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The Cost of Corruption and Abuse



Copyright (C) 1994 Constitution Society. Permission is granted to copy with

attribution for noncommercial purposes.



The Measure of Corruption



During the past several decades, American citizens have become increasingly

aware of corruption and abuse in this society, both official and corporate.

Many by being the victims of it, or by personally knowing its victims. Others

through the many exposes that have been written. However, most of these provide

only anecdotal evidence. What is missing are estimates of the extent of this

corruption, and the costs of it to our country.  Such estimates must of

necessity be very rough, as reliable statistics are generally not accessible

if they exist at all, but we can come up with working numbers until better

ones become available, based on both public and insider information.



- Market Corruption. This covers all those commercial transactions made

not on the basis of price or merit but as the result of bribes, kickbacks, or

extortion. It includes rigged bids on construction contracts, excessive prices

on items sold, labor padding, and bribes paid to secure peace with labor. It

also includes the excess costs of red tape intended to prevent such abuses,

which would not be necessary if the threat were not as great, although such

measures seldom prevent waste or abuse and often serve more to cover up

the abuse than reduce it. In many jurisdictions, such corruption is endemic,

and few if any areas avoid it. It has been variously estimated that such

corruption adds between 5 and 15 percent to the cost of all goods and

services. The latter figure is probably closer, and it may even be higher.

     A general excess cost of 15 percent is the equivalent of a tax to the

average worker, with a median annual income of $23000, of $3450 per

year. If made available for productive purposes, that could be expected to

increase the number of jobs by about 10 percent, or about 12 million jobs,

which would be more than enough to absorb the entire unemployed

population of the U.S., estimated to be about 10 million, and could also be

expected to raise average income by about 10 percent, and add about .5

percent to the average annual growth of the GDP.



- Narcotics. Illegal drugs are estimated to drain about $200-300 billion

from the economy each year, which amounts to about 4-5 percent of the

GDP. Contrary to disinformation about a "war on drugs", that volume of

trafficking is made possible only by official protection or participation,

probably at least 80 percent of it. It is estimated that about 40 percent of

all cocaine and heroin is smuggled in directly by such federal agencies as

the CIA, DEA, and FBI, especially the CIA. The "war on drugs" is only to

keep prices high, limit competition, and deceive the public. Some of the

money is used to finance covert or illegal government operations, but much

of it is used to enrich officials, international bankers, and to acquire assets.

The results of that acquisition is to bring an increasing proportion of the

economy under the control of criminals, and with it increasing political

power.

     To the direct costs of the drugs must be added the costs in increased

crime, law enforcement to deal with that crime, and the cost in lost lives,

health, and property. Taken together, we can estimate that the aggregate

cost amounts to about 12 percent of the GDP, 80 percent of which is

attributable to official corruption, equivalent to a tax of about $2300 per

year for the average worker. It can be estimated that more than half of that

money is not returned to the economy as consumption or new investment,

but is used to acquire existing assets without creating any new value,

resulting in a loss to the economy of about 8 million jobs, or almost as many

as the number of unemployed. It also makes a major contribution to the

balance of payments deficit, perhaps as much as $40 billion a year, since

most of the money is removed from the U.S. and only returns from abroad

to acquire assets or purchase U.S. government bonds, the interest on which

is then repatriated abroad. This balance of payments deficit increases the

cost of imports to U.S. consumers, especially oil, which is the major

product imported, which in turn contributes to increased costs for

everything. At the same time it increases the capital available for creating

jobs abroad that compete with U.S. workers, further contributing to

unemployment, far more than the effects of reduced tariffs.



- Raiding. This covers a variety of attacks on productive assets, including

financial institutions, businesses, and individuals, by corrupt parties,

including several agencies of the U.S. government. The largest category of

this raiding was the contrived collapse of the savings and loan industry,

mainly under the direction of the CIA and Justice Department. Thrift

institutions were induced to make bad loans to members of the conspiracy,

then taken over, looted, and seized, their owners wiped out, and their assets

sold to the conspirators at firesale prices, paid for with the same money

obtained by the bad loans. This process placated the public during the

1980s by stimulating a real estate boom, which created a brief period of

prosperity, but led to the recession of the 1990s when the real estate boom

failed. It is estimated that the collapse of the thrifts diverted about $1

trillion from productive use, about half of which went into the offshore

coffers of the CIA and other corrupt interests. It resulted in an increase in

the national debt which may cost the average worker about $2000 a year

for the next 50 years, and will cost the economy about 8 million jobs a year

over that period.

     Lesser but still important forms of raiding include bankruptcy fraud,

not just the kind in which the bankrupt commits fraud, but the kind in which

parties who file for Chapter 11 protection have corrupt judges and trustees

contrive to cause them to lose all their assets, which are then bought up by

cronies of the judges and trustees for pennies on the dollar. Again, the CIA

has played a prominent role in orchestrating this kind of raiding.

     Another approach to raiding is done by having subsidized government-

owned businesses called proprietaries compete with ordinary businesses,

forcing them into financial distress, then manipulating their financing

sources to force them to liquidate or sell. Once the agencies gain control of

the businesses, they either loot them of their assets and cover their tracks by

putting the business into bankruptcy, or else continue to operate it and to

bring strategic sectors of the economy under agency control. Again, the CIA

has been one of the major agencies doing this. It is estimated that this

approach is costing the economy more than $100 billion a year, or about 1

percent of GDP. It also results in increased unemployment as looted or sold

businesses lay off workers, and although many of them get other jobs

elsewhere, there is a net loss during the period they are unemployed, and a

loss in reduced wages after they do get other work.



- Legal abuse. This is essentially a conspiracy of most of the legal

profession against the public, resulting in an excess of legal costs over what

they should be of about 80 percent, which in turn increases the costs of

goods and services by about 2 percent, on the average. In some cases, by

much more. For example, about 70 percent of the cost of a new aircraft is

due to the cost of liability insurance, which is the indirect result of this

legal conspiracy. It also takes other forms. Attorneys often sell out their

clients to the opposition, resulting in their clients losing their cases.

They also often conspire to defraud the heirs in probate, manipulating

appraisals and diverting the assets to themselves or their cronies. More

than half of all judges are compromised, and pervert the judicial process

to serve the interests of  the Power Elite.



- Vote fraud. Most computerized elections can be rigged whenever the

Shadow Government chooses to do so. It goes through the motions of

influencing elections with large contributions and manipulation of the

mainstream media, but if those methods fail, the voting machines give the

result that was predetermined. This results in a terrible cost of a loss of

public confidence in the political process and the legitimacy of the

established institutions of society, a loss of morale and confidence, and

reduced cooperation and compliance with voluntary taxation.



- Rodney Stich, Defrauding America, 1994, available from Diablo Western

Press, Inc., PO Box 5, Alamo, CA 94507, 800-247-7389, $27.25.

- James M. & Kenneth F. Collier, Votescam: The Stealing of America,

1992, available from Victoria House Press, 67 Wall St #2411, New York,

NY 10005, $10.00.



For more information contact:

Constitution Society, 6900 San Pedro #147-230, San Antonio, TX 78216,

210/224-2868



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