Ethics, economic instability and world governance

When the fraud is taken away, is anything left of the boom we thought we had? Does anything solid remain of the growth in production and productivity we were told was taking place?
Yes, there is something left but we have yet to see whether it is enough to restore the world economy to some degree of robust good health.

A Culture of Corruption and Fraud

Apart from corporate corruption, has there been even more extensive corruption? In the United States and other countries formerly believed to be blessed with a culture of integrity, has there developed a veritable culture of corruption and fraud? In his Letter of March 2002, Dr Kurt Richebacher wrote that "the ease with which American economists turn everything black into glaring white in assessing the US economy keeps amazing us. Despite overwhelming evidence, it took them a long time to concede the possibility of a recession. Now they see the economy's immediate recovery in every statistical blip." Dr Richebacher also claims that corruption in US official statistics, including "hedonic" pricing, has exaggerated calculations of growth in the United States Gross Domestic Product and in productivity.

If this is so, we have been living in an official and corporate environment in which "the fabric of economic trust" may have been torn to shreds.

This abuse of economic trust is not confined to the United States.
We know it has occurred elsewhere. In Australia, the HIH insurance business collapsed with losses of $A5.3 billion. The Australian of 8 August 2002 reported that the company's chief executive, in his evidence before the HIH Royal Commission, appeared to think it was not aberrant behaviour to be "triggering a virtual avalanche of corporate largesse; lending company money to mates; bidding against an HIH subsidiary for a stake of Lloyd's business; and overseeing soaring bonuses for his executives, even as HIH plunged towards the abyss."

We still lack comprehensive data about the full extent of such corporate conduct in the United States, Australia and elsewhere; but the broad outlines are clear and confront us with issues of great ethical as well as economic consequence.

Official Paralysis

Much the most important question now is what we are going to do about it. Are we really confronting the substantive issues yet or are we relying on a sort of Micawber-like optimism that, if our problems don't go away, something instead will magically turn up.

Governments and international agencies appear paralysed. In the last twenty years, they have become so used to abdicating their public responsibilities to the "market" that they seem unable any longer to play a significant role in restoring stability and promoting prosperity.

So far, the United States Government has put handcuffs on a few corporate defendants and arranged "perp walks" for the media. Richard Reeves has described perp walks as "a little conspiracy between police and reporters to produce photos [of perpetrators] for morning papers and film for evening news."

Otherwise, after all the cuts he's already made, Alan Greenspan might reduce interest rates yet again. Even the optimists must doubt whether that will have much positive effect - and might wonder whether, with some major financial institutions delicately poised, it might even make things worse.

Other governments are doing no better. According to the Australian Government's "Foreign Minister on steroids," Australia will stand shoulder to shoulder with the Americans if they invade Iraq. With even more doughty steadfastness, the Government has welcomed the fast-track trade legislation passed by the United States Congress because it enhances Australia's prospects of negotiating - quickly - a free-trade-area agreement with the United States.

Evidently, the Australian Government sees no cause to re-think its investment and trade policies or its relationship with the country which has dominated its economic and financial experience in recent decades.

Generally, there is little evidence of new thinking or new policies by other governments or by those international agencies which might be expected to give some lead.