Governance of the impunity trap
The ability of those who wield great public and private power to flout the law and ethical norms for personal gain is one of the more glaring manifestations of inequality. The poor get life sentences for petty crimes, while bankers who fleece the public of billions get invitations to White House state dinners. A famous ditty from medieval England shows that this is not a new phenomenon:
The law locks up the man or woman
Who steals the goose off the common
But leaves the greater villain loose
Who steals the common from the goose.
In some societies and economic sectors, impunity is now so pervasive that it is viewed as inevitable. When unethical behavior by political and business leaders becomes widely viewed as “normal,” it then goes unpunished by public opinion, and is reinforced as normal – creating an “impunity trap.” For example, with politicians in the United States now so flagrantly and relentlessly on the take from wealthy donors, much of the public accepts new revelations of financial impropriety (such as the Clinton Foundation’s morally dubious financial dealings) with a cynical yawn.
The situation in the global banking sector is especially alarming. A recent careful study of ethical attitudes in the financial-services industry in the US and the United Kingdom showed that unethical and illegal behavior is indeed now viewed as pervasive. Some 47% of respondents said that it is “likely that their competitors have engaged in unethical and illegal activity,” and 23% believed that their fellow employees have engaged in such activities.
The younger generation has learned the lesson: 32% of respondents employed in the financial industry for less than ten years said that, “they would likely engage in insider trading to make $10 million if there was no chance of being arrested.” The chance of being arrested for such malfeasance is, alas, probably very low.
Yet not all societies or sectors are caught in an impunity trap. Some societies, most notably in Scandinavia, maintain the expectation that their public officials and business leaders should and will act ethically and honestly. In these countries, ministers are forced to resign for petty infractions that would seem trivial in other countries.
Recent studies have shown that when “generalized trust” in society is high, economic performance is improved and life satisfaction is higher. Among other reasons, commercial agreements are more easily reached and efficiently implemented. It is no coincidence that the Scandinavian countries rank among the world’s happiest and most prosperous year after year.
alberto balatti board member blog 