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Technology & Innovation

Corporate Fraud Is Ruining the World

Corrupt business practices are triumphing over political systems across the globe and the problem is worst in rich countries supposedly with “good governance”, says Jeffrey Sachs.

What’s the Latest Development?

The case against hedge fund manager Raj Rajaratnam, alleging he profited hugely from insider trading, is still being made in a New York court, and it is precisely there—in the institutions of wealthy, democratic countries—where malfeasance is most common, says Jeffrey Sachs, professor of economics at Columbia University and advisor to the United Nations on the Millennium Development Goals. The sheer scale of corruption in developed countries is currently unprecedented and the lack of corporate accountability threatens to undo the democratic project, he says.

What’s the Big Idea?

The lesson large corporations are allowed to take again and again from the current system of corporate accountability is that crime pays, and pays well. Nearly every large financial institution in the U.S. has payed millions of dollars in fines even though these punishments pale in comparison to profits reaped by illegal practices. The resources possessed by large financial institutions, says Sachs, intimidates even governments when it comes time to bring suit against them. What is worse, many politicians would dissuade government from taking action against fraudulent companies in the first place. About half of U.S. Congressmen are millionaires and have ties to financial corporations before entering office. 


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