Victor Davis Hanson at the City Journal recently attempted to explain why he is a California “lifer,” in an article entitled “California, Here We Stay.” Many reasons he cites make perfect sense. Family heritage is one, and it is perfectly understandable. Indeed, it is the best reason I can think of for why I live in Minnesota and not Texas. There is the weather, of course. And there are certain cultural and educational institutions that are very attractive.

On the other hand, hegemony and inertia cannot prevail forever – just ask Britain, Rome, Greece, even Akkad. The general rule is that it is better to be present for the incline phase than the decline phase, and I can’t help but think that even the best of California has hit its peak. If UC Berkeley were a stock, it’d be Pets.com.

Hanson is honest about California’s shortcomings. Finances built on rainbows-and-unicorns accounting methods; poor primary and secondary education; hostile business climate running the productive out of state; environmental extremism – all of these things are conspiring to choke off the best of what the state has to offer the world.

On the other hand, he makes a point that I simply cannot get behind:

Another reason to feel hopeful about California is that it’s reaching the theoretical limits of statism. To pay for current pensioners, the state simply can’t continue to bestow comparable defined-benefit pension packages on new workers, no matter how stridently the public-sector unions claim otherwise. And as public insolvencies mount—with Stockton, Mammoth Lakes, and San Bernardino seeking bankruptcy protection a year after Vallejo emerged from it—public blame is finally shifting from supposedly heartless state taxpayers to the unions. The liberal unionism of an aging generation is proving untenable, as we saw in recent ballot referenda in which voters in San Diego and San Jose demanded that public-worker compensation plans be renegotiated.

California is reaching the theoretical limits of statism? This strikes me as remarkably naive, and it sounds hauntingly similar to things like “it couldn’t happen here,” or “it can’t get any worse.” Or perhaps “there are no black swans.”

I for one prefer not to underestimate the statist impulses of a polity that has consistently pushed the once-bright beacon of hope that was California back into the dark ages of economic and social thought. And they did it in less than a century and a half to boot.

In my personal opinion, the decay in California is not over, and it is not close to being over. I know that making predictions is the easiest way to be proven wrong, but here goes nothing.

I think that California will continue to be held in a chokehold by statists until the situation becomes completely untenable on a state level. At that point, the citizens of California will become enraged – not at their elected Judas goats, but at the federal government for not bailing them out. Seeing the practical importance of California’s electoral votes to their parties, the statist kindred spirits in Washington will forge a bipartisan grand bargain to bail out California, complete with all the crony capitalism and blatant corruption that entails. California will then double down on its failed policies and things will get worse. Another bailout will happen in quick succession, and while token gestures may be made to restore fiscal sanity, the damage will have been done.

California’s future is not bright. Perhaps California “lifers” have a reason to stay if they are already wealthy or comfortable enough to avoid the worst of the coming catastrophe. But if you’re a common person, your odds are poor.  I fully expect to see the middle class, whose livelihoods are far more likely to hinge on the day-to-day health of the economy than the wealthy, to continue to flee.

My only hope is that they don’t bring the politics of old California with them when they go.

The Disturbingly Close Ties Between Chicago Gangs and Chicago Politicians

December 30, 2011 Leave a comment

When Barack Obama was elected president, most of the intelligent electorate knew exactly what to expect.  You may take the politician out of Chicago, but you can never take the Chicago out of the politician.

As expected, Obama has rewarded the country with corruption, sweetheart deals, arbitrary policies, and a spoils system on steroids.  Despite the frantic efforts of most mainstream news sources to avoid coping with this reality, the roots of the Obama presidency are solidly set in the seedy underworld of Chicago.

So when Chicago Magazine’s David Bernstein and Noah Isackson published their expose “Gangs and Politicians in Chicago: An Unholy Alliance,” I probably should not have been surprised at the length, depth, and breadth of corruption and crime in the highest reaches and lowliest bureaus of Chicago’s political machine.

But I was.

I strongly encourage you to read the entire article, as I cannot hope to encapsulate the perverse nature of this institutionalized corruption in a single quote.  However, the authors have helpfully summarized their findings, so hopefully reading this will induce you to seek more.

• While they typically deny it, many public officials—mostly, but not limited to, aldermen, state legislators, and elected judges—routinely seek political support from influential street gangs. Meetings like the ones Baskin organized, for instance, are hardly an anomaly. Gangs can provide a decisive advantage at election time by performing the kinds of chores patronage armies once did.

• In some cases, the partnerships extend beyond the elections in troubling—and possibly criminal—ways, greased by the steady and largely secret flow of money from gang leaders to certain politicians and vice versa. The gangs funnel their largess through opaque businesses, or front companies, and through under-the-table payments. In turn, grateful politicians use their payrolls or campaign funds to hire gang members, pull strings for them to get jobs or contracts, or offer other favors (see “Gangs and Politicians: Prisoner Shuffle”).

• Most alarming, both law enforcement and gang sources say, is that some politicians ignore the gangs’ criminal activities. Some go so far as to protect gangs from the police, tipping them off to impending raids or to surveillance activities—in effect, creating safe havens in their political districts. And often they chafe at backing tough measures to stem gang activities, advocating instead for superficial solutions that may garner good press but have little impact.

The paradox is that Chicago’s struggle to combat street gangs is being undermined by its own elected officials. And the alliances between lawmakers and lawbreakers raise a troubling question: Who actually rules the neighborhoods—our public servants or the gangs?

The extent of the corruption is shocking, and the brazen attitude with which politicians ally themselves with [more] common criminals is unbelievable.  If you want any indication of the source of the corruption currently in the White House, look no further than here.

Follow up on police corruption

December 8, 2011 1 comment

The Herald-Tribune follows up on the corruption of the Florida law enforcement disciplinary system.  By pointing this out, I don’t mean to impugn all police officers, but it is absolutely true that there are too many who are corrupt, brutal, lawbreaking, and absolutely impossible to fire:

The majority of the state’s 83,000 law enforcement officers perform their jobs with honor and distinction, but state records show that every year hundreds commit what are known as “moral character violations.”

These are not minor infractions, like showing up late to work or disrespecting a supervisor. Moral character violations often involve drugs, violence, theft, forcible sex or other crimes.

Forcible sex?  Look, I know that public-sector unions [ostensibly] have the workers’ interests in mind, but aren’t our public servants themselves supposed to put the public first?  Am I wrong to believe that there is an overriding public interest, and that maybe constantly reinstating officers after they rape people is a bad idea?

For example, former officers Timothy Simmons and Wyatt Henderson caused trouble in multiple agencies, but kept finding work as lawmen after misconduct cases that included falsifying reports and fondling a young girl. Like Currie, both lost their badges only after they were sent to prison. Simmons is incarcerated for rape and Henderson for a violent assault.

Well, at least you can fire them once they are in prison.

By the way, the full article is well worth reading.

Throwing Cold Water on the “Regulate More” Compulsion

November 5, 2011 Leave a comment

When financial companies blow up there always emerges a Greek chorus of poor pundits calling for more regulation, or worse, “smarter” regulation.  Megan McArdle takes the recent failure of MF Global and  its Chief Political Operative Chief Executive Officer Jon Corzine and uses it as a good example of why piling regulations on top of regulations simply will not help us out much

Don’t we need tighter regulations to prevent this from happening again?

No.  Or at least, probably not.
 
To start with, this is really illegal.  There are no “loopholes” that allow you cover your losses with client funds.  There is only the fact that it’s actually pretty difficult to catch embezzling, even if you’re looking really hard.  As I understand it, despite fairly tight internal controls and obvious incentives to prevent it, banks suffer quite a lot of embezzling every year, and hush much of it up rather than suffer the bad publicity.
 
The problem is that the embezzler knows where to look, and you don’t.  There are all sorts of ways to remove money from an account so that it will look fine to an auditor.  (A favorite, especially with bookkeepers, is simply writing a check to a shell company).  Eventually, of course, something won’t add up–the client will realize their statement is off, corporate accounts will run dry, or in some other way, reality will expose the fraud.  As accountants like to say, “recessions uncover what auditors can’t.”  Hello, Enron. 
Of course, understanding this requires some understanding of the actual regulatory climate as well as some sense of human nature, and it is rare to find a pundit who possesses these. 
 
In case you are wondering how I am qualified to judge these things if the punditocracy is not, I am a regulatory lawyer and with a practice in the investment management industry at that.  Having been on the front lines, the idea that we simply do not have enough regulation fails to pass even the laugh test.

A Word from Wisconsin, and My Fundamental Problem with Unions

February 23, 2011 5 comments

By now, all of my readers are likely to be apprised of the situation in Wisconsin, vis-a-vis public sector unions.  If not, the brief story is that new governor Scott Walker and the newly Republican state congress are attempting to pass a law outlawing collective bargaining rights for certain public sector workers, except over limited wage increases.  Naturally, this has led to much hissing, spitting, and general venomousness. 

Because when I want a raise at work, the first thing I do is march on the Capitol…

Everyone knows that we are out of money.  Wisconsin is trying to plug a $3+ billion budget shortfall.  And everyone knows that the public sector unions are a huge part of the problem.  They are institutionalized corruption.  First, they collect dues from their members, then they funnel those dues to politicians, then once said politicians are elected, they receive overly generous and completely unsustainable benefits packages, leading to more dues collected, and so on. 

That’s why teachers’ union members cannot be fired, even if they have sex with children; that’s also why police union members cannot be fired, even when they drive drunk and beat their wives; that’s also why so-called public safety officers have run up seven-figure legal bills defending civil suits over their abuse of citizens – with no consequences

But really, it’s all about a “living wage.”  Yeah…that’s the ticket.  (And for no good reason, the Wisconsin bill excludes the police!)

Much has been made about the nature of public sector unions, as opposed to their private sector brethren, but I don’t see it.  Yes, I understand how electing the people you are going to “negotiate” with for your next pay raise is the very definition of a conflict of interest, but that obscures the fundamental problem.  In my opinion, there is very little difference.

The reason why I find so little difference between public sector and private sector unions is because neither one operates outside the aegis of the government.  Sure, one group gets their overinflated paychecks signed by the state comptroller, and the other group gets their overinflated paychecks signed by a corporate officer, but both groups’ paychecks got overinflated in the same way.

The union labor movement, public and private, has been amazingly thorough in ensconcing themselves in the highest levels of the power elite.  And that is exactly why unions are not viable without specific governmental intervention.  For example, a majority of states still don’t have right-to-work laws, and thus they allow unions to force membership on anyone unfortunate enough to get a job in a union shop, whether they want to join or not.  In this context, it is simply silly to assume that private sector unions are any different than public sector unions.  After all, the coercion carries the force of law whether you work for the state or not. 

Is there any doubt that Detroit would be better off without such labor laws choking off the auto industry’s competitiveness?  Of course there is no doubt – but the private sector unions have Michigan’s government in a stranglehold, and they are not about to loosen up.  Neither is this some David vs. Goliath fight.  For all the talk about the Chamber of Commerce’s influence on the 2010 elections, the labor movement would prefer you not to know that, when it comes to spending on government lobbying and electioneering, unions are the “big dog,” and it doesn’t matter whether they are public or private.

And the labor movement doesn’t just influence elections – the people they elect often pass laws perpetuating the union’s influence far beyond election day.  And they have been hard at work increasing the labor movement’s scope, to the point of absurdity.  For example, did you know that in the highly publicized “labor” battle between millionaires and billionaires NFL players and team owners, federal labor law forced the taxpayers to pick up the bill for this mediation, simply because these overprivileged millionaires belonged to a union?  I can think of better uses for my tax dollars, thank you.

Did you know that the government can label a company a “sweatshop” for being non-union and thus prevent it from working on county projects?  And to give you an indication of the fairness of the process involved, consider this gem of a quote from your friendly local legislator:

“(Union organizers) would not be sitting there if something wasn’t going on,” Councilman James R. Ellenbogen, D-Banksville, said in announcing his support to an audience filled with union activists and company employees. “This is not a court of law, but I’m a working guy and I believe what they say.”

So slander is totally fine, just as long as you’re “a working guy”?  You can call one of the few remaining steel companies in the United States a sweatshop simply because “something’s got to be going on”?  And then you have the temerity to wonder why there aren’t any sizeable steel companies in the United States anymore?

Of course, none of this changes the overarching principle.  It does not matter whether your union represents government workers or not.  Your union exists because of the government.  Remove the intervention and you’ve removed the problem.

Then again, that is not an acceptable solution to the labor movement – they like their special privileges, thank you very much.  But it would be far more fair to those who are currently on the outside looking in.

Chicago and Baghdad: Sister cities for the age of profligacy

September 14, 2010 Leave a comment

An interesting article from Dennis Byrne in today’s Chicago Tribune asks whether Chicago is ready for democracy, which echoes eerily the punditocracy’s take on Iraq.  He’s on to something though.  Chicago has never really been a representative government, having suffered through years of mobsters, union thugs, and political machines (and occasionally all three at once).  Not to mention more than 40 years of Daleys.  Speaking of Daley:

Why hasn’t he endorsed an heir apparent? Why didn’t he groom anyone for the job?

The absence of a clear line of succession has some people worried about the return of Council Wars and “Beirut on the Lake,” the consequences of the ugly brawl for the orb and scepter of Daley’s father, Richard J.

What is this, the Grand Duchy of Daley?

Well, I suppose that’s a good question.  Chicago has found itself unwilling and unable to elect anyone not named Daley since the first George Bush was in office.  This despite the fact that Chicago, and indeed the entire state of Illinois, is bankrupt almost beyond comprehension. 

Although he is currently facing an approval rating of roughly 35%, Daley managed to rake in more than 70% of the vote in his last few elections.  And one certainly wouldn’t view his low approval numbers as fatal to another campaign, given the ruthless efficiency with which the machine organizes. 

How does one become so untouchably popular?  Byrne has an idea:

Not a few people see value in Daley’s “strong leadership,” for bringing the city together, for ending (or at least submerging) the racial and ethnic hostilities that have historically divided this city. It has almost become a cliche in recent days: Daley held the city together by bringing everyone “in.”

Uh-huh. If he is to receive credit for the sea change, it wasn’t that he just opened up his City Hall office for every faction and said, “Take a seat at the table.” He did it by giving them stuff.

…Stuff that, when you add it all up, costs money, lots of it. To the tune of an estimated budget deficit of $655 million next year.

The result of corruption, like the Daley administration, is massive problems that get kicked down to the next generation, but when the bill comes due, where will the city turn?  Here’s a brief summary of Chicago’s seemingly intractable problems:

All this kumbaya has virtually sunk this city, and whoever inherits this mess has some serious cutting to do. Cutting that will have to be balanced racially, ethnically, geographically and, pray tell, by sexual preference. The problems line up to the horizon: gang warfare; sinking credit ratings; the remainder of a 10-year labor contract that Daley gave to major city unions in 2007; other out-of-control employee costs; tax increment financing boondoggles; Block 37; ill-considered, overly ambitious and underfunded capital projects; three-person garbage trucks.

What’s the moral of the Daley story?  Simply this: if you want to remove corruption from the government, remove power from those who govern.  Chicago is not a responsive democracy, and it’s not a city that has any institutional respect for the rule of law, preferring instead to rely on strongmen more in the mold of Latin American caudillos than the founding fathers.  Because of that, the city’s imperial overlord, along with his corrupt cronies, have been able to abscond with the municipal wealth for decades.  The situation is sad, but not unexpected. 

After all, it has happened before.  In Iraq.

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