Who are the real criminals?

I wrote this one in ~June 2008 for Sociology 218: Crime and Justice at the University of Canterbury in Christchurch.  Facebook discussion here: http://www.facebook.com/note.php?note_id=17025664796

“Examine the global dimensions of corporate crime and demonstrate why this form of offending constitutes one of the most serious threats facing contemporary Western economies”.

INTRODUCTION

If asked to picture a criminal, most of us would have an image of a rough-looking, lower-class young male. It may be an American thug inspired by crime fiction, or a gang member of Māori or Pacific Island ethnicity as seen on the news. Crime in the media, and ostensibly in the statistics, is dominated by uneducated, uncivilised, unstable people from the low socio-economic levels. However this is not an accurate reflection of the true scope of criminal activity. Although crime amongst the lower classes is undoubtedly a serious problem, it is not commonly known that crime committed by the rich and powerful amounts to a much larger problem.

What is thought of as “traditional crime” are things like assault, robbery, drug-dealing, rape – all of which are most prevalent among the lower classes. This is known as “blue collar crime”. It is simple, easy to understand and convenient; it allows people to identify a lumpenproletariat, a “rabble” class of lazy, unemployed, uneducated low-lives with little respect for law, private property or their fellow citizens. The opposing category of crime, dubbed “white collar crime” by Edwin Sutherland (1949), is less intuitive. White collar criminals, rather than inhabiting the lower rungs of the social ladder, occupy positions of status and power in society. They are businesspeople or public servants; professionals who, if perhaps not liked by everyone, at least garner a certain level of respect and an air of legitimacy. They are seen to be working hard, succeeding, contributing to the economy. Because of the nature of corporate crime, it is not always obvious to tell when their success spells harm for others, and when their illegal or unethical activity is causing financial, environmental and societal damage. Despite a lower profile to its blue-collar cousin, the reality is that white collar crime is a substantial problem around the world and one of the most serious threats facing contemporary Western economies.

CRIME BY WHITE COLLAR INDIVIDUALS

Much corporate crime is not performed by corporations per se, but by individuals working within them, whose position enables them to rip off the company and/or its customers, often to the tune of millions of dollars or more. Corruption and crime by individuals working for governments is also widespread in contemporary Western economies (White and Habibis 2005, p. 168); ranging from President Nixon’s Watergate scandal to anonymous civil servants ripping off the taxpayer on a small scale, usually undetected.

Nick Leeson was a derivatives trader for Barings Bank, Great Britain’s oldest merchant bank, in the 1990s. He worked his way up to the position of Chief Trader, before his investing started going horribly wrong. He covered up his losses with false records and client accounts, only to lose more and more. Eventually he fled the country after having lost US$1.3 billion, undetected by his company. The bank was forced into liquidation, meaning its investors lost all their savings, and 1200 employees lost their jobs. He was apprehended in the end, but the damage was irreversible (Ibid, pp. 124-125).

CRIME BY CORPORATIONS

A larger category of corporate crime is that performed by corporations themselves, in the pursuit of profit. Individuals obviously do contribute to the crime, but they are in service to the company instead of embarking on the crime for their own individual purposes. However, “the line between the two can be blurred” (Ibid, pp. 124). Glasbeek likes a corporation to an “invisible friend”, (2002, pp. 6-7) which people can blame for their actions. They are able to distance themselves from their actions by saying things like “I’m just doing my job”. Whatever the reason, it is apparent that when large amounts of people and large amounts of money get together to try and do business, crime or other unethical conduct is very likely to occur.

White and Habibis (2005, pp. 126-127) divide corporate crime into four main categories: financial and prudential offences, offences against consumers, offences against employees, and environmental offences. All of these have the potential to cause massive amounts of harm, and although pharmaceutical, oil and motor vehicle companies tend to be the worst corporate offenders (Ibid, p. 125), many companies engage in them. One example of an environmental offence is that of chemical company Dupont. Dupont made a greaseproof covering for paper packaging. Unfortunately, the coating turned out to be an “indestructible chemical that causes cancer, birth defects and other serious health problems in animals” (Mokhiber & Weissman 2005). They discovered that the chemical was entering water supplies across the United States. However, they continued producing the product, covering up the studies for over 20 years, until it was finally brought to the attention of the Environmental Protection Agency. By this stage the chemical had entered the bloodstreams of 95% of American citizens, and it’s there to stay. It is impossible to tell how many cancers and birth defects it has caused, and will cause (Ibid).

This may sound “too bad to be true”, but crime and other misconduct by corporations is very common, and has been for some time. Edwin Sutherland, in his groundbreaking book White Collar Crime (1949) which gave rise to the phrase, studied seventy of the largest corporations in the United States (Ibid, pp. 17-28). In an average of 45 years of operation, he found that they had an average of 14 law violations each. Sixty percent of the companies had been convicted in criminal courts, and they had an average of four convictions each. He pointed out that in many states, persons with four convictions are known as “habitual criminals” (Ibid, p. 25). Sutherland’s study was not an anomaly; similar studies since have consistently shown that corporate crime is not only common, it is normal for companies to engage in it (White and Habibis 2005, p. 128).

Corporations are legally considered to be people, although unlike people, they cannot easily be imprisoned or punished. Also unlike most people, companies do not have any moral qualms about what kind of behaviour they will engage in. The way companies are designed is that their sole motivation is profit maximisation; in fact a corporation is “legally bound to put its bottom line ahead of everything else, even the public good” (The Corporation 2003). All employees, including company directors, must serve this one goal, telling themselves that they are not acting by choice but simply doing their job, and delegating all responsibility to their “invisible friend”. The problem is, the invisible friend does not have the any of the safeguards of conscience, empathy and socialisation that hold human beings back from causing harm and committing crimes. The film The Corporation (2003) compares the personality of corporations to that of a psychopath. The typical corporation meets all of the World Health Organisation criteria of a psychopathic personality, and an FBI consultant on psychopaths says that “in many respects, the corporation of that sort is the proto-typical psychopath” (Ibid).

Another fundamental difference between corporations and people is that they have far more power. In fact, their power is more comparable to that of nation-states: of the 100 largest economies in the world in 2000, 51 were companies and only 49 were countries (Shah 2002). Companies, however, tend to be far less democratic and more hierarchical than the liberal democracies that contemporary western economies ostensibly aim to be. The single-minded, amoral profit motivation of companies, combined with their lack of democracy and accountability and ever-increasing wealth and power, is a recipe for disaster, and it is little wonder that corporate crime is such a widespread problem in contemporary western economies.

THE OVERALL COST OF CORPORATE CRIME

Because of the huge sums of money involved, on a strictly financial level corporate crime dwarfs all conventional property offences. Indeed, a single act of corporate crime in a nation can cause more financial damage than all conventional crime in that nation for an entire year, combined (White & Habibis 2005, p. 130). A study in the 1980s showed that “for every dollar taken by conventional crime, about 40 dollars were stolen by criminals wearing suits and ties” (Newbold 2000, p. 44). Money taken from the individual also causes indirect, but very real, damage to people surrounding the victims; “for every person injured by the collapse of a company, ten others – wives, children, creditors and their families – are seriously affected by it” (Charles Sturt, cited in Newbold 2000, p. 45). It also harms economies in general, which affects most everyone in a society (Newbold 2000, p. 45).

Moreover, damage from corporate crime is far more than just financial. White collar crime is often seen as victimless (White & Habibis 2005, p. 131); even though a lot of money changes hands, which can be people’s life savings and place them in serious hardship, people can still tend to downplay the amount it affects people when compared to blue collar crimes like assault, where the damage is immediately obvious. However, nothing could be further from the truth. Environmental crimes cause immeasurable, often irreversible damage to flora, fauna and people living nearby; when the Exxon Valdez oil tanker ran aground in 1989 thirteen thousand miles of shoreline was polluted, with mass deaths of wildlife (Ibid, p. 132). Likewise health and safety crimes such as that perpetrated by Dupont can harm and kill “literally millions” (Ibid, p. 131) of people, and have long-ranging effects which are often not discovered until years later when it is too late to do anything about it.

Perhaps worst of all, white collar crime is not simply a matter of rich people ripping other rich people off. The victims of corporate crime are often poor people, and when they are victims, they are less equipped to deal with the damage as they cannot afford health and legal costs. Many financial crimes such as bribery and corruption “represent a transfer of wealth from the poor to the rich, even though it may not be a visible one” (Ibid, p. 133). Women and ethnic minorities also suffer disproportionately from corporate crime. Just like with blue collar crime, “it is those at the bottom of the socio-economic ladder who are most adversely affected” (Ibid).

A NEAR-BLIND EYE

The enormous impact of white collar crime is well documented, but the amount of attention given to it in the media and academia is disproportionately small. As such, the public discourse tends to largely ignore white collar crime as a common or serious occurrence. White and Habibis (2005, p. 120) identify that there does tend to be short-lived media coverage of sensational events such as company collapses, but not the same ongoing coverage of things like health and safety violations as there is with blue collar crime. In addition, “Public debate about ‘law and order’ continues to focus on traditional rather than white collar crimes” (Ibid, pp. 120-121). Interestingly, the academic literature also turns a relatively blind eye to corporate crime. This may be because acknowledging the true extent of white collar crime would force sociologists to abandon certain criminological theories which only apply to the blue collar sector; as “the existence and extent of white collar and corporate crime challenges any simplistic explanation of crime in terms of poverty or psychological pathology” (Ibid, p. 128)

Worse still, the justice system also gives tends to downplay corporate crime and give white collar criminals an easier deal than their blue collar counterparts. Although white collar crimes are usually far more damaging, they are also far less likely to get caught, and when they are caught, receive far lighter sentences. Nick Leeson, whose billion-dollar heist ruined thousands of investors and employees, was only sentenced to six years imprisonment. He was released after four, and has now made a small fortune writing and speaking about his experiences (Ibid, pp. 124-125). “The number of businesspeople in prison is tiny … Their time in prison is generally short, despite the damage caused by their actions. Often they eventually return to well-paid jobs in the business sector” (Ibid, p. 137).

The situation with crime by corporations is even more grim. Many health and safety violations, even those that cause widespread damage, injury and death, are treated as accidents. Other serious offences are covered by administrative rather than criminal law. This means softer penalties and avoiding convictions (Ibid, p. 135). Dupont were caught and fined $16.5 million; the largest fine the Environmental Protection Agency had ever dished out under toxic chemical law. However, it equalled less than half a percent of their average annual profits for just one of their products (Teflon) during the period they were covering the violation up. This was corporate crime on a massive scale and yet Dupont were barely given a slap on the wrist.

The unlikelihood of being caught is not helped by the fact that policing resources are grossly inadequate for the scale of the damage. In New Zealand, the Serious Fraud Office, which is dedicated to large-scale fraud offences, only receives 0.6% of the funding dedicated to blue collar crime (Newbold 2000, p. 45). Even so, the SFO has been reasonably successful in catching corporate criminals. Unfortunately, the department is now being disbanded, to be replaced with a police unit dedicated to organised crime (Trevett 2007). The entire situation leads Slapper and Tombs to declare that at all stages of the legal process, from the ideology behind forming laws, to specific sentences to those found guilty, corporate criminals are treated differently from “conventional” criminals. They say this “point[s] consistently towards the conclusion that most forms of corporate and organisational offences are relatively decriminalised” (cited in White and Habibis 2005, p. 135).

UNDERSTANDING THE DISCREPANCY

This can partly be explained by the “invisible” nature of corporate crime; many crimes are never discovered, and others are not discovered for years, as opposed to assault or burglary which are easily noticed (White and Habibis 2005, p. 134). Even when a misdemeanour is identified, the complexity of corporate law means it is often difficult to ascertain whether a criminal offence has been committed, and it can also be very costly and time-consuming to convict (Newbold 2000, p. 32). However, these factors can only go so far in explaining the vast class inequity in the justice system, and do not explain the relatively light sentences when corporate criminals are found guilty, nor the media’s focus on blue collar offences. In order to see the larger picture, we must look at the influence of money and power on government, the justice system, and public opinion.

In a capitalist democracy where there is freedom of speech but the loudest voices are the ones with the most money, the increasing power of corporations inevitably has an influence on the democratic process and the forming of policy. Glasbeek (2002, pp. 111-112) points out that although we may expect the media to hold the government and corporations to account, they are in fact corporations themselves. The mass media in Western countries is provided by an oligopoly of several large corporations, who are themselves part of huge multinational conglomerates with stakes in all sorts of industries. In addition, the bulk of their income is made by selling advertising to other corporations. When our media providers are so deep in the heart of the corporate system, it is little wonder that they turn a relatively blind eye to its offences.

Meanwhile, corporate interests engage in what can best be described as legitimised government bribery, through campaign contributions aiming to “stabilize the field of corporate activity” (Glasbeek 2002, p. 110). Corporations have a huge influence over governments in what Naomi Klein calls “a system that erases the boundaries between Big Government and Big Business” (Klein, p. 15). This “corporatist” form of governance has been becoming more powerful since the lasses-faire revolution of the 1980s, but it is nothing new; powerful institutions have always had common goals and banded together against the powerless when it suited them.

This all adds up to what Greg Newbold refers to as an “almost inevitable alliance between business and politics, between money and power” (2000, p. 33). This rings true in New Zealand, where the Business Roundtable holds considerable sway over governments, and other capitalist nations such as the United States, where corporate campaign donations play a huge role in influencing policy. This is the main reason why corporations and white collar individuals manage to get away with so much unethical and irresponsible behaviour in the pursuit of profit; and when they do run foul of the law, manage to be punished so lightly; it is a simple matter of bias for the powerful against the powerless. Often, the connection between political, corporate and coercive powers is too obvious to ignore, as in the case of the Bush administration bailing out Exxon Mobil from legal action in 2002. The International Labour Rights Fund, a US-based lobby group, was suing them on behalf of 11 villagers from the Acheh region of Indonesia, whom had been the victims of severe human rights violations at the hands of the Indonesian army (TNI) which Mobil had hired to provide security in the region. The case was never brought to fruition however, as the US State Department arranged for the case to be dismissed. This is not surprising, as Exxon Mobil were the second-largest donors to George Bush’s re-election campaign (Morse 2007, pp. 79-83).

Even when the judiciary is able to stay separate from the legislative and executive branches of government, they are still not free from inherent class biases. As White and Habibis (2005, p. 134) point out, judges have a shared social background with corporate criminals and are likely to look upon them with more sympathy than working-class defendants. This means that even in the rare cases when the law is adequate and the crime is clear, white collar criminals are still likely to receive lighter sentences than they perhaps ought to. As Bob Dylan (1965) pointed out in The Lonesome Death of Hattie Carroll, the belief that “the ladder of law has no top and no bottom” is a myth.

CONCLUSION

Corporate crime is a problem of far greater dimensions than most people realise. Not just members of the public, but governing bodies, law enforcement agencies and academics all tend to downplay the impact of corporate crime. It causes many times more damage than traditional or blue collar crime. Yet law enforcement of corporate crime is woefully inadequate, meaning that most corporate and white collar criminals either get away with their offending, or are punished far more lightly than conventional criminal. The reason for this bias is that the institutions and individuals with the most power in society stack the law and justice system in favour of themselves and their own class, both consciously and subconsciously. Because of the vast extent of corporate crime, and the lack of effort to stop it, it constitutes one of the most serious threats facing contemporary Western economies, and will continue to do so until the structural injustice supporting it is removed.

BIBLIOGRAPHY

Glasbeek, HJ 2002, Wealth by Stealth : corporate crime, corporate law, and the perversion of democracy. Between the Lines, Toronto.

Klein, N 2007, The shock doctrine : the rise of disaster capitalism. Henry Holt, New York.

Mokhiber, R & Weissman, R 2005, ‘The 10 Worst Corporations of 2005’, Multinational Monitor, vol. 26, no. 11, Retrieved May 26, 2008, fromhttp://multinationalmonitor.org/mm2005/112005/mokhiber.html

Morse, V 2007, Against freedom : the war on terrorism in everyday New Zealand life. Rebel Press, Wellington.

Newbold, G 2000, Crime in New Zealand. Dunmore Press, Palmerston North.

Pickett, KHS 2007, Corporate fraud : a manager’s journey. John Wiley & Sons, New Jersey.

Shah, A 2002, The Rise of Corporations. Retrieved 26 May 2008, fromhttp://www.globalissues.org/TradeRelated/Corporations/Rise.asp

Sutherland, EH 1949, White Collar Crime. Holt, Rinehart and Winston, New York.

Trevett, C 2007, ‘SFO victim of criminal intent’, New Zealand Herald, 15 September. Retrieved May 26, 2008, fromhttp://www.nzherald.co.nz/topic/story.cfm?c_id=124&objectid=10463653

White, R & Habibis, D 2005, Crime and society. Oxford University Press, Melbourne.

The Corporation 2003, videorecording [DVD], Big Picture Media Corporation, Vancouver.

Dylan, B 1964, The Times They Are A-Changin’, audiorecording [CD], Columbia Records, New York.

Advertisements

About calebmorgan

I write political blogs at cutyourhair.wordpress.com and sometimes other stuff at calebmorgan.wordpress.com. View all posts by calebmorgan

5 responses to “Who are the real criminals?

  • camostar

    Caleb everything you write makes me want to be a socialist. Recently I read The strange case of Dr Jekyll and Mr Hyde. It’s a Penguin Classics so it does the nice introduction and all that. It was talking about the effects that social darwinism had on 19th Century criminology. Stevenson’s Mr Hyde, intentionally or no, was the paragon of the lower-class example. Another example was of this researcher who photographed lots and lots of criminals to get a sense of the physical features (‘physiognomy’ was a scientific disciple about a hundred years ago) that make up the Joe Bloggs criminal. Whatever you do bro, make sure you marry someone with a degree and a good job, whatever, someone who wants to live in Cashmere or Merivale, and honeymoon in Europe, etc; don’t pollute those pure genes of yours with anything lower.

  • Caleb Morgan Anderson

    Yeah, that’s what’s holding me back I think, my genes. Why they let these criminal degenerates reproduce is beyond me.

    Glad you liked it. you may also enjoy my other crime-and-punishment-related essay here: https://calebmorgan.wordpress.com/2010/12/23/why-punishment/

  • The “science of crime” « Cut Your Hair

    […] be apprehended is white collar crime, the crime of the rich and powerful, which by many accounts is a far, far bigger problem than blue collar crime. However, only a tiny fraction of law enforcement and penal attention is paid to […]

  • Fabian Mika’s lawyer is (mostly) right | Cut Your Hair

    […] studying criminology is that if you’re disadvantaged in society in general, you’re also disadvantaged at every stage of the crime and punishment process: – examples of crime vs. other examples – opportunities for […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: