Corruption in a Trump Presidency

November 23, 2016
gallery-1462816039-donald-trump-1

The president of the United States

In December 2009, I moved to Philippines just before the presidential election.  Like most of the former leaders of the Philippines, the outgoing president, Gloria Macapagal Arroyo, was exiting under a cloud of scandal.  The candidates pledged to end the corruption that plagued the country, promising to jail Arroyo and clean up the government.   

The leading candidate was a man named Manny Villar.  I remember him for two reasons.  First, he had possibly the smarmiest campaign ad I’d ever seen.  But more importantly, he was a billionaire politician – the only Filipino on the Forbes list – running on a promise to end poverty and corruption.  During the campaign, the Senate investigated Villar for using his position as Senate president and head of the finance committee to authorize the building of an extension to the C5 highway around Manila that would pass directly through properties he owned, making them far more valuable in the process.  To go through Villar’s land, the Filipino government would need to pay him for “right-of-way” compensation. The government had already paid right-of-way compensation to different landowners when Villar modified the plans for the road, inserting a provision to pay himself much more than others received.  Not content simply wasting millions in taxpayer money on a massive infrastructure plan to increase his own property values, Villar insisted on extracting payments from the government for the inconvenience to himself.  

The C5 road extension.  The orange houses are Manny Villar's properties.

The C5 road extension.

Once the favorite in the polls and considered a sure winner by the press, Villar couldn’t recover from the scandal.  He finished third, and Benigno “Noynoy” Aquino III, the son of Benigno Aquino Jr., a politician assassinated on tarmac upon returning to the Philippines from exile, and Cory Aquino, who became the first president after her husband’s death catalyzed the People Power Revolution, the largest non-violent revolution in modern history, became the president.  As a candidate, Noynoy was uninspiring.  But with a family name synonymous with the modern chapter of the country, he might be less susceptible to rampant corruption that ensnared his predecessors. He went on to become president for the next six years.  

The story of Manny Villar always stuck with me.  The corruption was so brazen, it was almost as if he hadn’t bothered covering his tracks because he was so confident he’d get away with it.  And despite it all, he came very close to becoming the president of the Philippines.  

Maybe more importantly, the story taught me why corruption is such a destructive force in a country.  It erodes the trust people have in their government, reinforcing their belief that politicians only care about enriching themselves.  It undermines trust in institutions, calling into question every decision made by those in charge.  When people become convinced that their taxes will be misspent, if not stolen outright, they become less willing to pay.  World Bank economist Augusto Lopez-Carlos explains this dynamic:

There is a delicate tension between the government in its role as tax collector and the business community and individuals as tax payers. The system works reasonably well when those who pay taxes feel that there is a good chance that they will see a future payoff, such as improvements in the country’s infrastructure, better schools and a better-trained and healthier workforce. Corruption sabotages this implicit contract. When corruption is allowed to flourish taxpayers will feel justified in finding creative ways to avoid paying taxes or, worse, become bribers themselves.

Lopez goes on to explain the other reasons why corruption is a “destroyer of human prosperity”, including inefficiency, misallocation of resources, and inequality. Corruption makes capital investment projects like the C5 Highway prime targets for exploitation, allowing politicians to extract rents – whether campaign donations, jobs after leaving office, or outright bribes – from businesses vying for contracts.  And in each country I lived – the Philippines, Ghana, and Kenya – I saw the destructive power of systemic corruption.

money-and-politics

I hadn’t thought about Manny Villar until this week, when Donald Trump said of his business interests, “The law’s totally on my side, the president can’t have a conflict of interest.” Michael Shear of the Times asked Trump, “what do you see as the appropriate structure for keeping those two things separate, and are there any lines that you think you won’t want to cross once you’re in the White House?” Trump gave a meandering answer, but the point is clear – he doesn’t intend to separate from his business in a way that would eliminate the conflicts of interest (if that was even possible).  In 2010, I couldn’t believe a man whose real estate interests were so entwined with his role in government could come in third in the Philippines.  With Trump, it’s as if Manny Villar won the presidency of the United States.

Before unpacking why this is so troubling, let me give a quick rundown of Trump’s conflicts of interest (for a comprehensive overview, check out this article from the Atlantic).  

When individuals actively running companies are elected to office, they put their business holdings into a “blind trust”, which is managed by a trustee with whom they have no contact.  This isn’t a true Chinese wall, since presumably they know what is best for their business and can still enact policies favorable to their business.  But at least it is an attempt to separate them.  Trump, on the other hand, plans to hand over management of his business to his children.  Unless they spend next Thanksgiving talking about something other than business or politics – is there anything else? – it is hard to believe that one won’t influence the other.  Even if he does turn the business over to his children, all three of them are on his transition team, and his son-in-law, Jared Kushner, is considered to be his most trusted advisor.  Anyone who claims that arrangement constitutes legitimate separation of interests is either lying or delusional.

Then there is his new DC Trump hotel.  According to the Washington Post, the General Services Administration (GSA) provided a 60-year lease to Trump the Post Office Pavilion for $180 million a year.  As president, Trump will nominate the head of the GSA, whose employees will then re-negotiate the terms of the lease with Trump’s children, who will be in charge of the company.  On top of that, any foreign diplomat visiting Washington will be staying in that hotel, because they’d be crazy not to.  

The opening of Trump International Hotel in DC

The opening of Trump International Hotel in DC

Trump has property holdings in foreign countries.  He has an office building in Buenos Aires, and Trump asked the Argentinian prime minister – in his first official state call – to deal with permit issues that were holding up construction.  He has properties in Saudi Arabia, a key frenemy in the Middle East, a golf course in Scotland, where he’s asked Nigel Farage to oppose wind farms that would obscure the view from the fairway, and an apartment complex in Mumbai, whose co-investors visited Trump during his transition.  Unlike domestic policy, where congress passes legislation that becomes law, foreign policy is mainly the purview of the executive branch.  Donald Trump is the commander-in-chief and head diplomat of the United States.  And regardless of who is running his company, he knows where it operates.

Trump with his Indian business partners

Trump with his Indian business partners

And finally, the Philippines.  In April 2016, Rodrigo Duterte, a violent strongman, became the president of the Philippines, succeeding Noynoy Aquino and portending the election of Trump six months later.  Duterte, who called President Obama a “son of a whore”, elected Trump’s business partner in Manila, Jose E.B. Antonio, as the official trade envoy to the United States.  

That is the abridged version of his massive conflicts of interest in the U.S. and around the world.  Already, supporters are offering explanations of why it won’t be a problem.  Reince Preibus, his chief-of-staff, seems to be laying the groundwork for a “we’ll abide by the law” justification, knowing that, as Trump himself said, the law doesn’t explicitly prevent the president from holding these conflicts of interest.  Holman Jenkins, a columnist for the Wall Street Journal, offers a less convincing explanation in his column, “Living with Donald Trump’s Conflicts”:

To imagine that Donald Trump, in order to eliminate conflicts of interest, would or could cash out his stake in his business empire is entirely unrealistic. This, we ought to admit to ourselves, was simply part of the bargain when voters elected Mr. Trump, in full view of his business interests. If the criterion now for supporting President Trump or accepting the legitimacy of his actions is to require of him a basically impossible task of de-conflicting himself from the Trump family business, that would have been a criterion to stipulate before Election Day, not after.

This explanation is a little ridiculous.  I don’t put too much stock in what a hack like Jenkins has to say (just read his column from two months prior about how Trump might clean up corruption), but his take is useful in understanding how Trump’s defenders distort the truth to justify his inherent corruption.  First of all, Trump made this entire election a referendum on corruption.  He promised to “drain the swamp” and claimed that Hillary Clinton was the most corrupt candidate in history.  Here is a statement from October 6th – one month before the election – on Trump’s website:

The more that comes out, the clearer it is that the Clinton State Department was for all intents and purposes an arm of the Clinton Foundation. The fact that Hillary Clinton was handing out government contracts to family friends, siding with Clinton Foundation donors over human rights activists in Burma and having her aides coordinate activity between the State Department and her foundation is deeply troubling. A Clinton White House would be more of the same but worse: the highest office in the land would be brimming with corruption and compromised by undue foreign influence.

Compromised by undue influence?  It has been exactly two weeks since Trump has been elected president and he has already tried to exert his influence to his own benefit in five countries (that we know of).  So, I don’t buy the idea that somehow the voters knew that they were electing a president who would have inherent conflicts of interest.  I think a more plausible explanation is that Trump simply lied.

The larger point is not about whether Donald Trump will become richer as president.  He will.  Every politician does – it is how the system works.  But generally, they wait until they are out of office to cash in.

So what happens now?  For an example of how Trump’s foreign policy might play out, you could look at the example of the Dulles brothers and the United Fruit Company, which bribed officials and exploited Latin American workers in the fifties.  In his book, “The Fish that Ate the Whale”, Rich Cohen explains the network of influence:

John Foster Dulles, who represented United Fruit while he was a law partner at Sullivan & Cromwell – he negotiated that crucial United Fruit deal with Guatemalan officials in the 1930s – was Secretary of State under Eisenhower; his brother Allen, who did legal work for the company and sat on its board of directors, was head of the CIA under Eisenhower; Henry Cabot Lodge, who was America’s ambassador to the UN, was a large owner of United Fruit stock; Ed Whitman, the United Fruit PR man, was married to Ann Whitman, Dwight Eisenhower’s personal secretary. You could not see these connections until you could – and then you could not stop seeing them.

United Fruit Company – known today as Chiquita – became a monopoly in several Central American countries, known today as “Banana Republics”.  The lasting impact on the economies of Honduras and Guatamala is profoundly negative.

screen-shot-2016-11-23-at-12-22-27-pm

 

But, more importantly, what happens to our perception of our own government?  Trump ran on a promise to end corruption.  As a candidate, he would drain the swamp from the Washington beltway and work on behalf of the forgotten masses.  As a president, it is looking increasingly like he’ll be presiding over the type of kleptocracy more often seen in the developing world.  If he does, he’ll continue undermine the democratic institutions he has already called into question through his speeches and rallies.  And he has convinced a large swath of the country that the one institution that can shine a light on his corrupt dealings – the press – is itself corrupt.

How will Americans look at our institutions in four years?  Maybe they will be fed up with Trump’s self-dealings and elect someone else.  More likely, we’ll live in country with a weaker press – due to media economics, restrictions placed by President Trump, etc. – and one in which what we now call “corruption” is simply the way things are done.  

The people of the Philippines had the good sense to not reward Manny Villar’s corruption with the presidency.  In the U.S., people are asking to give Donald Trump a chance.  But we’ve seen this film before.  And the ending isn’t good.

Post to Twitter

Leave a Reply

Your email address will not be published. Required fields are marked *


*

Rss Feed Tweeter button Facebook button Linkedin button