From Capitalism to Corruptionism, LA Style

CORRUPTION WATCH-Capitalism’s birth date is often designated as 1776 when Adam Smith published Wealth of Nations.  No doubt the signing of the Declaration of Independence that same year has re-enforced using 1776 as a pivotal year.

Documents result from decades of prior work. Unlike Athena who sprung full grown from the head of Zeus, the law of supply and demand and inalienable rights of “life liberty and pursuit of happiness” did not appear out of nothingness in 1776. Rather both economics and political philosophy had been working in parallel directions for hundreds of years. 

The evolving economic and political order located power inside the individual human being and not in God’s hands nor in the grasp of a monarch. Benjamin Franklin, however, was rather jaded about the ability of the average man to safeguard the emerging economic and political order. After the Constitutional Convention in 1787 when asked what short of government had been fashioned, Franklin replied, “A republic if you can keep it.” 

A Republic Was Formed to Secure Our Inalienable Rights 

We the People tend to forget that the purpose of forming a republic was to secure our individual inalienable rights including Life, Liberty and Pursuit of Happiness. Almost nothing is written about Pursuit of Happiness. As mentioned previously, Thomas Jefferson used those words to replace “property” in John Locke’s triad, “Live, Liberty and Property.” Jefferson was avoiding an implication that slaves who were property were not free and thus not entitled to life or liberty. When we realize that Pursuit of Happiness replaced property, we see that Jefferson was referring to individual economic prosperity by Pursuit of Happiness.   

Power Tends to Corrupt 

One hundred years later in 1887, Lord Acton succinctly noted what everyone had known: “power tends to corrupt.” Isn’t that inherent in the story of King David, Bathsheba, Uriah and the prophet Samuel (“Thou art the man”)? Because all economic systems allow some people to acquire power, all economic systems are susceptible to corruption. 

Under a Republic, however, where the government’s existence is predicated upon it securing each individual’s inalienable rights, the government has the duty to protect all citizens from economic corruption. At this point politics and economics intersect. In order for an economic system to function, the price system must be protected. 

The Need to Safeguard the Price System 

Unless people know the value of things, they do not know how much to pay or for how much to sell anything. The idea that the government can set the price of things is a delusion with which no intelligent person should dilly-dally. The market system, aka the law of supply and demand, sets the price of everything. Prices are determined by billions of transactions each day by willing sellers and willing buyers striking deals which they find mutually acceptable. The weak word in that formulation is “willing.” Fraud vitiates consent. In other words, a buyer has not willingly agreed to pay $40,000 for a car if it has been concealed from him that it was totaled in a wreck and then flooded during Hurricane Katrina. 

Government’s role is to establish and monitor a system which endeavors to give each person as accurate information about everything as can be provided. One of the most famous examples is the law against insider-trading. A company executive who knows that his company is on the brink of bankruptcy may not use that insider information to unload all his stock on the unsuspecting public.  That is what Ken Lay and other Enron executives did while urging people to buy more Enron stock to cover up the fact that top Enron executives were selling.   

Corruption Is Epidemic in the American Economy 

The American economic system has become so corrupt that it is fatally ill. Of course, an economy can crash and the patient lives on. Despite the political turmoil after the Crash of 1929 and that the Crash along with the Treaty of Versailles led to World War II and over 100 million people dead, Europe still exists. The Third Reich is dead, but Nazis march in Charlottesville chanting “Blood and Soil,” and “Jews shall not replace us,” while the California courts and even the Governor actively support anti-Semitism. The connection between economic corruptionism and political brutalities is well known. Hard economic times result in extremism, violence and ethnic and religious hatreds. 

Don’t look to the opportunist Trump for the origin of our current owes of extremism. Look to the repeal of Glass-Steagall, the proliferation of credit default swamps, as well as Obama’s too Important to Prosecute Doctrine for the Wall Street felons. Also, look to your daily life as an Angeleno to see the impact of corruptionism. 

Daily examples of Corruption in Los Angeles 

Water mains constantly burst. 

When the city loots the treasury to subsidize mixed-use housing projects, the city lacks funds to replace its ancient water system. Since the pipes were installed between 80nand 100 years ago, the DWP knew that the system would require replacement, but the city refused. But for City Hall corruption, we’d have very few water mains bursting. 

LA Traffic congestion is worst in the world. 

For one hundred years, we have known what causes traffic congestion. The excessive concentration of offices in a few locations with people living miles and miles away causes horrible traffic congestion.  Bunker Hill, Century City, DTLA, the Hollywood construction have the same origin: corruption. A city council which valued Quality of Life of Angelenos would never have allowed the dense concentration of offices in the Basin. The people who profit are a few landowners where the high-rises are constructed and the corrupt city officials who are in the developers’ hip pockets.  

Exorbitant Housing Costs. 

This fraud on the Price System continues today with Garcettism and now State Senator Scott Weiner’s anti-homeowner mania with SB 50 and SB 827. Concentration of offices and housing increases housing costs despite the constant lie that it reduces housing costs. This column has documented how allowing developers to buy and build what they want inflates all housing costs. 

When the land costs two to five times as much as it is worth as Living Space, whatever is constructed costs more, while at the same time driving up the cost of all nearby single-family homes. Each new seller lists his home at the Developer Value. “If Mike and Sally got $1.3 for their home, I should get $1.3 million or more.” 

If you’ve bought a new home in LA in the last five to ten years, then you’re a victim of corruption. You’re paying hundreds of thousands of extra dollars to Wall Street for a mortgage on a house which sold way above market value due to corruptionism. 

Car deterioration. 

If you drive on LA streets, you have a high statistical chance of having much higher car repair bills due to the atrocious condition of our roads. LA is not Boston. We have no snow, no freezing rains, no salt on the streets. The reason we have the worst streets is corruptionism. The public money which should be devoted to streets is given to developers. 

Mass Transit. 

Everyone loves mass transit – for others! One of the most successful vicious cycles of corruptionism is (1) excessive density in the Basin, (2) which causes terrible traffic, (3) which results in calls for more mass transit, (4) which results in hundreds of billions of dollars for more taxes and bonds, (5) which then results in demand for more density near mass transit so there are more riders, (6) which results in more cars on the roads as people in TODs tend to drive, etc. 

We Are All Victims of Accounting Control Fraud 

Rather than protect the Price System so that everyone knows the value of everything from TVs, to cars, to mixed-use projects, to subways, to costs of not repairing streets, Angelenos in particular are subject to Accounting Control Fraud. Those boring words mean: Crooks are lying to us so that they can steal hundreds of billions of dollars from the local treasuries to enrich themselves while making everyone else poorer. When one understands William K. Black’s book, The Best Way to Rob a Bank is to Own, one realizes that the best way to loot City Hall is to become a mayor or a city councilmember. 

All economic systems are susceptible to corruption. In fact, Socialism which is the current vogue is particularly prone to corruption, but that subject is for another day.


(Richard Lee Abrams is a Los Angeles attorney and a CityWatch contributor. He can be reached at: Rickleeabrams@Gmail.com. Abrams’ views are his own and do not necessarily reflect the views of CityWatch.) Edited for CityWatch by Linda Abrams.