The Cost of Corruption and Abuse
Copyright © 1994 Constitution Society. Permission is granted
to copy with attribution for noncommercial purposes.
The Measure of Corruption
During the past several decades, American citizens have become increasingly
aware of corruption and abuse in this society, both official and corporate. Many
by being the victims of it, or by personally knowing its victims. Others through
the many exposes that have been written. However, most of these provide only
anecdotal evidence. What is missing are estimates of the extent of this
corruption, and the costs of it to our country. Such estimates must of necessity
be very rough, as reliable statistics are generally not accessible if they exist
at all, but we can come up with working numbers until better ones become
available, based on both public and insider information.
Market Corruption. This covers all those commercial transactions
made not on the basis of price or merit but as the result of bribes, kickbacks,
or extortion. It includes rigged bids on construction contracts, excessive
prices on items sold, labor padding, and bribes paid to secure peace with labor.
It also includes the excess costs of red tape intended to prevent such abuses,
which would not be necessary if the threat were not as great, although such
measures seldom prevent waste or abuse and often serve more to cover up the
abuse than reduce it. In many jurisdictions, such corruption is endemic, and few
if any areas avoid it. It has been variously estimated that such corruption adds
between 5 and 15 percent to the cost of all goods and services. The latter
figure is probably closer, and it may even be higher.
A general excess cost of 15 percent is the equivalent of a tax to the
average worker, with a median annual income of $23000, of $3450 per year. If
made available for productive purposes, that could be expected to increase the
number of jobs by about 10 percent, or about 12 million jobs, which would be
more than enough to absorb the entire unemployed population of the U.S.,
estimated to be about 10 million, and could also be expected to raise average
income by about 10 percent, and add about .5 percent to the average annual
growth of the GDP.
Narcotics. Illegal drugs are estimated to drain about $200-300
billion from the economy each year, which amounts to about 4-5 percent of the
GDP. Contrary to disinformation about a "war on drugs", that volume of
trafficking is made possible only by official protection or participation,
probably at least 80 percent of it. It is estimated that about 40 percent of all
cocaine and heroin is smuggled in directly by such federal agencies as the CIA,
DEA, and FBI, especially the CIA. The "war on drugs" is only to keep
prices high, limit competition, and deceive the public. Some of the money is
used to finance covert or illegal government operations, but much of it is used
to enrich officials, international bankers, and to acquire assets. The results
of that acquisition is to bring an increasing proportion of the economy under
the control of criminals, and with it increasing political power.
To the direct costs of the drugs must be added the costs in increased crime,
law enforcement to deal with that crime, and the cost in lost lives, health, and
property. Taken together, we can estimate that the aggregate cost amounts to
about 12 percent of the GDP, 80 percent of which is attributable to official
corruption, equivalent to a tax of about $2300 per year for the average worker.
It can be estimated that more than half of that money is not returned to the
economy as consumption or new investment, but is used to acquire existing assets
without creating any new value, resulting in a loss to the economy of about 8
million jobs, or almost as many as the number of unemployed. It also makes a
major contribution to the balance of payments deficit, perhaps as much as $40
billion a year, since most of the money is removed from the U.S. and only
returns from abroad to acquire assets or purchase U.S. government bonds, the
interest on which is then repatriated abroad. This balance of payments deficit
increases the cost of imports to U.S. consumers, especially oil, which is the
major product imported, which in turn contributes to increased costs for
everything. At the same time it increases the capital available for creating
jobs abroad that compete with U.S. workers, further contributing to
unemployment, far more than the effects of reduced tariffs.
Raiding. This covers a variety of attacks on productive assets,
including financial institutions, businesses, and individuals, by corrupt
parties, including several agencies of the U.S. government. The largest category
of this raiding was the contrived collapse of the savings and loan industry,
mainly under the direction of the CIA and Justice Department. Thrift
institutions were induced to make bad loans to members of the conspiracy, then
taken over, looted, and seized, their owners wiped out, and their assets sold to
the conspirators at firesale prices, paid for with the same money obtained by
the bad loans. This process placated the public during the 1980s by stimulating
a real estate boom, which created a brief period of prosperity, but led to the
recession of the 1990s when the real estate boom failed. It is estimated that
the collapse of the thrifts diverted about $1 trillion from productive use,
about half of which went into the offshore coffers of the CIA and other corrupt
interests. It resulted in an increase in the national debt which may cost the
average worker about $2000 a year for the next 50 years, and will cost the
economy about 8 million jobs a year over that period.
Lesser but still important forms of raiding include bankruptcy fraud, not
just the kind in which the bankrupt commits fraud, but the kind in which parties
who file for Chapter 11 protection have corrupt judges and trustees contrive to
cause them to lose all their assets, which are then bought up by cronies of the
judges and trustees for pennies on the dollar. Again, the CIA has played a
prominent role in orchestrating this kind of raiding.
Another approach to raiding is done by having subsidized government-owned
businesses called proprietaries compete with ordinary businesses,
forcing them into financial distress, then manipulating their financing sources
to force them to liquidate or sell. Once the agencies gain control of the
businesses, they either loot them of their assets and cover their tracks by
putting the business into bankruptcy, or else continue to operate it and to
bring strategic sectors of the economy under agency control. Again, the CIA has
been one of the major agencies doing this. It is estimated that this approach is
costing the economy more than $100 billion a year, or about 1 percent of GDP. It
also results in increased unemployment as looted or sold businesses lay off
workers, and although many of them get other jobs elsewhere, there is a net loss
during the period they are unemployed, and a loss in reduced wages after they do
get other work.
Legal abuse. This is essentially a conspiracy of most of the legal
profession against the public, resulting in an excess of legal costs over what
they should be of about 80 percent, which in turn increases the costs of goods
and services by about 2 percent, on the average. In some cases, by much more.
For example, about 70 percent of the cost of a new aircraft is due to the cost
of liability insurance, which is the indirect result of this legal conspiracy.
It also takes other forms. Attorneys often sell out their clients to the
opposition, resulting in their clients losing their cases. They also often
conspire to defraud the heirs in probate, manipulating appraisals and diverting
the assets to themselves or their cronies. More than half of all judges are
compromised, and pervert the judicial process to serve the interests of the
Vote fraud. Most computerized elections can be rigged whenever the
Shadow Government chooses to do so. It goes through the motions of influencing
elections with large contributions and manipulation of the mainstream media, but
if those methods fail, the voting machines give the result that was
predetermined. This results in a terrible cost of a loss of public confidence in
the political process and the legitimacy of the established institutions of
society, a loss of morale and confidence, and reduced cooperation and compliance
with voluntary taxation.
 Rodney Stich, Defrauding America, 1994, available from Diablo
Western Press, Inc., PO Box 5, Alamo, CA 94507, 800-247-7389, $27.25 Ppd.
 James M. & Kenneth F. Collier, Votescam: The Stealing of America,
1992, available from Victoria House Press, 67 Wall St #2411, New York, NY 10005,
For more information contact:
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