Janine Wedel - Unaccountable - How Elite Power Brokers Corrupt Our Finances, Freedom, and Security

Likewise, mortgages are sliced and diced and sold—all without consideration of the impact on the client, let alone the broader impact. “Innovative” bankers across Wall Street were stuck within the ethics and expectations of their silo, which valued short-term dealmaking more than long-term consequences. Yet they would not consider their activities corrupt. And retired generals who see no problem serving on both government advisory boards and defense-contractor boards surely believe this, too, because their silo—the military—has convinced them of their rectitude, expertise, and ability to self-regulate.

Were the generals or the exotic-derivatives traders to ask those outside their silo, at the diner or coffee shop, say, “Does my behavior pass the smell test,” the answer might well be “no.” They aren’t asking that question of themselves nearly enough.

It’s time that we ask again and again if there’s any hope of holding the unaccountable to account. Why is that such a problem?

In recent decades, “accountability” has become associated with specific auditing practices in the United States, the United Kingdom, and elsewhere. 8As checklist-type accountability practices ascended in the 1980s, accountability assumed a more mechanistic meaning, political scientist Melvin J. Dubnick has shown. 9Such practices, whether applied to the state or private sector, disconnect accountability from much of what matters. Accountability is imposed from the outside—without the engagement of a “moral community”—a community “that shapes (and is shaped by) the expectations, rules, norms and values of social relationships,” as Dubnick characterizes it. The resulting checklist accountability is removed from the internal ethics of a community—that very community or body that it is supposed to hold to account. Accountability gets reduced to a performance, a technocratic exercise without moral or ethical moorings.

The disconnect is not only from the outside. Auditing breaks things down into observable, isolated, and often quantifiable pieces and then scrutinizes the pieces—frequently with little or no regard for the whole. With essential parts separated from each other, knowledge, wisdom, and institutional memory are sidelined. We might ask how it can be that, in a society consumed with auditing virtually everything—from relationships to job performance to government programs—there have been so many failures of accountability in finance.

Promontory Financial, discussed in Chapter 6, surely went through many checklists of proper corporate governance with its client MF Global; MF Global was then able to demonstrate to the government that it had reformed with a laudatory report penned by Promontory. But it may have been just that—a demonstration—not so very different from a “performance.” Promontory, acting as a paid, private stand-in for real government oversight, missed the broader picture of malfeasance that would explode within a matter of months.

Whether government, private, or some amalgam thereof, these parties are all constrained by walls around their compartments. Consider government auditors. Confined to silos and vertically structured laws and regulations, they cannot begin to effectively track the new power brokers, who work horizontally. In addition to limited jurisdiction, these auditors are not typically charged with tracing influence across organizations but rather with how governments spend taxpayers’ money. Their methods hark back to an older world: one with clearer demarcation.

Accountability practices also evaluate individuals, not network or group actions. Groups are scarcely subject to investigation unless they fall under organized crime or terrorism, and even then it is typically individuals who can be held to account.

In today’s world of shadow elites, shadow lobbyists, and their ilk, this will not do.

Beyond Checklist Accountability

Perhaps our most important task as a society is to reintegrate ethics and accountability. This is an essential undertaking, and one that will be hard to achieve.

The absence of moral community under today’s checklist accountability shows how difficult it is for the players to be shamed, even when they can be named. Players we have met in this book—from the retired general who serves simultaneously as an adviser to a military agency and a consultant to a defense company pushing services to the agency, to the economist-scholar recommending lax regulation to a congressional committee without mentioning his Wall Street roles, to the high-status professor touting the “reforms” of a despot without mentioning that he is being paid by a PR firm—all try to inoculate themselves by claiming ignorance of the consequences of their actions. Of course, we can never quite know for sure what our activities will reap. But isn’t it their—and our—professional obligation to anticipate the consequences of given actions and to read their implications?

Consider former U.S. Congressman and speaker of the House Newt Gingrich, who simply plowed ahead even when lambasted for serving as a handsomely paid “historian” for housing giant Freddie Mac in the decade leading up to the financial crisis. (He’s currently enjoying a perch on the CNN program Crossfire .) Or the reporter who still calls himself a journalist even when a foreign, repressive regime is underwriting his salary as a well-paid lobbyist.

Often the players themselves seem only dimly aware of their own conflicts, as when Mike McConnell, then the Director of National Intelligence, suggested to a reporter, with apparently no reservations, that there was no real difference between his work for a private contractor (a lucrative business that paid him a huge salary) and his work for the government (on behalf of the public, that earned him a fraction of his Booz Allen salary). Is it that he has so accepted the intertwined nature of intelligence that he doesn’t see the ethical tangles that are obvious to those of us who stand outside the system?

True accountability cannot be achieved merely by deploying a checklist. Helen Sutch, a longtime World Banker whose expertise on corruption of all kinds may be unparalleled, goes a step farther, suggesting that ticking the boxes “is a corruption risk in itself, because it implies that as long as the boxes are ticked, anything beyond that, if not explicitly forbidden, is okay. More broadly, it also discourages people from taking responsibility for the success of the whole activity.” 10The fact is that we need both accountability from the outside and trust on the inside. 11

The traditional accountability had both connotations. So do many native terms into which the English word is translated. When I asked participants from China, Chile, Nepal, South Africa, Russia, and France, among other countries, at a 2003 workshop I organized in Poland to discuss how it is rendered into their languages and what it connotes, it became clear that the more recent meaning of accountability doesn’t travel well. In French, Spanish, and other Romance languages, for example, accountability means responsibility. 12This approach engages the moral community.

The damage wrought when a system is disconnected from moral community and practice is huge. A prominent Polish essayist just after World War II described an “excluded economy”—an entire informal system of off-the-books survival—that flourished under the weight of German occupation. “An economy morally excluded from the life of the nation has left behind calamitous psychosocial practices,” he wrote. “Only now are we paying the price of the occupation.” 13

While this is an extreme example, far removed from the experience of most of us, I hope that the ethical disconnect that we have seen in this book is, by now, clear. Above all, ethics and accountability must be reintegrated. Today’s crisis of formal institutions and of leadership makes this change all the more urgent. Thinking about corruption in terms of violating the public trust helps to clarify the issue.