Saturday, December 15, 2018
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< view full issue: The corruption that does not cess
Juan Ignacio Bartolomé and Mauro Lozano

​Corruption: a drama in four acts

Economists and members of Economists combating the crisis

The scene simulates a prison, where Luis meditates in an attitude reminiscent of Rodin's "The Thinker".


NARRATOR


As a spectator who sympathetically watches this representation, do not worry. Theatre is fiction and the facts and characters that are narrated here are only products of the author's excessive imagination. Its purpose is that you spend a pleasant evening, committing to the space and time in which you are find yourself are as unreal as the Atlantis of Plato or the Insula Barataria de Cervantes (a fictional isle awarded to Sancho Panza by some noblemen as a prank in Part II of Cervantes' Don Quixote). The work addresses the phenomenon of corruption and although it contains elements that incline you to do so, you should not get depressed, rather, you should sit back, relax and enjoy it. Nevertheless, we give you a brief synopsis here in advance so that you do have the opportunity to vacate your seat in the likely event that events depicted seem too close to be bearable.


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Adding an further warning, we need to inform you the spectator that the work lacks originality. In fact, there are several authors who, with different formats, including theatre and celluloid, have addressed this topic. It is understandable. Its transcendence has captured the attention of the general public and even literature, already having dealt with real events, now imaginary, aiming to give clues that encourage understanding.


Synopsis


FIRST ACT


(Scene: a prison cell) The cell is comfortable, but far removed from the luxurious spaces to which Luis is accustomed. He is the treasurer of their party, the right-hand man in the leadership, and he has been a senator. His situation seems absurd to him. Why do not they not come take get him out of there? After all, the accusation against him is only based on personal assets, some forty million Euros, which they have detected in a tax haven. He has explained their provenance, although, apparently, in an unconvincing manner. He has received comforting messages from the president: "Luis stands firm", and assumes that power has mechanisms to release him. However, confinement lasts too long and he begins to suspect that he will be used as a scapegoat. He knows about all the movements party funds, their origin and their destiny, and knows that his fortune is his remuneration, agreed upon and therefore legitimate, in return for his management. Of course he cannot tell, it would aggravate his situation. Nevertheless, he can send a message, a threat that incites the powers-that-be to act decisively in his favour. In fact, the judge who uncovered the case has been expelled from the judiciary. He surmises that they could also remove the prosecutor and the judge who imprisoned him from the case.


Luis decides to dispatch the message. My means of a good friend, he filters to the media his notes on amounts he has paid in black to the party leaders. They are small amounts, some hundreds of thousands, that do not imply criminal responsibilities and that for the most part have prescribed (lapsed), but just as he imagined, the scandal is enormous. For the taxpayers, it is inadmissible that those in charge of collecting their taxes receive money without declaring it. The warning is blunt.


SECOND ACT


(Scene: A meeting room) Your party feels the effects of the blow and decides to go on the offensive. They deny the evidence and launch a campaign to discredit Luis. "The papers are lies invented by a criminal who has been stealing for years". Simultaneously, they destroy their computer hard disk, knowing that Luis, as a good accountant, might have written down all the figures, the true dimension of the movements of funds. They assume that there are other copies, but this computer is within a judge's reach.


The cards are on the table. Luis can unveil the entire network, putting the party on the edge of the precipice, but would be facing a power that have showed him their teeth and, in addition, he would be portrayed as having the most responsiblity. It would be a war in which everyone would lose. It is time to negotiate.


Luis is released from prison provisionally. He insists of the veracity of the annotations that he had divulged, but does not go further. The charges against him are diluted. He may end up sentenced to a minimum penalty, but it is acceptable, given the period that he has already served. Of course, his party will not file a complaint against him for misappropriation. He can enjoy his money and freedom. Time, that great ally according to the Galician philosophy, will end up solving the problem.


THIRD ACT


(Scene: a courtroom) A new character enters the stage, Francisco, the main defendant in the "Gurtel case", over which the threat of a severe sentence looms. As part of a thoughtful defence strategy, he decides to switch the fan on. In his statement before the court, Francisco denounces, without providing evidence, the collection of a commission of 3% on all public works, motorways, airports, AVE... in exchange for the adjudication of work. In the hypothetical case, the treasurer of the party in the government would, supposedly, be responsible for making the corresponding arrangements, the origin of funds and their destination.


The figures referred to by Francisco, without offering any evidence, would be an overwhelming amount. 


During eight years, spending on public works exceeds 40,000 million Euros, and so 3% would be above 1.2 thousand million. In turn, 3% of this 3% would be close to 40 million.


While Francisco the stage, a voice in off announces the constitution of a commission that investigates the financing of the PP party.


NARRATOR


It is not lost on you, perceptive spectator, that Francisco's statement and the commission of inquiry put the discourse on a new plane. It is no longer a question of a game between unethical politicians and businessmen in search of easy money that, in an atmosphere of impunity, redesignation of land and predetermined assignments of contracts of small relative importance are handed out. It would now be a problem of state, in which the players are not mere amateurs, rather real professionals. This leads to the appearance on stage of two new characters, the sociologist and the economist who, with the format of academic papers and based on the imaginary assumptions contained in the foregoing acts, present their respective theories to the audience.


The author of the work is aware that this format might be cumbersome and that their effort to shed it, through a fluid dialogue, is probably a waste of time. However, they have run this risk, but in the hope of not being too boring.


FOURTH ACT


(Scene: a university classroom) In their discourse, the Sociologist argues that corruption in its many variants is obviously not a recent phenomenon and that it has probably been a determining factor in the history of the world and, without doubt, also in the imaginary country in which the action takes place.


The "problem" of corruption, apart from ethical considerations, is its chaotic and uncontrollable nature that generates multiple negative effects and, in the end, determines the non-viability of social organization until it reaches the failed state.


Corruption fulfils a double function: On one hand, it is an "ideal" tool to consolidate relations between extractive groups installed in political structures and oligopolistic economic power groups. They know that, in open and democratic societies, where there are multiple decision centres, controls are increased and factors such as competitiveness and efficiency, become the determining elements for a society's success. In addition, they are not willing to risk dominating the market by competing in an open economy with free competition. On the other hand, this allows the over-financing of the political structures (and their members) that make social control possible.


Therefore it is to promote and facilitate the development of this precious tool, but with the condition of avoiding its negative effects (chaos, inefficiency, internal fights between groups, scandals,...) that can endanger social order and stability.


The objective is the control of the State beyond the servitudes of the democratic game, of putting the Public Sector at the service of the dominant groups, but without jeopardizing the stability of the State.


Precisely, the great contribution in this case has been the organization of corruption, applying a methodology of work inspired by Lucky Luciano and the "family" pacts.


Of course, the management of corruption has to be adapted to the governance structures of the Regional State (Multilevel Governance). In effect, the governance of the State is articulated in three levels: General State Administration, Regional Regions and Local Entities. Apart from the complexity of the system and the assignation of powers problems existing between administrations, there is no doubt that a good organization of corruption has to adapt to this framework as much as possible.


With regard to the General State Administration, their sights focus on the Ministries and investor entities. The big bite is the Ministry of Development and the logical thing would be to put a person with extensive experience in the General Secretariat of the party at the head of this Ministry, and therefore in the control of its treasury and its financing. Considering that practically all of the Ministry of Public Works contracts are carried out by multinational companies, the operation is simple, does not require many intermediaries, does not make a fuss and allows commissions to be paid outside of Spain without major problems.


Probably, this innocent hypothesis would explain Luis's "silence" and the fact that their money in tax havens is not recoverable. and the question arises about the destiny and the ownership of funds that, in their case, would be considerable.


Regarding the second Level of Governance, the Regions, the scheme is duplicated in the same way, but it becomes more complex depending on the increase of intermediaries, different investment destinations (health and education) and constant frictions with the third level (City and Provincial Councils). It appears systemically and structurally in Catalonia. As for the Regional Government of Andalusia, the great corruption issue focuses on the ERE (fictitious workers compensated when laid off due to official large-scale company staff reductions), but there is no data pointing to the existence of systematic and structured corruption.


As regards local entities, particularly municipalities, corruption acquired an endemic character centred on the area of town planning.


This type of corruption, fed by the building bubble, mushroomed intensely on the Mediterranean Coast, given the strong demand for tourist housing, and in the areas of greatest urban demand (Madrid, above all). Because of its great capillarity, the social effect of this corruption has been devastating, to the point that it is probably responsible for the evident degradation of social ethics.


The other character's performance, the Economist, focuses on the analysis of the impact of these practices on the economy as a whole. He argues that corruption has seriously affected the efficiency of public spending and has distorted the proper allocation of productive resources, to the point of being responsible to a considerable degree for the occurrence of the economic crisis. It has caused the construction of airports where no aeroplane has ever landed, of toll motorways with no cars that end up being bailed out with public funds, of empty houses whose construction used up enormous financial resources borrowed contributed by banks that also end up being rescued by the State.


With a tone that pretends to be pedagogical, he points out that the crisis in this imaginary country began with the collapse of the financial system, as a consequence of the imbalance in its accounts that was caused by giving the excessive credit to the construction sector. Unlike what happened in other countries, banks had not entered the world of "toxic assets" disseminated in international financial groups. In international markets they were borrowers, not lenders: they did not buy assets, they asked for loans.


The banks created their own "toxic assets" by granting loans that later could not be repaid. and if they allocated so much financing to the construction sector, it was because it offered a higher return than other sectors. 


This profitability differential came from the profits generated by the land re-designations, the award of public contracts..., obtained by paying commissions. He argues that it is not an exaggeration to point to corruption as being responsible for the crisis.


After their performance, a dialogue between both characters is established, which addresses, without claiming to assume prophetic capacities, the foreseeable evolution of the phenomenon of corruption. They agree that this organizational model is not operational at present. Undoubtedly, one of the side effects of the serious economic crisis that began in 2008 and has not yet been entirely overcome was the collapse of the organizational model described. 


One of the causes of the crisis was corruption and, at the same time, paradoxically, corruption was a factor that deactivated it. 


The bursting of the bubble and the financial crisis plunged the urban and real estate sector into bankruptcy. Also, the fiscal problems of the State forced a drastic cut in their investment activity that affected all the Administrations. The goose no longer laid eggs, and far less golden ones.


Frustrated expectations, unfulfilled promises and breaches of commitments lead to an environment of revenge and denunciations among corrupt people involved in the affaires proliferate, with the consequent arrests and accusations of numerous crimes directly integrated in the organized model of corruption.


In view of the numerous judicial proceedings in progress, both characters conclude that the corruption of the PP was the result of a systemic model of plundering of the Public Sector and that the different corrupt plots were inserted into a highly consolidated structure. They also maintain that this model has ceased to be operative. and cannot resist the temptation of leaving in the air a question for the audience, who has so kindly endured a performance dressed with perhaps unbearable elements. Does the collapse of the model means the end of corruption or simply the need to replace it with another model?


Juan Ignacio Bartolomé and Mauro Lozano. Economists and members of Economists combating the crisis.
Juan Ignacio Bartolomé is Professor of Economic Theory at the Complutense University and a member of Economists Facing the Crisis.


Mauro Lozano is an Economist. He has carried out his professional activity in Industry. He has held various positions in the public sector aimed at industrial and business restructuring.
https://economistasfrentealacrisis.com/

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