Anti-employee Control Fraud

By William K. Black

Apple has released a report on working conditions in its suppliers’ factories.  It highlights a form of control fraud that criminology has identified but rarely discussed.  I write overwhelmingly about accounting control fraud because it drives our recurrent, intensifying financial crises.  The primary intended victims of accounting control frauds are the shareholders and the creditors.  Other private sector control frauds target customers (e.g., George Akerlof’s 1970 article on “lemons”), and the public (e.g., the unlawful disposal of toxic waste, illegal logging, and tax fraud). 

Bill Black Chats with Dylan Ratigan: Firedoglake Book Salon This Afternoon

Don't miss William K. Black on today's Firedoglake book salon.  Professor Black will be chatting with Dylan Ratigan about his new book, Greedy Bastards:  How We Can Stop Corporate Communists, Banksters, and Other Vampires from Sucking America Dry.  The chat begins at 5:00 p.m. (EST).  Click here to watch the chat.

In the meantime, you can read Professor Black's review of Dylan's book below.

Marshall Auerback discusses the Euro on the Lang and O'Leary Exchange.  Watch it here.

Bill Moyers Essay: Occupying a Cause

The first episode of Bill Moyers' new TV, Moyers & Company, features our own William K. Black and the Occupy Wall Street movement.  Click here for local listings.


.

A Federally-Funded Jobs Program? Lessons from the WPA

By John Henry

In the current debates surrounding various job guarantee programs (in association with the Chartalist or Modern Money perspectives), it might prove helpful to review some aspects of the Works Progress Administration (renamed in 1939 as Work Projects Administration).  While the WPA was not a “job guarantee” program, it nevertheless points to a number of issues that are under current discussion, including those of the nature of the projects undertaken, impact on the larger economy, concerns surrounding bureaucratic impediments, etc.  Let’s begin with an introductory statement pertaining to the political and economic orientation of Franklin Delano Roosevelt (and his Administration).

Roosevelt was not a progressive. He ran on a balanced budget platform, and initially attempted to fulfill his campaign promise of reducing the federal budget by slashing military spending from $752 million in 1932 to $531 million in 1934, including a 40% reduction in spending for veteran’s benefits which eliminated the pensions of half-a-million veterans and widows and reduced the benefits for those remaining on the rolls. As well, federal spending on research and education was slashed and salaries of federal employees were reduced. Such programs were reversed after 1935. And one might recall that Roosevelt attempted to return to a balanced budget program in 1937, just as the economy appeared to be slowly recovering. The result was a renewed depression that began in the fall of that year and ran through 1938.

Thus, the Roosevelt Administration was forced into progressive activism because of massive—and organized—popular discontent based mainly in working class and small farmer organizations. The union movement was rejuvenated through the formation of the CIO, farmers organized to prevent the forced sales of their properties (and this often included the threat of armed action), rent strikes were rampant, etc. Chicago, New York, other cities saw massive demonstrations. “Riots” shook the Kentucky coal fields. One must remember that the communist party was large (as these parties go), active, and popular. The specter of revolution was in the air and some politicians responded.  Hamilton Fish Jr. instructed his fellow Congressmen, “(i)f we don’t give (security) under the existing system, the people will change the system. Make no mistake about that.”

FDR's Second Bill of Rights: An Unrealized Dream

By Stephanie Kelton

Sixty-eight years ago today, Franklin Delano Roosevelt laid out what he referred to as a "Second Bill of Rights" in his State of the Union address to Congress.  Those of us who've been part of the MMT movement for well over a decade have worked tirelessly to advance an understanding of the way modern monetary systems operate so that we might one day replace suffering with opportunity and a minimum standard of economic security for all.  

Roosevelt's Second Bill of Rights

“This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights—among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty.

As our Nation has grown in size and stature, however—as our industrial economy expanded—these political rights proved inadequate to assure us equality in the pursuit of happiness.

We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. "Necessitous men are not free men." People who are hungry and out of a job are the stuff of which dictatorships are made.

In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all regardless of station, race, or creed.

Among these are:

The right to a useful and remunerative job in the industries or shops or farms or mines of the Nation;

The right to earn enough to provide adequate food and clothing and recreation;

The right of every farmer to raise and sell his products at a return, which will give him and his family a decent living;

The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;

The right of every family to a decent home;

The right to adequate medical care and the opportunity to achieve and enjoy good health;

The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;

The right to a good education.

All of these rights spell security. And after this war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well-being. ”

Greenspan’s Laissez Fairy Tale

By William K. Black
(Cross-posted from Benzinga.com)

We continue to witness remarkable developments in the intersection of the related fields of economics, finance, ethics, law, and regulation.  Each of these five fields ignores a sixth related field – white-collar criminology.  The six fields share a renewed interest in trust.  The key questions are why we trust (some) others, when that trust is well-placed, and when that trust is harmful.  Only white-collar criminologists study and write extensively about the last question.  The primary answer that the five fields give to the first question is reputation.  The five fields almost invariably see reputation as positive and singular.  This is dangerously naïve.  Criminals often find it desirable to develop multiple, complex reputations and the best way for many CEOs to develop a sterling reputation is to lead a control fraud.   Those are subjects for future columns.

This column focuses on theoclassical economics’ use of reputation as “trump” to overcome what would otherwise be fatal flaws in their theories and policies.  Frank Easterbrook and Daniel Fischel, the leading theoclassical “law and economics” theorists in corporate law, use reputation in this manner to explain why senior corporate officers’ conflicts of interest pose no material problem.  The most dangerous believer in the trump, however, was Alan Greenspan.  His standard commencement speech while Fed Chairman was an ode to reputation as the characteristic that made possible trust and free markets.  I’ve drawn on excerpts from one example, his May15, 2005 talk at Wharton.