Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism

reduce the demand needed to bolster growth’. J. Burton, ‘Koreans resist the economic facts – With a presidential election near, foreign plots are blamed for national ills’, Financial Times, December 12 1997.

*

This ratio recommends that the total lending of a bank should not be more than a certain multiple of its capital base (12.5 is the recommended ratio).

*

Unemployment rates in developing countries underestimate the true extent of unemployment, as many poor people cannot afford to remain unemployed (as there is no welfare state) and, therefore, end up working in extremely low-productivity jobs (e.g., selling trinkets on the street, catching doors for people for small changes). This is known as ‘disguised unemployment’ among economists.

*

More recently, the BIS has suggested an even more ‘prudent’ system called BIS II, where the loans are weighted by their risk rating. For example, riskier loans (e.g., corporate lending) need to be supported by a larger capital base than safer loans (e.g., mortgaged loans for house purchase) of the same nominal value. This will be particularly bad for developing countries, whose firms have low credit ratings, as this means that banks would have a particular incentive to reduce their lending to developing country corporations.

Chapter 8

1

Press Conference, October 15 2006.

2

As of April 2006, these included Chad, Kenya and Congo in Africa, India, Bangladesh and Uzbekistan in Asia, Yemen in the Middle East, and Argentina in Latin America. See the website of the NGO, Brettonwoods Project, dedicated to monitoring the IMF and the World Bank. http://www.bretton-woodsproject.org/article.shtml?cmd %5B126%5D=x126–531789.

3

This point was eloquently made by Hilary Benn, the British international development secretary, at the 2006 annual meeting of the World Bank, as he was refusing to give unconditional support to Mr Wolfowitz’s anti- corruption drive.

4

G. Hodgson & S. Jiang (2006), ‘The Economics of Corruption and the Corruption of Economics: An Institutionalist Perspective’, a paper presented at the Annual Meeting of the European Association for Evolutionary Political Economy, November 3–4 2006, Istanbul.

5

See C. Kindleberger (1984), A Financial History ofWestern Europe (Oxford University Press, Oxford), pp. 160–1, for England and pp. 168–9 for France. Also see R. Nield (2002), Public Corruption – The Dark Side of Social Evolution (Anthem Press, London), chapter 4 for France, and chapter 6 for Britain. Even in Prussia, arguably the least corrupt European country in the 18th century, offices were not openly for sale but effectively sold to the highest bidder, as the government very often gave jobs to those willing to pay the highest amount for the tax that was customarily imposed on the first year’s salary. See R. Dorwart (1953), The Administrative Reforms of Frederick William I of Prussia (Harvard University Press, Cambridge, Massachusetts), p. 192.

6

Nield (2002), p. 62.

7

He was supposed to induce the members of his party to support the government by offering them the gifts of offices in the civil service. See Nield (2002), p. 72.

8

The Pendleton Act required the most important jobs (about 10% of total) to be competitively filled. This ratio rose to 50% only by 1897. G. Benson (1978), Political Corruption in America (Lexington Books, Lexington, Massachusetts), pp. 80–5.

9

As cited in T. Cochran & W. Miller (1942), The Age of Enterprise: A Social History of Industrial America (The Macmillan Company, New York), p. 159.

10

As cited in J. Garraty & M. Carnes (2000), The American Nation – A History of the United States, 10th edition (Addison Wesley Longman, New York), p. 472. Open sales of votes by them were especially widespread in the 1860s and 1870s. The group of corrupt assemblymen from both parties, called ‘Black Horse Cavalry’, demanded $1, 000 per vote on railroad bills and vigorous bidding drove prices up to $5, 000 per vote. The group also introduced ‘strike bills’, which, if passed, would greatly hinder some wealthy interests or corporation, and would then demand payment to drop the bill. As a result, some companies created lobbying organizations that bought legislation, sparing themselves from blackmail. See Benson (1978), pp. 59–60.

11

The information is from World Bank (2005), World Development Report 2005 – A Better Investment Climate for Everyone (World Bank, Washington, DC), p. 101, Box 5.4.

12

S.Huntington (1968), Political Order in Changing Societies (Yale University Press,