Monday, September 30, 2013

Bill Black — Why do Conservatives Oppose Prosecuting Elite Corporate Frauds?

There are at least four principles that virtually all conservatives purport to support – except when the potential defendant is socially elite. I have written previously about two of these principles on several occasions – the need for accountability and “broken windows” theory that calls for the prosecutors to make the prosecution of even minor street crimes a high priority if they have, even indirectly, a material effect on the community.
The third principle is that it is vital to punish in order to deter crime.....

The fourth principle, the one this column addresses, is the conservative love of “creative destruction” – a concept made famous by the economist Joseph Schumpeter. I have a simple proposition – there is no more creative destruction than putting a control fraud out of business through a prosecution, receivership, or enforcement action....
New Economic Perspectives
Why do Conservatives Oppose Prosecuting Elite Corporate Frauds?
William K Black | Associate Professor of Economics and Law at the University of Missouri – Kansas City

Double standard of justice. Why? Because the fundamental principle of conservatism is that some people are better than others, whereas the fundamental principle of liberalism is that all are created equal. As a result, there is no reforming conservatism. It is a pernicious doctrine that underlies and justified exploitation by an authoritarian elite, often in the name of "freedom."

Where I would disagree with Bill is where he asserts, "Control frauds are the ultimate betrayal of capitalism." I would say that they are the logical outcome of capitalism, which leads to elite capture of the state and exploitation of the people. Only by restraining and ultimately putting an end to capitalism can the situation be addressed in a lasting way. Otherwise, they'll be baaack, zombie-like. Cyclicality is part and parcel of capitalism.
Conservative scholars love (purported) “private market discipline.”  This is the theory that creditors will promptly destroy any control fraud.  The problem is that creditors actually fund the massive growth of control frauds rather than “disciplining” them.  Control frauds report extreme profits.  In the case of accounting control frauds these reported profits are fictional, but the creditors love to fund their growth.  In the case of other forms of control fraud the supra-normal profits produced by the fraud are real, so private market “discipline” is a complete oxymoron.  The creditors eagerly fund these other forms of control fraud because of their highly profitable frauds.

1 comment:

The Rombach Report said...

I am a conservative libertarian who also happens to appreciate MMT and I do not oppose prosecuting corporate elites. To the contrary, one of my biggest gripes is that no one has gone to jail for their culpability in the credit market collapse.