Corruption in Government


The amazing thing about the continuously unfolding saga of corruption in Washington is not that it exists; surely the readers of this magazine are not surprised that these things are taking place in our increasingly fascistic mixed economy. Rather, it is the sustained attention and interest focused on these matters by a courageous press and an outraged public that is surprising—and heartening. To be sure, people have always been skeptical of politicians, and the press has undoubtedly known more than they have told, over the past decades. But people have been curiously reticent to talk about these things, to admit the extent to which corruption was a way of life in government—until now.

Although the current disillusionment with government is a very healthy thing, there is a real danger that the most important lesson of the current scandals will be missed. For there is a common thread running through all the incidents, one that the press has not hidden, but has failed to identify and focus on. Let's look at a few examples:

The Milk Deal: In 1971 the Associated Milk Producers offered the Administration $2 million in campaign help in exchange for import quotas against foreign dairy products. In 1972, they contributed $400,000 in exchange for a 10% increase in federal milk price supports. Since the increased subsidy netted $500-700 million in additional revenues, the milk producers got back 1500 times what they paid. That kind of leverage is hard to beat.

The Agnew Affair: Our former vice-president received regular payoffs from road and building contractors in exchange for favorable treatment in bidding on government contracts. A Maryland bank received the State's lucrative bond business only after coming through with "contributions" to Agnew.

The Gurney Booster Fund: Building contractors in Florida paid into a secret bank account in order to obtain influence in getting FHA contracts. One builder has told a Miami grand jury that he was promised influence through Gurney's office if he would pay $500 per house for each FHA-subsidized housing contract.

Rebozo's Bank: The Nixon Administration twice reversed the strong recommendations of two federal bank examiners that a group of businessmen be permitted to open a bank on Key Biscayne in competition with the island's sole existing bank, headed by Nixon pal Bebe Rebozo. Just one month after the Treasury Department ruled that the businessmen had shown only a "marginal banking need," the Federal Home Loan Bank Board granted two directors of Rebozo's bank a charter for a new savings and loan institution on Key Biscayne. The Board justified the S&L using the same economic figures that Rebozo had provided the Treasury Department to show that there was insufficient demand for loans to warrant a second bank on the island. Approval of the S&L had been turned down twice before, and was finally granted only after a Nixon appointee was named to head the Board.

The Hughes Caper: Howard Hughes contributed $50,000 in cash to Nixon (via Rebozo) in 1969, and another $50,000 in 1970. In 1969 the CAB decided to allow Hughes to purchase ailing Air West, and in 1970 the Justice Department dropped its antitrust opposition to Hughes' acquisition of additional Las Vegas casinos.

In each of these cases, the common element is that of businessmen influencing government officials to grant them economic favors, either in preference to other businessmen, or at the expense of consumers. The businessmen pay the government to be exempted from the forces of the marketplace (or, as in the case of Hughes, from arbitrary, unjust government regulations). The fact that, in many cases, the money is given in the form of "campaign contributions" is completely beside the point. Those who advocate cleaning up corruption by "reforming" campaign financing are either hopelessly naive, or are as uninterested in stopping corruption as the politicians themselves.

It is only the existence of massive government interference in the economic life of the country that makes it possible for government officials to grant economic favors. Study after study has shown the economic inefficiencies of government regulation and intervention, and the harm caused to consumers and to innovative, competitive businessmen. The free marketplace can do a far better job of providing goods and services, and politicians know this. They also know that the only way they can continue to remain in the position of granting economic favors to those who will pay is to make people think that the free market can't handle things and would produce chaos, when in fact the exact opposite is true. In the cases cited above:

• Why shouldn't milk producers price their product in the marketplace like all other food producers?

• Why can't the money now spent on government housing and highway programs be left in the capital market, to finance entrepreneurs who can build economically-justified roads and housing?

• Why can't banks be left free to compete like shoe stores and supermarkets, with branches wherever they can make a go of it, and innovative, competitive services?

• Why can't we repeal the antitrust laws, which penalize efficiency and competence, and retard U.S. companies in international trade?

• Why can't the CAB be abolished, to let the airlines compete on price and service, instead of on trivialities like steak and movies?

It is the existence of laws and regulations like these that gives politicians their license to peddle influence. We shall have corruption as long as these powers remain in the politicians' hands.

At the height of the McCarthy era, outspoken individualist Frank Chodorov commented that the way to get rid of communists in government jobs is to eliminate the government jobs. His point is well taken. The way to eliminate corruption in the government's economic functions is to eliminate those government functions.