Economics of soft corruption

In an age of increasingly sophisticated and miniaturized recording and surveillance tools, it has become hazardous for those seeking to buy political or regulatory favor to do so with explicit transactions of the old form: I will give you $X million in return for a favorable decision for this bid for work with the government or for this regulatory change which will be beneficial to my commercial interests.

In local politics, at least in my state, there is, instead, a lot of soto voce corruption. Nothing that is illegal but favors that are done at two and three removes. Donor X gives to Recipient Y's cause or foundation, Recipient Y being a confidante or patron of Politician Z with regulatory or commercial purview over Donor X's industry. Nobody is bribing anyone but the taxpayers interests are not being served and ethics are not being minded.

As an economist, the lack of causal connectivity between the actions of Donor X and the regulatory decisions of Politician Z poses a problem. From a real world perspective, you know there is an issue but being able to measure it is problematic.

Consequently, A Quick Guide to the Questions About Clinton Cash by David A. Graham caught my eye. The Clinton Foundation has long struck me as at best a minefield of conflicts of interest and at worst, self-serving soft corruption. Its low rate of expenditures on activities that are demonstrably philanthropic in nature heightens that concern.

I have long wondered whether Hillary Clinton's continued role in politics, first as Senator, then as Secretary of State and now as a second-run Presidential candidate might not simply be a means of keeping the cash flowing. Her baggage train looks like that of an ancient potentate, her positions mixed, muddled and contradictory, her retail political skills negligible and indeed destructive, her tin ear deaf to the common vernacular, etc. Her age and health might be issues. There seems like an almost inexhaustible number of reasons why she perhaps ought not to run. So why is she running? Hunger for power is the easy answer and cannot be discounted. But I have wondered as well for a couple of years whether her running isn't the means of keeping the cash flowing into the Clinton Foundation and into their personal accounts. What will happen to the flow of donations and payments for speeches if she drops out and there is no Clinton running for any position of authority? My suspicion is that the money tap closes at that point.

Graham provides a data point which bolsters that cynical economic view.

While the Times story focused on the policy implications of money coming into the Clinton Foundation, it also pointed to the other side of that coin—that Hillary Clinton's time at Foggy Bottom was lucrative for the Clinton family. ABC digs more deeply into that, and finds that Bill Clinton's speaking fees doubled or tripled once his wife become secretary of state:

Where he once had drawn $150,000 for a typical address in the years following his presidency, Clinton saw a succession of staggering paydays for speeches in 2010 and 2011, including $500,000 paid by a Russian investment bank and $750,000 to address a telecom conference in China.

Some of the groups shelling out to hear the former president speak also had business before the State Department. Department ethics officials reviewed the speaking engagements, but apparently rarely, if ever, objected. As with the other cases, there's no clear proof of a quid pro quo, but it's also hard not to imagine that those paying Bill Clinton might have hoped it would give them extra access or sympathy with Hillary Clinton. ABC's scoop partly follows on Schweizer's book.

Bill Clinton's speeches have a going rate of X. His wife becomes Secretary of State and, nothing else changing, those same speeches are now valued in the marketplace at 3X - 5X. From a strictly economic perspective this is strong evidence for the expectation on the part of donors that payments to Bill Clinton will yield benefit in the future in terms of decisions Hillary Clinton will make. That doesn't mean that that benefit was delivered, merely that the donors expected that it would be.