An accurate picture of the world balances a longer-term view against the short-term oscillations. The short-term is looking much brighter, for reasons I describe below. The long-term is a pitched but slow-moving battle around whether the current wave of disruptive technology will be used more for good or evil. This battle touches our jobs, politics, communication, finances and international relations.
In that regard, today’s podcast with Peter Eigen, the founder of Transparency International (TI), is fascinating. You can listen to the full episode here. If one aspect of evil is corruption, Peter and TI have dedicated decades to trying to accurately measure it.
Short-Term Optimism
First, the wave of political extremism is ebbing. This is true both in the US but also abroad, in Brazil. Going into the US election, there were low but not zero odds of a breakdown in order, like a candidate not conceding defeat and armed protestors flooding the streets. None of that happened. Yes, there are intense divisions, like over abortion, but if they are worked out via voting as opposed to violence, the US and the world are in a much safer position.
Second, the economic risks are ebbing. The pandemic wreaked havoc with the economy, first leading to a collapse of demand and shocking unemployment then, as we recovered, a surge of inflation which in turn triggered rapid policy tightening and a sharp decline in asset prices and, almost certainly, a coming rise in unemployment. Now though, there are signs that we are gradually moving past that peak inflation. Both commodity prices and measures of inflation are no longer rising at such a rapid rate. How fast will inflation fall? Tough question.
Third, Russia’s risk to the rest of the world is ebbing. Putin is killing tens of thousands of his own citizens as well as Ukrainians in an effort to expand territory and preserve power. But the war is clearly failing, as the retreat from yet another city, Kherson, reveals. Modernity is about voluntary rather than coercive association. When this battle focuses on, say, transgender rights, which directly impact less than 1% of the population, it’s easy to get distracted. The war makes this same battle cartoon obvious, Voldemort versus Harry Potter.
Fourth, Covid is ebbing. It’s colder now in the US and cases are surging but death rates remain low. Most everyone I know has had Covid by now, some with lingering effects, but the terror of death has disappeared. Theaters are packed and few wear a mask.
All these positive shifts speak to the power of self-corrective systems. The rise in populism highlighted a key issue—income inequality—but also scared enough people about the risks of authoritarianism that we came back from the brink. The same feedback mechanisms are at work in the economy (prices) and the war (coalitions and battles).
Longer-term, today’s technology is wildly powerful and, for the owners, lucrative. Will this power be used to surveil, distort and coerce? Or will it be used to make the make the world more efficient, self-aware and, the focus of today’s post, less corrupt? Corruption prevents a system from reaching equilibrium because it mutes important signals. I’ve traveled to a lot of places and in each corruption is loathed, perhaps due to our tribal sense of fairness.
Categories of Corruption
My own introduction to a culture of corruption came abroad. It was a crisp fall day in 1991. I stood in front of a high-school classroom in Moscow School #345.
“What are the two roads Robert Frost is referring to in his poem The Road Not Taken?”
I directed my question to a student in the front row who stared back, like an animal in the headlights. Did he not understand me or did he not know the answer to the question? I was four months out of college, and a few weeks into teaching Russian high school students.
From the back of the classroom whispers began. The sounds rolled up the classroom like a flock of birds taking flight. Students to the left and right of the student leaned into him and began whispering what they thought the answer in both his ears, the collective wisdom of the entire class.
“Stop,” I said, “no cheating.” The students looked up at me in absolute shock. I soon found cheating was endemic to the Russian system. From cops at checkpoints to doctors in the delivery room, cheating was normal. I divided Transparency International’s results into nine different categories, below. Russia is among the worst.
Measuring Graft
For a corrupt system to correct, step number one is accurate data. For instance, surging Covid deaths was an objective measure that accelerated vaccine innovation. But how to capture corruption, in all its many forms? TI came up with a methodology, here.
Globally, TI data shows there are a number of small, Democratic, homogenous countries that are essentially clean, places like Denmark and New Zealand. These countries represent less than 1% of the world’s population. There are places that are clean and authoritarian, like Singapore. There are large, heterogenous countries like the US that have become more corrupt. And then there are big countries like China and Russia which are corrupt, Russia extremely so, and then the basket cases. Said differently, most of the world lives with corruption.
Peter said that one reason why the US slid in the rankings is money in politics, citing in particular the Citizens United case of 2020, in which the Supreme Court overturned limits on campaign spending by corporations. There has since been an explosion of “super PACS,” which are organizations where the wealthy (some fueled by tech wealth) try to adjust legislation to favor themselves. Note the US line turning lower below.
Thus, Trump and Bernie supporters both feel the system is “rigged.” Based on TI data, there is a grain of truth in this. To change this, Congress, which is deformed by these very rules, would have to vote in controls of itself. If they watched the Transparency Ratings the same way they do the polls, they might.
Investment Outlook and the Collapse of Crypto Brokerage FTZ
I’ve been cautious this year in terms of investments.
Keep reading with a 7-day free trial
Subscribe to Things I Didn't Learn in School to keep reading this post and get 7 days of free access to the full post archives.