CORRUPTION IN BUSINESS AND POLITICS
V
CORRUPTION IN BUSINESS AND POLITICS
No form of corruption can exist without reacting upon the life of the state. Pollution of the sources of public instruction defiles individuals and all the manifold non-sovereign social organisations, but it culminates in an infection of public opinion which directly contaminates the body politic. Even more immediately corrupt business practices lead to corrupt political practices. This is so conspicuously the case that separate discussion of the two subjects is virtually impossible. It is feasible, however, and should prove profitable, to distinguish the various subdivisions of economic and political corruption and to point out certain lines of the development which have bound the two so closely together in our modern life.
Pre-eminent among the forms of business corruption are the vicious practices which have grown up in the general relation of buyer and seller. Purveyors of adulterated, infected, or diseased consumption goods, such as food stuffs, and particularly meat and milk; dealers in sweatshop clothing; vendors of patent medicines; owners and builders of unsanitary tenement houses, of unsafe theatres, and excursion steamers; managers of railroad and trolley companies who neglect to install devices to protect their passengers may serve as illustrations. A further branch of this form of corruption, the importance of which would perhaps justify separate classification, occurs in connection with the dealers in vice,—the dive keepers, policy kings, gamblers, and procurers. The relation of master and servant furnishes a second subdivision of the primarily economic forms of corruption. Transportation companies, mine owners, manufacturers, and others who neglect the installation of safety devices to protect labourers; the employers of child labour; the labour leaders who extort blackmail by threatening strikes are cases in point. Still another subdivision of economic corruption centres about the fiduciary business relations such as occur particularly in connection with savings banks, trust companies, corporate directorships in general, and with the work of the promoter. Underlying nearly all these kinds of economic corruption, and emerging in the corruption of public instruction and political corruption as well, is competition,—itself a force or
method rather than a form. Some species of corruption belonging logically under one or another of the preceding heads exhibit the effects of competition more plainly than others. Thus many practices common to those periods of forced competition which so frequently precede the formation of trusts have come to be looked upon as essentially corrupt and deserving of legal restraint. Corruption does not disappear when competition is practically eliminated, however. Some of the most difficult problems involved in dealing with it notoriously result from the existence of monopolies which have outstripped if they have not exterminated their rivals.
To attempt the adequate discussion of all the forms of economic corruption would require extended treatises on the labour problem, the trust problem, banking, transportation, insurance, and many other special subjects. The limitations of the present study exclude anything beyond a few general observations. It may first be noted that many of the abuses which are now undergoing the process of sanitation were the result not so much of corrupt intention as of ignorance and the relatively unlimited character of the competitive struggle to which reference has already been made. They emerged long before the era of consolidation, and are therefore not to be attributed solely to big business. For many years prior to the Chicago slaughter house exposures of 1906, for example, unclean meat was sold both by large packers and by country butchers. Small producers were and are largely responsible for impure milk and sweatshop clothing. Petty landlords as well as extensive holders of real estate have built unsanitary tenement houses and overcrowded them with renters. The neglect of transportation companies to install safety devices for the protection of passengers and employees has in the very nature of the case been a corporation offence. On the other hand small as well as large mining operators have sinned in this way, and small as well as large manufacturers have exploited child labour. Betrayal of fiduciary relationships has naturally occurred most frequently and most disastrously in enterprises of large capital, although by no means confined exclusively to them. Indeed there would seem to be reason for believing that in certain ways consolidation has aided in bringing about the correction of some of these evils. It centres them in a few large establishments, often in a single district of no great size, where by their very magnitude abuses force themselves upon a sluggish public attention. Consolidation also makes it appear that the interests of a few selfish owners are being pursued at the cost of the general welfare. This at once enlists popular support for attacks upon abuses, and is a factor well worth comparison with the defensive strength of massed capital. For these reasons the cleaning up of the meat industry probably proceeded far more rapidly after the Chicago exposures than would have been the case if the effort had been made some years earlier during the period of many scattered local abattoirs.
So many factors co-operated in bringing about the business evils under consideration that the quality of corruption cannot always be ascribed to them directly. Under a policy of laisser faire, of unlimited competition, of public indifference and apathy, it is not easy to fix moral responsibility. Even the twentieth mean man at any given time may be only a little meaner than several of his nineteen competitors. His offences are dictated by self-interest, of course, but they are offences against a vague set of business customs or moral principles. Public interest suffers, it is true, but the public is apathetic; it has not laid down definite norms of business conduct. On the part of the offender there is often lacking that conscious and purposeful subordination of public to private interest which constitutes full fledged corruption. Whatever degree of extenuation is afforded by these considerations vanishes, however, when definite regulation is undertaken by the state. Now that we are fairly launched upon an era of legislative and administrative control, business offences of the kind under consideration are frankly corrupt. Public apathy has vanished, the interest of the public has been sharply defined, and he who in contravention of these norms places his private gain above the general welfare does so with full intent, and cannot evade or shift the accusation of corruption.
A further consequence of the effort to regulate business practice by law is not only intrinsically important but also serves as the great connecting link between primarily economic and political corruption proper. As soon as regulation is undertaken by the state a motive is supplied to the still unterrified twentieth mean man to break the law or to bribe its executors. In either case, by the way, the profits are directly conditioned by the thoroughness with which his competitors are restrained from following his own malpractices. The scales employed by tariff officials may be tampered with in the interests of large importers whose profits are thereby enormously increased. Or inspectors may be bribed to pass infected carcasses, to approve impure milk, to permit get-rich-quick concerns to use the mails, to wink at lead weighted life preservers, to ignore the fact that the exits of a theatre are entirely inadequate. With cases where state regulation supplied the motive for the direct commission of fraud we are not directly concerned here, but in all the cases where the collusion of inspectors is involved we have to note that government regulation of business has made easy the transmutation of what before was merely corrupt and morally offensive into direct bribery. And from the point of view of a venal official or political machine the extension of state control means the widening of the opportunities for levying tribute. Thus a form of corruption which began among, and for a time was limited to, business relations becomes under regulation a menace to political integrity. In other words, it takes on the form of political corruption as well, and must, therefore, become the subject of discussion in that connection.
However disheartening in other ways, a consideration of the forms of business corruption yields the comforting reflection that all the major forms of evil in this field are clearly recognised and severely criticised. One must guard oneself against too cheerful optimism in the premises, however. Reform forces armed cap-a-pie do not spring like unheralded knight errants of old into every breach at which social integrity is being assailed. Instead they can be developed only by persistent individual and associated effort and sacrifice. Moreover the problem of corruption, as we have seen, is a persistent one, the forms of which are ever changing and ever requiring new ingenuity and resourcefulness in the methods of social sanitation. Back of reform effort, also, there remains much that the individual can affect simply by clearer habits of moral reflection and action even in the small affairs of life. Public sentiment is built of such individual fragments. Low opinion, low action in everyday affairs become a part of the psychological atmosphere befogged by which the outlines even of the larger evils of the present régime grow indistinct. Professor Ross has performed a valuable service by exposing the fallacy that “sinners should be chastised only by their betters.”[53] Social life, indeed, would be inconceivable if the judgment of disinterested parties were not superior to that of parties in interest. This is true even if the former are themselves far from moral perfection. But it is further true that the judgment of the disinterested will be more worthy and helpful if in the conduct of their own affairs the disinterested have habituated themselves to scrupulous honesty of thought and action. Till this is more generally the case social ostracism, public contempt, and loathing of the corruptionist, regardless of his looted wealth, will not prove such effective measures of restraint as one might hope. “The simplest reform,” said Mr. James B. Dill, “the hardest, but it must be the first, is to make up our minds not to do those things which the other man may be doing, but which we know to be wrong.”[54] Of course the universal acceptance of such higher individual standards would solve not only the problems of corruption but all our other social and moral difficulties. We may not hope for the early arrival of the millennium in this way, but neither may we hope for any large movement toward better conditions without improvement of personal character. Under our present circumstances much may be accomplished by institutional reform, by legislation and the application of the power of the state, although none of these is possible without the application of the good will, the clearer intelligence and honesty of individuals. If not the first or only reform, then, still it is clear that no movement against corruption is complete which does not demand frank recognition by the individual that he must deliberately choose to get along less rapidly at times when the cost of advancement is personal dishonour.
Corrupt practices may begin in, and at first be limited to, the business world, but, as we have just seen, they are likely to overstep economic boundaries and become a menace to the integrity of the state. As such they must also be recognised and discussed as derivative forms of political corruption. But in addition to evils of this kind which originate, as it were, in other fields, various subdivisions of the forms of corruption which immediately involve government may be marked out tentatively for subsequent illustration and discussion.
To gain means for its support the state is obliged to impose taxes and other burdens upon its citizens. The self-interest of the latter leads them into many evasive practices of a more or less corrupt character. The state is also a great buyer of materials and services of all sorts, and hence subject to fraud in innumerable forms. It is further a great seller and provider of various services, and is equally exposed to danger in this capacity. Efforts by the state to regulate or suppress vice and crime necessarily lead to attempts on the part of the vicious and criminal to protect themselves by corrupt means. Without outside collusion public officials may endeavour to exploit in their private interest the powers which were conferred upon them solely for the public benefit, and the result is auto-corruption, as defined in an earlier study.[55] Preyed upon by corruption the state also at times instigates corruption in the pursuit of its own ends, particularly where international rivalries are concerned.[56] Finally the control of government by political parties may lead to the purchase or stealing of elections and the perversion of the functions of all the organs of government in the interests of the machine. The fundamental importance of the practices which fall under the last head is apparent. Upon them ultimately depends the ability to maintain and profit by all the other forms of political corruption.
Regulation of business by the state is an established fact, the causes and origin of which need no further discussion in this place. Once established it is subject to attack and evasion along various lines. Downright fraud is possible, as in the concealment or false weighing of dutiable articles, the publication of false statements regarding the financial condition of fiduciary institutions, the covering up of defects in tenement house building, and so on. Practices of this character are extremely dangerous, however, as they are subject to detection and consequent punishment by the first more than ordinarily inquisitive inspector. Criminal chances are materially improved by the bribery of officials who are thus bound to concealment both by money interest and their own fear of exposure. Vigilant and honest administration of the laws and the infliction of sufficient penalties, particularly if they involve the imprisonment of principals, may be trusted to reduce such practices to a minimum. There are, however, other and more open methods of attack upon the regulation of business by the state. Appeal may be made to the courts in the hope that laws of this character may be declared unconstitutional. Business interests may also seek their repeal or amendment at the hands of the legislature. No one who accepts the fundamental principles of our government can quarrel with either of these two modes of procedure. While doubtless intended to secure the public interest, attempts to regulate industry by the state may in given cases really defeat this end. And the latter likelihood would be increased almost to the point of certainty if legitimate protests from the businesses affected were stifled. On the other hand attempts may be made by business interests to influence courts or legislatures corruptly. Assuming that the honesty of all the departments of government would be proof against such attempts there is still another possibility. A business affected by some form of state regulation may endeavour to call to its aid the influence of party. This final method of procedure may also be conducted in a perfectly legitimate fashion. Public sentiment may be honestly converted to the view that the amendment or repeal of the law, as demanded by the business interest, is also in the interest of the state as a whole. On the other hand the effort may be made, either by large contributions to campaign funds, or by other still more objectionable means, to enlist the support of party regardless of the public welfare. Carrying out these various methods of procedure to their logical conclusion brings us, therefore, face to face with the question which underlies the whole fabric of political corruption, namely how shall our party organisations be supported and financed?
Reserving this issue for subsequent discussion, certain general features of the reaction of industry against state regulation must be noted as of immense importance. Black as it is corruption after all is a mere incident in this struggle. The broad lines of development which the Republic will follow in the near future would seem to depend largely upon the outcome of this great process. Certain social prophets tell us insistently that there are but two possibilities: if the state wins the upper hand the inevitable result will be socialism; if on the other hand business triumphs we must resign ourselves to a more or less benevolent financial oligarchy. Imagination is not lacking to embellish or render repulsive this pair of alternatives. From Plato to Herbert George Wells all social prophets have been thus gifted with the power of depicting finely if not correctly the minutiæ of the world as it is to be. Time, the remorseless confuter of all earlier forecasters of this sort, has shown them to be singularly lacking in the ability to anticipate the great divergent highways of development,—sympodes in Ward’s phrase,—which have opened up before the march of human progress and determined the subsequent lines of movement. So it may well be in the present case. The social futures, one or the other of which we are bidden by present day prophets to choose, are like two radii of a circle. They point in very different directions, it is true, but between them are many possible yet uncharted goals. And if social development may be likened to movement in three instead of only two dimensions the lines open to the future are enormously more divergent than our seers are wont to conceive. Employing a less mathematical figure, prophecy usually proceeds from the assumption that cataclysmic changes are immediately impending. Otherwise, by the way, the prophets would utterly fail to attract attention. But this presupposes an extremely plastic condition of society. If social structures, however, really are so plastic, they may then be remoulded not into one or two forms merely, but into many other forms conceivable or inconceivable at the present time. Current and widely accepted forecasts to the contrary, therefore, one may still venture to doubt that our through ticket to 1950 or 2000 A.D. is inscribed either “socialism” or “financial oligarchy,” and stamped “non-transferable.”
Whatever the future may bring forth faith has not yet been lost in the efficacy of state regulation. It is certainly within the bounds of possibility that some working balance between government and industry may be established through this means which will continue indefinitely. As late as 1870, according to Mr. Dicey, individualistic opinions dominated English law-making thought.[57] Reaction from the doctrine of laisser faire was, if anything, even later in the United States. For a considerable period after the turning point had been passed measures of state regulation were weakened by survivals of old habits of thought. Even to-day the period of construction and extension along the line of state regulation seems far from finished. Certain inevitable errors have required correction, but no major portion of the system has been abandoned. Further progress should be made easier by accumulating experience and precedents.
It is significant of the temper of the American people on this question that an increasing number of the great successes of our political life are being made by the men who have shown themselves strongest and most resourceful in correcting the abuses of business. Under present conditions no public man suspected of weakness on this issue has the remotest chance of election to the presidency or to the governorship of any of our larger states. On the purely administrative side of the system of state regulation new and more powerful agencies,—such as the Bureau of Corporations and the various state Public Service Commissions,—have been devised recently to grapple with the situation.
Considering the extreme importance of the work which such agencies have to perform it is improbable that either their position, or the position of government in general, is as yet sufficiently strong with reference to corporate interests. Under modern conditions success in business means very large material rewards. Important as are industry and commerce, however, certain parts of the work which the state is now performing are, from the social point of view, immensely more valuable. The commonweal requires that our best intellect be applied to these tasks. Any condition which favours the drafting of our ablest men from the service of the state into the service of business is a point in favour of the latter wherever the conflict between them is joined. Yet not infrequently we witness the promotion of judges to attorneyships for great corporations, the translation of men who have won their spurs in administrative supervision of certain kinds of business to high managerial positions in these same businesses. As long as our morals remain as mercenary as those of a Captain Dugald Dalgetty there may seem to be little to criticise in such transactions. Doubtless loyalty is shown by the men concerned to the government, their original employer, and to the corporation, their ultimate employer. If, however, there is to be an exchange of labourers between these fields it would be vastly better for the state if the man who had succeeded brilliantly in business should normally expect promotion to high governmental position. As things are at present the glittering prizes known to be obtained by ex-government officials who have gone into corporation service cannot have the most favourable effect upon the minds and activities of officials remaining in public positions requiring them to exercise supervision over business activities.
It is high time that there should be a reversal of policy in this connection. We need urgently greater security of tenure, greater social esteem, much higher salaries, and ample retiring pensions for those public officials who are on the fighting line of modern government. Incomes as large as those of our insurance presidents or trust magnates are not needed, although in many cases they would be much more richly deserved. There is recompense which finer natures will always recognise in the knowledge that they are performing a vitally important public work. In spite of the loss which political corruption causes the state it is probably more than made up by the devoted, and in part unrequited, work of its good servants. Still the labourer is worthy of his hire. It is both deplorable and disastrous that the current rewards of good service should be so meagre while the rewards of betrayal are so large.[58]
But it may be objected that public sentiment in a democracy will not support high salaries even for the most important public services, that democracies notoriously remunerate their higher officials very much less adequately than monarchies. The time is ripe, however, for challenging this attitude. As long as government work is looked upon as a dull, soulless, and not extremely useful routine, popular opposition to high salaries is not only comprehensible but praiseworthy. Once convinced of the value of certain services, however (and there is plentiful opportunity to do this), it is doubtful if self-governing peoples will show themselves less intelligent than kings. Even now engineers directing great and unusual public undertakings are frequently paid larger salaries than high officers of government charged with the execution of ordinary functions. Recognition of the importance of the work of the specialist is much more common now than formerly. The development of science and large scale industry is daily enforcing this lesson. As regards the unwillingness of democracy to pay well, a change that has recently come over the policy of certain labour unions is worth noting. Instead of ordering strikes they have on occasion taken a lesson from the procedure of their employers, and resorted to the courts for the redress of grievances. And in doing so they have called in the very ablest lawyers they could find, paying the latter out of the funds of the union fees as large as they could have earned on the opposing side. A similar illustration is afforded by the policy of the Social-democratic party in Germany which for a considerable period has recognised and met the necessity of remunerating its leaders in editorial, parliamentary, and propagandist work at professional rates far higher than the average wages received by the party rank and file.[59] Demos may despise aristocracy of birth but he is perhaps not so incapable of comprehending the aristocracy of service as many of his critics suppose.
By the system of regulation, as we have seen, government is brought into close contact with business along many lines. But the state is also one of the largest sellers and buyers in the markets of the world, and as such has many other intimate points of contact with economic affairs. Like any individual or corporation under the same circumstances it is liable to be victimised by practices designed fundamentally to make it sell cheaply or buy dearly,—both to the advantage of corrupt outside interests. Franchise grabbing is perhaps the most magnificent single example of the difficulties the state encounters when it appears as a vendor. Popular ignorance of the real nature of such valuable rights has been responsible for enormous losses on this score. A city which for any reason had to dispose of a parcel of land would find itself safeguarded in some measure by the fact that a large number of its citizens were familiar with real estate values and methods. Knowledge of intangible property is very much less common. There has been a great deal of effective educational work along this line, however, and that community is indeed backward which at the present time does not understand perfectly that perpetual franchises without proper safeguards of public interests are fraudulent on their face. Administrative agencies such as were referred to in connection with business regulation, and particularly public service commissions, are doing extremely valuable work in cutting down the possibilities of franchise corruption. The grabbing of alleys, the seizure of water fronts, and the occupation of sidewalks are minor forms of the same sort of evil which can no longer be practised with the impunity characteristic of the good old free and easy days of popular ignorance and carelessness.
In disposing of its public domain, although here, of course, the price obtained was not the major consideration on the part of the government, notorious cases of corruption were of common occurrence. Recent developments, particularly in connection with timber, mineral, and oil lands, reveal the stiffer attitude which the public and the government are taking on this question. Time was also when deposits of public funds yielded little or no interest to cities and counties. At bottom such loan transactions were sales, i.e., the sale of the temporary use of public monies. Quite commonly treasurers were in the habit of considering themselves responsible for the return of capital sums only, and any interest received was regarded as a perquisite of office. The system had all the support of tradition and general usage; it was frequently practised with no effort at concealment and without protest on moral or business grounds. Nowadays its existence would be regarded as a sign of political barbarism, and would furnish opportunity for charges of corruption about which effective reform effort would speedily gather.
The element of selling is not of major importance in many services performed by the state which nevertheless require constant watching in order to prevent corrupt misuse. Efforts to use the mails improperly are continually being made by get-rich-quick schemes, swindlers, gamblers, and touts of all descriptions. Crop reports are furnished without charge, but extraordinary precautions are necessary to prevent them from leaking out.
Instances such as the foregoing also serve to illustrate the point that any extension of the functions of government results in an enlargement of the opportunities for political corruption. Government railways, for example, would afford venal public officials many crooked opportunities (as e.g., for false billing, charges, and discrimination) which do not now exist as direct menaces to public administrative integrity. Private management of railways, however, has not been so free from such evils as to be able to use this argument effectively against nationalisation. Municipalities selling water, gas, or electricity, are notoriously victimised on a large scale by citizens whose self-interest as consumers overcomes all thought of civic duty or common honesty.[60] There is one other closely related phenomenon connected with the extension of the economic functions of government which will perhaps not so readily be thought of as corrupt, and which yet deserves consideration from that point of view. Public service enterprises under government ownership and management are always exposed to what some writers stigmatise as “democratic finance,”—that is strong popular pressure to reduce rates. Cost of production and the general financial condition of a given city may make the reduction of the prices charged for water, electricity, or gas, frankly contrary to public policy. Yet the self-interest of the consumer suggests the use of his vote and political influence to compel such reductions. Of course his action is not consciously corrupt, but it has every other characteristic feature of this evil.
The state is a much larger buyer than seller, and manifold are the possibilities of malpractice in connection with its enormous purchases of land, materials, supplies, and labour. Yet nothing in our contemporary political life is more marvellous than the light-hearted indifference with which the public regards the voting and expenditure of sums running into the millions. We recall vaguely that the great constitutional issues of English history were fought out on fiscal grounds, but we find the budget of our own city a deadly bore. We rise in heated protest whenever the tax rate is advanced by a fraction of a mill, but we regard with indifference the new forms either of necessary expenditure or needless extravagance which make such increases inevitable. There is one general advantage which state buying has over state selling, however. A great many of the purchases of government are made in competitive markets where fair price rates are ascertainable with comparative ease. Even large public contracts such as for erecting public buildings or for road construction are usually resolvable into a number of comparatively simple processes and purchases. Of course there are exceptions, as for example government contracts with railroad companies for carrying mail. But as a rule the ordinary purchasing operations of the state are simpler and more easily comprehensible than such acts of sale as franchise grants,—to mention the one of most importance from the view point of possible corruption. It is precisely at this vulnerable point on the buying side of governmental operations that the New York Bureau of Municipal Research has struck home. With a skill that amounts to positive genius this voluntary agency has placed before the people the ruling market prices and the enormously higher prices actually paid by officials for public supplies. Taking the purchasing departments of our best organised private corporations as a model it has drawn practical plans for the installation of similar methods as part of our municipal machinery. Equipped with field glasses and mechanical registering devices its agents have kept tab upon the flaccid activities of labourers in the public service and have contrasted the long distance results thus obtained with the suddenly energised performances of the same men when they knew themselves to be under observation. It has co-operated quietly and effectively with all willing officials in improving the methods of work in their offices, in installing more logical accounting systems and better methods of recording work done; and it has fought effectively, with the penalty of discharge by the Governor in two cases, those officials who were not amenable to proper corrective influences. And finally the Bureau has attacked the city budget and has even succeeded in making that dry and formidable document the object of active and intelligent public interest. Yet the cost of the Bureau’s work has been out of all proportion small in comparison with the benefits obtained. “Less than $30,000 was spent in 1908 in securing for four million people the beginnings of a method of recording work done when done, and money spent when spent, which will henceforth make inefficiency harder than efficiency, and corruption more difficult than honesty.”[61]
It is extremely gratifying to note the widespread interest which this work is arousing. Philadelphia and Cincinnati have established bureaus under the supervision of the parent organisation, and other cities are earnestly considering similar action. There would seem to be ample opportunity for the employment of the same sort of agency in connection with our state governments, and possibly in certain fields of national administration. Altogether it is by far the most noteworthy recent effort to stamp out governmental inefficiency and corruption. Other efforts are being made to the same end, particularly where extravagance is concerned. In many cities business men’s clubs, improvement associations, and taxpayers’ leagues, are watching expenditure as it has never been watched before. Public officials have co-operated loyally in a number of cases. Occasional discoveries have been made of safeguards and powers in the law which had been long forgotten or unused. The progress of uniform bookkeeping is rapid and highly significant in this connection. Aided largely by the latter development census reports, particularly the special issues dealing with statistics of cities of over 30,000 inhabitants, are making it possible to compare municipalities on strictly quantitative lines as to the cost and efficiency of various services. Altogether we are developing a new financial alertness and intelligence that should materially cut down various forms of political inefficiency and corruption, particularly on the purchasing side of governmental operations. It is not too much to say that the methods by which these results are to be effected are either at hand or capable of being worked out on demand. The question now is simply one of funds and the training of specialists to do the work.
Efforts by the state to regulate or suppress vice and crime bring about reactions on the part of the interests affected not unlike those which follow from the attempt to regulate legitimate business.[62] The corrupt practices thus occasioned are among the commonest and most objectionable that society has to contend with. Very large money returns in the aggregate are obtainable by political organisations which protect vice. It is doubtful, however, whether such sources of income are ordinarily so productive financially as the various corrupt relationships between business and politics described above. On the other hand the alliance between politics and the underworld has the advantage, from an unmoral point of view, that it yields not only money but also strong support at the polls. And as some of the voters whose support is thus secured may be depended upon for work as repeaters, ballot-box staffers, and thugs, the net political power which they wield is much greater than their number alone would indicate. There is one other important difference between the corruption arising from the attempt to regulate legitimate business and that which arises from the regulation of vice. In the former case a “deal” can frequently be consummated between two principals, the leader of a centralised business interest on the one hand and the leader of a centralised political organisation on the other. Something of the secrecy and the binding personal obligation of a “gentleman’s agreement” are thus obtained. Of course to carry out the compact the political leader must control the action of his dependents in public office, but the latter, whatever they may suspect, know nothing definite about the agreement into which the boss has entered. The protection of vice cannot be managed by so small a number of conspirators. Compliance by the whole police force with orders from the “front” is necessary. Every patrolman knows what is going on when he is told that he must not molest dives, gambling hells, or brothels. Members of the force may or may not be used to collect protection money and pass it “higher up,” but since there are many establishments which must pay tribute the employment of a considerable corps of collectors is necessary. In any event the number of those who have knowledge amounting to legal evidence is likely to be much larger in the case of the protection of vice than in the case, for example, of a corrupt franchise grant. Exposure either by some disgruntled police officer or by some overtaxed purveyor of vice is likely to come at any moment.
When revelations of this kind are made the moral uprising which follows seldom lacks force. Cynics may sneer at such popular manifestations as paroxysms of virtue, but practical political leaders are not likely to underestimate the damage which they are capable of inflicting. Even if the machine emerges comparatively unharmed from such a period of attack the heads of some of the leaders are likely to fall before the popular fury. Remembering Fernando Wood’s caution about the necessity of “pandering a little to the moral element in the community,” farsighted bosses are therefore more and more inclined to limit their operations in the field of vice protection and to seek support from their relations with legitimate business interests. If this process is carried on further, as now seems likely, the general problem we are considering will be simplified by the reduction to a minimum of corruption by the vicious element, although, of course, we would still have on our hands the large question of corruption in the interests of otherwise legitimate business.
With all their mistakes and wasted energy moral uprisings will help this development materially. After a “spasm” things seldom fall back into the lowest depths of their former state. We need more frequent spasms, at least until we shall have learned to live continuously and steadily on a higher plane. The gravest evil of the present intermittent situation would seem to be that in our occasional fits of indignation we write requirements into the law which, considering the prevalence of minor vicious habits among large masses of the people, are impossible of execution. One of the lessons which we have learned in attempting to regulate business is that legislation of this sort must be supplemented by special administrative agencies if it is to have any effect whatever. Admirable child labour laws, for example, remain absolutely futile without labour commissioners and a force of inspectors created particularly to see them enforced. Yet in the regulation of vice we rush on heedlessly piling one new duty after another upon an already overburdened and underpaid police force. As a consequence its chiefs become habituated to the idea that they can exercise discretion as to what laws are to be enforced and what laws may with impunity be neglected. Usually the police decision of such questions is that crime must be dealt with vigilantly and severely, vice, on the other hand, with large tolerance. No better situation could be devised for the schemes of corruptionists. Moreover the latter are materially aided in their nefarious work by the high standards and the severe penalties which the moral element has written into the law. Using these as clubs the corrupt politician can extort much larger contributions than would otherwise be possible. There are only two ways in which this situation may be met. Either we must reduce our too ambitious programmes for the regulation of vice, or we must strengthen our police forces until they are adequate to meet the demands placed upon them.
In whatever way this question may be decided there is ample ground for demanding the application of the most thoroughgoing civil service reform rules to our police establishments. It is well known that the rank and file of our police forces despise the dirty work forced upon them by the political wretches “higher up.” No man capable of the heroic deeds which are commonplace in the annals of the police service rings the doors of bawdy houses and collects a tithe from the sorrowful wages of shame except under the compulsion of the sternest bread and butter necessity. Usually it is necessary to select the yellow dogs of the force for this particular devil’s work, and the promotion of such creatures for their pliancy is a stench in the nostrils of their honest comrades. If one doubts that this is the real spirit of the police force let him consider the character of the fire departments of nearly all of our cities. The men in the latter service are chosen from the same class, face dangers of the same magnitude, and receive wages of about the same amount as policemen. In the main they deserve and receive high praise for their efficiency and honesty. It is true that they are not exposed to the corrupt temptations which surround policemen, and also that their work is held up to exacting standards by business men and insurance companies. The fact remains that our police forces are constructed of the same human material as our fire fighting forces. It is difficult to avoid the conclusion that if we adapt our requirements in the regulation of vice to the capacities of our forces, (or vice versa); if we criticise and appreciate their work in the same way as we do the work of their sister department; if we place their appointment, tenure, and promotion, upon grounds of merit and utterly exclude the influence of the corrupt “higher-ups,” we will have gone a long ways toward drying up the most despicable of the sources of political corruption.
Certain of the moral aspects of tax dodging have been dealt with in an earlier connection.[63] Contrary as it may seem to the principle of economic interest there is a good deal of carelessness and stupidity in this field, and cases are occasionally found of property that has been over-assessed. On the other hand more or less deliberate dodging is indulged in very largely. So far as this practice deserves the stigma of corruption it is a stigma which rests to a very considerable extent upon the so-called class of “good citizens.” Certain residents of “swell suburbs” who daily thank God that their government is not so corrupt as that of the neighbouring city are among the worst offenders of this kind. As directors of corporations men of the same standing are sometimes responsible for monumental evasions. Of course what was said with regard to the reaction of business against state regulation holds good here also. There are plenty of legitimate methods of protesting against unjust or oppressive taxes,—before the courts, before legislatures, and by open propaganda designed to influence party organisations. But the furtive concealment or misrepresentation of taxable values is a matter of entirely different moral colour, and it is the latter practice that we now have to consider.
Tax dodging is so common and so well established that it has built up an exculpatory system of its own. Instead of bringing his conscience up to the standards set by the law the ordinary property owner inquires into the practice of his neighbours, and governs himself accordingly. Wherever business competition is involved the threat of possible bankruptcy practically forces him into this course. Yet withal our citizen is likely to be somewhat troubled in his mind about his conduct, at least until he learns how shamelessly John Smith who lives just a little way down the street has behaved. This information quite restores his equanimity, and at the next assessment he may outdo Smith himself. Thus the extra legal, if not frankly illegal, neighbourhood standard tends constantly to become lower. And not only taxpayers but tax officials themselves are affected by local feeling and fall into the habit of closing their eyes to certain kinds of property and expecting only a certain percentage of the valuation fixed by law to be returned.
Back of such neighbourhood ideas on taxation there are at least two lines of defence. One is that our present tax system is highly illogical, bothersome, and burdensome. To a considerable extent, unfortunately, this is the case, but it does not justify illegal methods of seeking redress. Not much argument is required to convince the ordinary property owner that all the inequities of the existing system fall with cumulative weight upon his devoted head. His pocketbook affirms this view more strongly perhaps than he would care to admit, but anyhow the net result is that he feels himself more or less pardonable for evading the burden as far as he can. The other common excuse for tax dodging is supplied by the conviction that much of the money raised by government is wasted or stolen. The logic based upon this premise is most curiously inverted, but none the less it sways the action of great multitudes. Politicians are a set of grafters, says our taxpayer. The more money they get the more they will waste and steal. I will punish the rascals as they deserve by dodging my taxes, that is by becoming a grafter myself. Seldom, however, is the latter clause clearly expressed. Yet the existence of corruption on one side of the state’s activities is thus made the excuse for corruption on another side whereby the state is mulcted of much revenue which it might receive. Of course evasion results in higher tax rates, which, by the way, fall crushingly upon the citizen who makes full and honest returns, and thus part of the loss in income to the government is made up. It seems clear, however, that in the long run government income is materially reduced by the feeling prevalent among taxpayers which has just been described and the procedure based upon it. On the whole this is by far the most serious single economic consequence of political corruption. It is bad enough that public money should be stolen, that public work should be badly done, and that politicians and contractors should grow rich in consequence, but it is far worse that the state should be starved of the funds necessary to perform its existing functions properly and to extend its activities into new fields. In the regulation of industry, in education, philanthropy, sanitation, and art, American government is very far from achieving what it should do in the public interest and what it could do more efficiently and cheaply than any other agency. Yet our progress toward this goal is perpetually hindered by the existence of waste and corruption on the one hand, and the consequent peremptory shutting of the taxpayers’ pocketbooks on the other hand.
Consideration of the theory underlying tax dodging reveals certain broad lines of correction. In proportion as our tax system approximates greater justice, the evasion which defends itself on the ground of the inequities of the present system will tend to disappear. To show how this may be done is beyond the limits of the present study. Suffice it to say that the work which reformers and students of public finance are now doing on inheritance, income, and corporation taxes, on the taxation of unearned increment, on various applications of the progressive principle, and so on, should eventuate in the tapping of much needed new sources of income, and thus facilitate the correction of present unjust burdens. The introduction of economical methods and the elimination of the grosser forms of corruption in the field of government expenditure will weaken the excuses offered for evasion on the ground of public waste and graft. There is an overwhelming mass of evidence to show that the American taxpayer, once convinced of the necessity of a given public work and further assured that it will be honestly executed, is generous to the point of munificence. The annals of our cities are full of the creation of appointive state boards composed of men of the highest local standing and intrusted with the carrying out of some great single project,—the erection of a city hall building, the construction of a water works and filtration plant, or of a park system. Very few such commissions are grudged the large sums of money necessary for their undertakings. If every ordinary branch of our government enjoyed public confidence to a similar degree such special boards would no longer be needed, and ample funds would be forthcoming from taxpayers for all our present functions and for other new and worthy functions which might be undertaken greatly to the public advantage. Finally our system of tax administration, like our system of government regulation of business, needs strengthening. Larger districts and centralised power in the hands of the assessors will help to lift them above the neighbourhood feeling which is responsible for so much evasion. Higher salaries will bring expert talent and backbone sufficient to resist the pressure brought to bear by large interests. As a matter of fact the first threat of a virile execution of the laws wipes out a considerable part of the tax dodging in a community.
There would also seem to be much virtue in the plan for the reduction of the tax rate advocated by the Ohio State Board of Commerce.[64] Given a community with a high general tax rate it may be the case, for example, that only about fifty per cent of true value is being returned. Everybody knows it; everybody is sneakingly ashamed of it. Still fundamental honesty is supposed to exist in the man who does not cut the percentage below say, forty; the really mean taxpayer is he who risks twenty-five per cent on what he feels obliged to return and conceals whatever he can into the bargain. Under such circumstances it is proposed to take the heroic step of reducing the tax rate to one-half its existing figure or even less.[65] If this can be done it is hoped that taxpayers can be induced to return their property at full value, and that much personal property will come out of the concealment into which it has fled under the menace of a high general property tax rate. In support of this argument cases are cited where a reduction of the personal property tax rate alone has brought in much larger returns and converted into a source of revenue a form of taxation which everywhere under high rates shows a tendency to dwindle to practically nothing.
As against the plan it may be said that taxpayers are habitually suspicious and extremely likely to regard any change whatever as certain to increase their burdens. Many of them would see nothing in the proposition beyond a tricky device to screw up their valuations under the pretext of low rates with the intention of falling upon them later with rates as high or higher than before. Unless the reform were fully understood and then backed up by the most vigorous administration there would be grave danger that revenues would materially suffer. Given these conditions essential to success, however, the plan would seem decidedly worth trying. A community willing to take the plunge, it is pointed out, would enjoy large advantages over its less enterprising competitors in the advertising value of a low tax rate, particularly as a means of inducing new industries to locate in its midst. The reform would probably not increase revenue, indeed it does not aim to do so, but it would yield a moral return of immense value. Self respect would be restored to many otherwise thoroughly good citizens, and public opinion, to the tone of which the taxpaying class contributes largely, would be lifted to higher planes. Under the present vicious system there must be a considerable number who realise secretly and more or less vaguely the inherent kinship between their conduct and that of the corrupt political organisation under which they live, and who in consequence remain inactive and ashamed when movements for better things in city, state, or nation, are on foot.
In our earlier study of the nature of political corruption an effort was made to distinguish between bribery and auto-corruption. As examples of the latter, legislators may employ knowledge gathered on the floor of the chamber or in committee rooms for the purpose of speculating to their own advantage on stock or produce exchanges; administrative officials who by virtue of their position learn in advance any information which may affect the market (i.e., crop reports) can do likewise; knowledge of important judicial decisions before they are handed down may be exploited in a similar fashion; insiders who have access to plans for projected public improvements are in a position to acquire quietly the needed real estate for sale at much advanced prices to the city or state when condemnation proceedings are actually begun. In addition to large and striking transactions of this sort there are innumerable smaller possibilities for auto-corruption which present themselves to public functionaries ranging in rank from the highest places in the official hierarchy to that of the policeman on his beat. Logically the practices under consideration are not separable from the general forms of political corruption as the term is applied in the present discussion. Instead they would seem to be a special method of carrying on corrupt transactions of many different kinds. All cases of auto-corruption, however, have the common feature that bribery by an outside interest is excluded, and this absence of bribery has sometimes led to the assertion that the practices included under this heading are “honest grafts.” An illusory appearance of innocence is also conferred by the difficulty of tracing the incidence of the burdens resulting from such transactions. There is no moral ground for such favourable distinctions, however. On the contrary, auto-corruption is clearly worse than bribery in that an entire transaction of this character must be guiltily designed and executed wholly by one person, and that person an official charged with knowledge which should be used only in the public interest. Moreover the profits of his secret treachery may be turned entirely into his private bank account. If so he cannot even plead in justification that he has been acting in behalf of a party organisation by gathering and contributing the funds necessary to its management. The latter feature of auto-corruption stands in need of special consideration.
It may be laid down as a principle of fairly general applicability that political corruption as such is disadvantageous to the party organisation permitting it. From a purely tactical point of view it would be the extreme of bad party management to tolerate loose conditions under which a large number of officials could graft freely on their own account and place the entire proceeds in their own pockets. Whether they confined themselves to auto-corruption or accepted bribes singly or in combinations the case would not be materially altered. A day of reckoning at the polls would surely come, and it would find the party treasury unprovided with the means of defence. Yet conditions of this character prevailed pretty generally prior to the advent of strongly centralised political machines. Corruption was extremely diffuse, personal responsibility for it widely scattered, party responsibility not so clear. Manipulation required whole corps of lobbyists, “third houses,” “black horse cavalry,” and the like. Under present conditions the party organisation with strongly centralised management has a direct interest in limiting corruption and also in seeing that contributions which arise from such practices as it tolerates actually flow into the party war chest. Corruption in purely selfish interest becomes treachery to the party as well as treachery to the state. Of course even under strong centralised and permanent party control cases of auto-corruption still occur, and at times officials receive bribes without turning in their quotas. If so, however, it may fairly be presumed that they make their peace with the organisation in other ways. They may be exempt from paying tribute, but they are nevertheless obliged to deliver votes or influence. Many sins are laid at the door of the machine. It has at least the advantage of enabling us to centralise responsibility for all corrupt practices which occur under its management.
From this point of view one may undertake an outline of the form of corruption connected with political control. All the preceding forms of political corruption may be considered the obverse, this is the reverse of the die. None of the practices earlier considered can be carried on without danger; the corruption of political control is the crooked means of avoiding the cumulative effects of these practices. It is not popular, it is not good politics even in the narrowest practical acceptance of that term, for a political organisation to grant corrupt favours to business, to wink at the violation of the law by vice, to allow its partisans in office to sell government property cheap and buy government supplies dear. If any of these things are permitted the organisation, like the common criminal, must take care to lay aside “fall money” against a day of trial.
One might feel greater confidence in the restraining influence of party centralisation were it not for the fact that the more dangerous to party success are the forms of corruption which an organisation tolerates the more lucrative they are apt to be. Though its sins be as scarlet still they produce funds sufficient to buy indulgences and to leave a handsome profit over. In connection with business regulation, for example, bribery in any considerable amount is not possible until legislation is enacted or close at hand. And legislation of this kind is not likely to be passed or threatened unless a strong public sentiment demands action. Political manipulation which attempts to frustrate regulation at such a juncture must sooner or later prepare itself to reckon with the public sentiment which it has flouted. Vice cannot be tolerated except in contravention of laws against it, and to do so means to offend the moral sentiment in the community which placed such laws on the statute books. Franchise grabbing is not profitable on a large scale until the experience of earlier public service corporations has impressed upon the public mind the great value of such grants. If, nevertheless, grabs are permitted by the machine, the boodle must be sufficient to pay both for the personal services involved and to repair any resulting damage to party prestige at the next election. Of course many citizens are apathetic with regard to such abuses or even ignorant of their existence, and there are others who are so involved in corrupt practices, particularly in connection with tax dodging, meter fixing, and the protection of vice, that they feel themselves allied in interest with the party organisation and accordingly vote its ticket. Always, however, there is a contingent, and frequently it is large enough to hold the balance of power, which is neither ignorant nor apathetic, and which, although perhaps too quiescent ordinarily, will rise in revolt against any organisation which grafts too boldly and too widely.
The situation of the venal machine is, therefore, substantially this: more money can be obtained at any time if certain practices dangerous from the point of view of party expediency are tolerated. If they are tolerated greater expenditures of money and of other party resources must be made when the final accounting with public sentiment takes place. To put the matter in another way: the forms of political corruption earlier described, i.e., corruption in connection with the regulation of business and of vice and corruption in connection with the buying and selling operations of the state, are for the most part sources of income, whereas corruption in the form of political control is mainly expenditure. Under George III., according to Mr. Dorman B. Eaton, a “Patronage Secretary of the Treasury” was appointed
“whose duty it was to stand between members and partisan managers appealing for places for their favourites, on the one side, and the heads of offices who needed to have these places filled with competent persons, on the other side. This Secretary measured the force of threats and took the weight of influence; he computed the political value of a member’s support and deducted from it the official appraisement of patronage before awarded to him. It is said that actual accounts, Dr. and Cr., were kept with members by this Patronage Secretary.”[66]
Whether or not “accounts Dr. and Cr.” are kept by our political organisations, a calculus of essentially the same character must underlie the determination of their policy.
On the spending, or political control, side of their ledgers the various heads are comparatively simple. Office holders must be kept in line, and to this end patronage, promotion, and the control of primaries are important. The direct use of money for bribes may play only a small part in this process; opportunities for auto-corruption may be left open in special cases, but personal and party loyalty and ambition can be relied on to a large extent. Back of the office holders of the hour, however, there are the constantly recurring necessities of election day. Party organisation must be kept up continuously, involving the reward in some way of swarms of assistants and hangers-on who cannot all be remunerated directly at public expense. At times votes must be bought, and repeaters, thugs, and ballot-box stuffers must be paid for their services. A heavy toll is apt to be taken out of the funds used for such purposes by every hand through which they pass on their way down. In addition to the expenditures already noted there are many other occasions, some of them quite legitimate in character, and others unobjectionable or even laudable, for the lavish use of money to secure party success and party control.
The situation which has just been described is so common that the only justification for repeating its description here is the necessity of completing an outline the other parts and interrelations of which are somewhat more obscure. In the gradual awakening of the American people to corrupt conditions existing in their government the first evils clearly seen were the abuses of the patronage and the defilement of the ballot-box. Civil service reform and corrupt practices acts (the latter term seems lamentably narrow in its original usage to the present somewhat more sophisticated generation) were the result. Later the presence of purveyors of vice immediately behind much of the prevailing electoral corruption was clearly discerned, and the battle on that score is still being waged. It is beyond question that our present local option movement is directed against the saloon not so much because it is a place where intoxicating liquor is sold, as because it is a political centre which did not know how to be moderate in its exercise of power during the days of its ascendancy. Still later the more secret relationship between grafting business and political corruption was laid bare. Renewed determination to impose the necessary measures of state regulation and, more specifically, the campaign contribution issue were the results. The problems presented by corrupt practices in connection with political control are still far from adequate solution. Reforms already achieved in the right direction, and still more the determination to press for further reforms, are the most hopeful features of the present situation. In our national government, for example, the civil service movement has reached a gratifyingly high development, but it still needs much extension and strengthening in our states and cities. We have some stringent legislation against ballot-box crimes, but, an election once settled, our tolerance on this subject is amazing and deplorable. Every act which simplifies our governmental machinery, which places responsibility squarely upon a few shoulders and provides means for enforcing it, which shortens our cumbersome ballots, which makes the primary accessible to independent voters, will help in the solution of the problem of honest party control.
Without undertaking a summary of the argument on the various forms of business and political corruption the same point may be made with regard to them that was made with reference to the corruption in the professions, journalism, and the higher education,—namely that the major forms of evil are recognised and savagely criticised. To an even greater extent legislative action has been secured against the primarily political forms of corruption. The fight for the regulation of business is the great unsolved problem of our time, but so far as it is successful we may expect not only more honest business practices but also a favourable reaction upon political life. A great many means may be brought to bear to secure honesty in the buying and selling operations of the state and to prevent the corrupt toleration of vice. Their success will mean that the corrupt political manager will find himself deprived of some of his most lucrative sources of income. A strong impression prevails at the present time that corruption funds in general are much smaller in amount than a few years ago. In part this is perhaps due to a change of heart, in part to the fear, intensified by recent events, of exposure. Perhaps, however, it is still more largely the result of a conviction that the “goods” could not, or would not, in the present state of public opinion, be delivered by the politicians. It is evident that the more successful we are in thus drying up the income sources of venal political organisations the smaller will be the resources available in their hands for the extension and perpetuation of their power of control.