III.3: Legal Corruption

Would a truly wise person even want to run for political office today?

In a previous post, I said that a wise person would desire a solid and comfortable income. And I described how that is different from the ridiculous wealth that most politicians are able to amass through their manipulation of insider information. Corruption is not only widespread; much corruption is perfectly legal for the well-connected. Search the internet for the net worth of U.S. congressmen and senators. You’ll find that virtually all of them who’ve been there long are fabulously rich.

In fact, a study published in the Journal of Financial and Quantitative Analysis examined the stock purchases and sales of U.S. Senators. The study found that from 1993 to 1998, the average senator made about 12% better than the stock market. Compare this to actual Wall Street experts who only beat the market by 5% on average. And you and I do very well if we can just match the market! But obviously, senators are able to use inside government information to their advantage. And this is all perfectly legal, not just for senators, but for congressmen, bureaucrats, and even Supreme Court justices. Also, the study found no difference between the gains of members of the Democrat and Republican parties. (Ziobrowski et al 2004)

Where does party loyalty fit into the world of legal corruption?

The chairman of a congressional committee can stop or delay a bill or select the day it passes. And they can base the decision on how it will affect their and their friends’ investments. Similarly, they can control the value of particular real estate or other valuables at any given time. In other words, they can buy low and sell high based on inside knowledge and control. Would this help to explain party loyalty, since the majority party appoints committee chairmen?

I suggest that our problem here is not about particular parties or politicians. Rather, the incentives in our government are set up all wrong. Most truly wise people would never consider a career in government. Our founders expected society’s “natural aristocrats” to be morally above economic considerations. And they wanted them to run the U.S. government. But instead, we have the very thing they designed our government to prevent. Our government is run by political parties, which are nothing but gangs of mostly wealth-seeking and power-seeking risk-takers. Do you think wealth-seeking and power-seeking risk-takers would be wise, pure, or noble?

So if government power accumulates so much wealth to those who run the government, why would we ever want the government to own all of industry and commerce? That is socialism by definition. Has there been more equality under socialist governments, like the Soviet Union, China, or Venezuela?

Because of legal corruption, we need drastic change, but socialism is the wrong change.

Every socialist government that ever existed was run for the benefit of those who controlled the government, that is, politicians. Yet naïve people fall for the socialist lie from power-hungry politicians every day. And furthermore, the word “socialism” gets confused with the idea of “welfare”, which is the use of tax dollars to help the poor. Politicians use the fact that many well-meaning people do not understand that socialism and welfare are vastly different concepts.

I found solutions to legal government corruption by putting together the writings of our second, third, and fourth presidents – John Adams, Thomas Jefferson, and James Madison. I have written up a set of proposals based on their solutions in a book soon to be published.

Meanwhile, how would you solve the problem of legal corruption? To simply ban government officials from investments without a much more comprehensive solution would never work. Can you see why?

This site is for discussing how to improve our political system. It is NOT for discussing party politics or political figures. So if you have a non-partisan question or comment, feel free to leave it below.

Sources:

Ziobrowski, Alan J., Ping Cheng, James W. Boyd, and Brigitte J. Ziobrowski 2004. “Abnormal Returns from the Common Stock Investments of the U.S. Senate”. Journal of Financial and Quantitative Analysis, vol. 39, no. 4, December 2004. Seattle: School of Business Administration, University of Washington