Saturday, July 22, 2017

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Something in the Water? New Jersey’s Spider Web of Corruption

Last week’s bust of 30 elected officials by the FBI in a corruption probe in  New Jersey is unfortunately not a shock to many residents. Abuse of public office and public funds in New Jersey is big, and it is small, and it is everywhere.

But is it an expectation?

According to the Cliffview Pilot, that’s how the Mayor of Hoboken, Peter Cammarano, now in custody for allegedly accepting $25,000 in cash bribes, sees it. This spring, then-candidate Cammarano told an FBI cooperator posing as a corrupt developer his election as Mayor was in the bag, “I could be indicted, and I’m still gonna win 85 to 95 percent.” The conversation, recorded in the Malibu Diner, is now evidence of how the Mayor agreed to suspend zoning laws for a developer in exchange for, “some green.”

New Jerseyans like corruption about as much as they like impending state bankruptcy and high property taxes. But what’s not often mentioned is  these things are related.  These arrests fight the symptoms but not causes.

As FBI Special Agent Dun stressed in Thursday’s press conference, “Corruption in this state will not end due to law enforcement’s effort…it’s time for the citizens of New Jersey to ask what do we need to do to wipe the spider web of corruption off the face of this state.”

That spider web has everything to do with the state’s institutions and how individuals choose to profit from, or avoid, the regulations those institutions have created. This is what provides the opportunity for civil servants to take bribes: “I might be willing to waive this permitting fee, but it’s going to cost you.”

Take note, this is also how things work in Chicago. And in countless other places all over the world.

Where costly bureaucracies proliferate, deal-making, evasion, bribery, and black markets grow.  Many politicians know this. They also know that  private parties are willing to pay to prevent a rule or regulation from being implemented.

In his book Money for Nothing, economist Fred McChesney develops the theory of rent extraction. Politicians extort payments (campaign donations) from private parties by making threats to expropriate wealth. People pay politicians to leave them alone.

In a related vein, when rules or burdensome regulations are already in place, enterprising civil servants know that playing with the municipal code has value for someone. That is the essence of the abuse of power.  It happens in Hoboken and in Cleveland.

This raises a question: when does a regulation or rule move from being a means to solve a social or economic problem, to becoming the problem itself — a means for the public sector to extract favors?

Because it has gone on for so long, abusing public office and public money may even be tacitly accepted within the institutions themselves. That is why we are likely to see more enterprising “operators,” who view their electorate with the same near-contempt of Mr. Cammarano.

To hobble the “culture of corruption,” shrink the bureaucracies and petty rules governing private property, and economic activity which provide the ethically-challenged with the means, the money, and the opportunity to win favors by granting them to the highest bidder.

For more, here is Bob Ingle and Sandy McClure’s investigation of New Jersey’s culture of corruption, The Soprano State.