Need Transparency Taken To Eleven

In my last post I mentioned the terrible scores Houston and San Antonio governments received for transparency in their economic development programs, according to a report by Good Jobs First.

One reason the stakes for transparency are high is because the amounts of subsidy are so big. How big? Well, we’ll soon find out. In 2017, for the first time, cities and counties nationwide will have to disclose how much in total subsidies they provide to private businesses, due to a new accounting standard known as GASB 77.

A study by the New York Times in 2012 found that governments in Texas provided the most economic subsidies to private business of any state in the nation, at $19.1 billion.

Texas Monthly writer Erica Grieder makes the point in her book Big, Hot, Cheap and Right: What America Can Learn From the Strange Genius of Texas, that “free-market capitalism” in Texas has, ironically, long relied on strong government intervention and subsidies for private business.

But with that high subsidy comes – I would argue – a heightened duty to keep the public informed of programs and results.

The current way of reporting on economic development subsidies, officials in each of the City of Houston, City of San Antonio, and Bexar County all told me, is that, once a year, the economic development department sends a spreadsheet over to someone at the newspaper, either the Houston Chronicle or San Antonio Express News. Beyond that once-a-year data dump, either an enterprising citizen or more likely a bored reporter on a fishing expedition working on deadline would need to submit a specific request to the economic development department of the city or county.

Since the information is deemed public, this request presumably would be fulfilled with little muss or fuss. All of the officials with whom I spoke reiterated that no formal “Freedom of Information Act” request (a “FOIA” for the cool kids) needs to be filed.

But you can probably see why, although that constitutes a minimum standard of public disclosure, it falls far short of what we should reasonably expect in 2017. What if the reporter or editor at the respective paper had a full plate of stories that week and didn’t really want to make use of the information? What if – as is likely every year – no particular economic development deal jumped out as worthy of newspaper coverage? What if – as shocking as this will sound to all of you reader-types – a citizen doesn’t actually read the newspaper? How would they learn about this? For each of these reasons and more, an annual newspaper data dump isn’t the right level of transparency at this point in time.

good_jobs_firstAll of the economic development officials I spoke with agreed with me in theory on this point, but obviously it will take some effort and resources in their respective departments to improve the situation.

And we can agree that improving searchable websites for ease of transparency can be difficult. Bexar County’s Executive Director of Economic Development David Marquez pointed out to me that certain (not to be named) newspaper websites can be notoriously un-searchable. That’s a fair point, my man. A fair point.

Anyway, I hope they will all take a look at Austin’s searchable database, to see what good disclosure and transparency looks like.

Beyond the amount of money involved, why else do we need a high degree of transparency with respect to economic development deals? Just this. There is nothing quite like conferring a public good – a generous tax break – to a private company that gets my spider sense tingling about potential conflicts of interest. You don’t have to be paranoid or a cynic like me (although I invite you to be) to believe that a natural symbiosis exists between public officials who need money and have the ability to award valuable subsidies and private enterprises who would happily return the favor.

going_to_elevenWe – not just writers, but also citizens – should be able bring up an online database showing, just to pick an example, political campaign contributions, and compare that database to public subsidies of private companies. Are there any connections? Does a company that contributes to a campaign show up as a beneficiary of public subsidy? That’s the very definition of conflict of interest, and we need the tools to prevent that. If there are any dots to connect, everyone should have the power and ability to connect them, from the comfort of their own laptop. If there are no dots to connect, then we all sleep better at night.

This is in no way a Republican or Democratic Party issue. But if you want to see it that way, just consider the importance of making sure officials from that other party (the one you most distrust) can’t get away with it. We need you on that wall, people, guarding against that other party’s nefarious conflicts of interest!

I believe the right volume of transparency for economic development tax breaks for private companies is a “SHOUT IT FROM THE ROOFTOPS, CONSTANTLY” level of transparency. On a scale of one to ten, I want transparency that goes to eleven. Because you see, it’s that one bit louder, isn’t it?

The next best thing to a transparency volume turned up to eleven is an online searchable database. Properly understood, that’s strongly in the interest of public officials and private corporate recipients as well. They also want and deserve the legitimacy that goes with transparent economic development plans, free from charges of influence peddling or conflicts of interest.
Please see related posts:

A version of this post ran in the San Antonio Express News and Houston Chronicle.

Need for Transparency in Economic Development Part 1

Economic Development Subsidies: Turtles All The Way Down

Book Review: Big Hot Cheap and Right, by Erica Greider

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Conflict of Interest and Moral Codes

I was under the impression that we all agreed that government officials should do everything to eliminate both the reality and the appearance of acting for financial gain before, during, and after serving as a public figure.

Trump_teethApparently, that was naïve of me, as President-elect Trump has signalled his plan to turn over his business to his children, with details to follow in January 2017.

Wall Street Journal columnist Holman Jenkins wrote recently that any President is “always conflicted,” and therefore maybe President Elect Trump should be cut some slack with respect to his and his family’s business interests.

As Trump declines to fully separate himself from the family business, “Why not widen our tolerance a bit?” asks Jenkins. “Why not allow that Americans have the right to pick a business owner as President? Let’s see how their choice plays out.”

No, let’s not. People who make public policy should not have a private financial stake in the outcome, or even the appearance of a stake in the outcome. Shifting the Trump businesses to his children does not solve this problem. Even if the Trump family members aren’t seeking to profit from government ties, both critics and favor-seekers will assume that’s the case. That assumption itself undermines basic good government.

I understand Trump supporters view his business success as a kind of protection against financial corruption. After all, he and his children don’t need the money. Personally, I like the idea of a wealthy businessperson in office who therefore should be “immune” to financial temptation.

But that’s not even the point. People will still assume that policy isn’t made with the public’s interest foremost in mind. His critics will assume everyone’s on the take. Allies and favor-seekers will attempt to gain an advantage however they can. Is that great hotel site with water views in Costa Rica worth $50 million? Maybe selling to the Trump children for just $40 million gets an important meeting set up. Revisiting Dodd-Frank banking regulation soon? I’m happy to review those financing terms for you, Mr. Trump, Jr.

What real estate seller anywhere in the world wouldn’t want to cut them a good deal? What bank wouldn’t offer preferential terms?

Mafia
Mafia

The widespread idea that people get rich off of public service is an insidious termite nest, eating at and hollowing out the foundations of a republic. Successful generals in the late Roman republic generated extraordinary, corrupting wealth through their public offices. Latin American governments and Putin’s Russia offer past and current examples of the corrupt practices and cynicism it engenders about government. This is not a “Let’s see how their choice plays out” situation. We already know how it plays out.

Different moral codes

Jane Jacobs in Systems of Survival: A Dialogue on the Moral Foundations of Commerce and Politics argued that a completely different set of moral codes defines how people in government should act versus how people in private enterprise should act. The two moral codes are each valid, and each work independently and properly in parallel, when contained within their own system. The blending of the two moral systems, however, leads to criminal outcomes and a breakdown of trust in society.

I read this about 20 years ago and haven’t seen a better explanation since.

The partial list of the proper moral codes of government workers – and here you could picture the police and military, plus political campaigners and government office holders – include the following precepts: Shun Trading, Be Obedient and Disciplined, Adhere to Tradition, Respect Hierarchy, Be Loyal, Take Vengeance, Dispense Largess, Be Exclusive, Show Fortitude, and Treasure Honor. Those moral codes make me picture an impressive old county courthouse, commanding a bit of awe. In a government and public service context, these moral precepts work best.

 

A partial list of the proper moral actions of business people – and here you could picture a trading firm, a technology startup, or a busy coffee shop – include the following codes: Shun Force, Collaborate Easily with Strangers, Compete, Use Initiative and Enterprise, Be Open to Inventiveness and Novelty, Be Efficient, Be Thrifty, Dissent for the Sake of the Task. I’m picturing an open floorplan marketing company with comic-book colored walls, glass conference rooms, and the smell of caffeine. In a business context, these moral values work best.

The point is not which code of conduct is morally superior, but rather that each code is consistent and appropriate to the job at hand.

Jane_jacobs
Jane Jacobs, activist and brilliant writer

The problem, Jacobs explained, is when you mix the two moral codes. The mixing leads to monstrosities. The Mafia, for example, is a for-profit business enterprise which employs moral codes from the government side, like loyalty, largesse, honor, and vengeance. Government office holders, on the other side, slip into corruption when they adopt values like of profit-seeking, inventiveness, and enterprise. Private armies and mercenaries are a special kind of mixed moral-code monstrosity, as is anytime we see politicians engaging in clear pay-to-play practices. What is moral and good in one context is not moral and good in the other.

Democrats too

By no means does one party have a cleaner history than the other on this. According to biographer Robert Caro, Lyndon Johnson built an ill-gotten fortune through pressuring businesses in Texas to advertise with radio stations nominally “owned” by Lady Bird Johnson, while Johnson served in Congress and the Senate. Technically (technically!) they weren’t his, but come on, “entrepreneurial activity” in this context is obviously wrong. Al Gore reportedly left the Vice Presidency in 2000 with a $1.7 million net worth, which then grew to an estimated $200 million net worth by 2012 through media, technology, and solar investments. I have a hard time believing his business partners solely valued him for his business acumen, rather than his government experience. The $240 million in income reportedly earned by the Clintons in their post White House careers also disgust me. They mixed the separate moral codes of business and government in a monstrous way, and they unfortunately set the stage for Trump to blow off calls to fully separate himself from his family’s businesses.

The point should not be “forget it, because both sides do this.” The point is, we should not be ok with the mixing of profit and public service, nor even the appearance of it. People will assume it’s happening with Trump’s family. We can’t do what Jenkins suggests, and normalize it, accept it, and “see how their choice plays out.”

Accepting this kind of moral monstrosity moves the republic much close to the Russian and Latin American model, and that’s not a good thing.

 

Please see related posts:

Curt Schilling and Rhode Island – The Moral Monstrosity of “Economic Development Politicies”

Book Review: Systems of Survival: A Dialogue on the Moral Foundations of Commerce and Politics, by Jane Jacobs

Book Review: The Death and Life of Great American Cities, by Jane Jacobs

Book Review: Cities And The Wealth of Nations by Jane Jacobs

Trump – Why I Can’t Sleep At Night

 

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