Why Are Their Bribes So Small? The Rate of Return on Bribery in Democracies.
South Africa’s Jacob Zuma is out. Israel’s Benjamin Netanyahu might be out. Others should be out. Their crime: not their policies, but bribery. Each of these men has – it seems – taken large sums of money from corporate middlemen. In return, these leaders have produced policies that benefit the corporations. This is known as corruption.
There is no better rate of return for corporations than bribery of elected officials. They give out hundreds of thousands of US dollars and earn – in return – hundreds of millions of US dollars in government contracts or through favourable tax policies.
For instance, there is an allegation that former South African President Jacob Zuma took R500,000 (approximately $40,000) per year from the French weapons and electronics firm Thales. But Thales meanwhile made millions of dollars from its contracts with cash starved South Africa (including an $86 million contract for a rail signalling system). The bribe that Zuma is alleged to have taken is miniscule compared to the deal that he allowed Thales to win – if indeed it was his influence that won Thales the contracts.
For instance, again, the Israeli police say that Prime Minister Benjamin Netanyahu took bribes of $300,000 from two businessmen – one of them the Hollywood producer Aaron Milchan and the other Aaron Packer (who inherited his wealth from his father, the pirate of cricket Kerry Packer). For this modest money – which came over ten years – Netanyahu passed a tax exemption in 2008 that benefited Milchan. Estimates of the benefit run into the millions of US dollars for Milchan. Netanyahu tried to help Milchan become a stakeholder in Israel’s Channel 2 television network and to help Milchan build a free trade zone on the Israel-Jordan border (the latter was said to have included Ratan Tata, who denies the allegation).
What is embarrassing is that these men – Netanyahu and Zuma – sell their countries for such little money. If they are going to betray their patriotism, they might as well ask for more.
So here we have two elected officials – Zuma and Netanyahu. Both of them are alleged to have taken bribes. For these bribes, they have allegedly helped corporations and billionaires make a great deal of money. The bribes are a rounding error compared to the profits. What tempts the corporation to bribe is not that it will get the contract, but that the rate of return on the bribe is so high. It is irrational not to bribe. Bribery is the most rational way to operate in a capitalist democracy, where for a small political fee massive profits can be generated.
Take the case of Greece. Whistle blowers told the government that the Swiss pharmaceutical company Novartis paid €50 million in bribes over a decade to several politicians, while the company siphoned €4 billion from the Greek health system. Suitcases of cash were handed over to politicians, while money far too voluminous to pack into a box was sent off to Novartis’s headquarters in Basel, Switzerland. Novartis denies part of the story. Some of it will be undeniable. All of it supremely commonplace.
Attention is correctly focused on politicians. They betray the public trust when they take bribes. They must be removed from office. But there is far too little attention paid to corporations, for whom this is a normal practice. One executive might be fired or another transferred, but the corporation itself goes on with tax crimes, money laundering, and bribery. It cannot be said that these crimes ‘distort’ the system. They are, in fact, the system.
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