Corruption Is Inevitable

Corruption in systems built by humans happens everywhere. Systems that hold corruption to a minimum or are able to self heal from corruption are truly amazing. The only two systems I have seen that generally can heal from corruption are the free market, which heals through removing corruption by natural selection and bankruptcy, and democracy, which heals through periodic elections and purges. And even those two systems can often be subverted beyond repair.

Corruption is everywhere you look:

The American Medical Association (AMA) may have started out as an organization with patients interests at heart. Now it is a cancer on our country that exists solely to enrich it’s members by preventing new doctors and nurses from being licensed, and through patent structures designed to enrich pharmaceutical companies. Doctors have one of the highest average rates of pay of any profession, and top doctors can make 8 or 9 figures a year.

The US government itself started as a small, idealistic organization but now is one of the largest bureaucracies on the planet. The reason is that the government grows but never shrinks. The process works as follows: an idealistic group says, “Government please solve problem X”. The government creates an agency to do so and initially helps. After a while though, the employees of the agency become entrenched and care more for their salaries and benefits then for working on problem X. No one holds them accountable to do work, so they don’t do work. When politicians see the agency is ineffective, they give it more money to hire more people who then repeat that process. In the end, you have a government that sucks 38% of GDP from the economy while providing very little benefits.

Country clubs are another place corruption arises. I have seen myself how one long time employee was able to subvert a lot of funds to himself without supervision, and I have heard how another club had an employee who embezzled millions and got away with it. You would think in a private club owned by the members that corruption would not exist as members would not stand for it, but that is not the case.

If corruption is inevitable, what can be done about it? Systems need internal systems for the eradication of corruption. The brilliant part of free market systems is the adversarial approach of different parties making deals in their own interests… Basically, every party will prevent corruption by fighting to maximize the deals for themselves. And if one organization becomes too corrupt, it is no longer able to compete on price or value and it ends up going bankrupt and being removed that way. Democracy ideally is similar, and allows for elections where corrupted politicians get voted out.

We have seen corruption start to creep into the free market. Government granted monopolies are good examples of the subversion of the free market: patents, regulations, special tax deals or incentives, and lobbying all bring corruption that cannot be removed by natural selection and bankruptcy.

Democracy has fallen to corruption as well when you have lifetime senators like Mitch McConnell or Nancy Pelosi who entrench themselves with special interests so they are impossible to remove.

The greatest problem of our time is how do we build systems that can resist corruption and rebound from the inevitable corruption that does take place?

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Joel Gross

Joel Gross is the CEO of Coalition Technologies.

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