Combating corruption, competition and development: how did we get so wrong?

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By ALESSANDRO OCTAVIANI*

The idea that anything can be done in order to fight corruption is itself a corruption inducer.

The failure of the fight against corruption as a spectacle and catharsis: three indications

The anti-corruption policy that galvanized a considerable part of Brazilian energies in the last decade has entered a terminal stage. There are three orders of evidence that such a policy, based on the articulation of various diplomas – such as Laws 12.846/13 and 12.529/11 – should be the object of profound reflection and reform.

The first of these unmistakable signs is his impressive record of court defeats. What began with an inquiry into the abusiveness of “temporary but almost eternal prisons” gradually advanced to a broad observance of evidentiary standards, culminating in revisions of sentences, granting of freedom and, subsequently, the determination of compensation payments for abusive acts of former investigators, now defendants in private lawsuits.

Those who were arrested are free, those who had them arrested saw their arbitrariness being exposed on a worldwide network and today are approaching the status of debtor due to abusive acts.[I] The need for reform of a given policy is evident when one is faced with such judicial fragility. What should an anti-corruption policy look like in order to have full support in our courts and before our most respected jurists?

A second layer of signs comes from the field of politics: the two most relevant media figures of the moribund model of combating corruption have publicly jumped, as if this were a natural path, from State functions to the party world. The judge who conducted the most relevant trials in the fight against corruption had been transformed into a factory for selective leaks with a high impact on the electoral world; he decided to imprison the then best-placed candidate in the polls for the presidency of the Republic, ruling him out of the election, which ended up being won by another, whom the judge went to serve as Minister of Justice.

His attempt with his ally having failed, the judge withdrew to become a candidate for the presidency of the Republic himself. The career of the judiciary, supposedly neutral and silent, honored because considered, becomes an instrument of public projection, until it is completely forgotten and despised, enabling the transmutation of a career server into a candidate. This example, caricatured but shocking, serves as another indication that what was meant to be a State policy, perennial, routinized, discreet and efficient, was read as something fleeting, heroic, spectacular and, in the end, disposable.

What should an anti-corruption policy look like so that its main actors are not seduced by the limelight of the partisan game? What incentives and punishments should exist so that those who hold power over such legal discipline do not use it inappropriately, aiming at their own strategic objectives, in the party arena, in the immediate future of their performance as career civil servants?

The third serious indication that the current anti-corruption discipline and legal experience needs to be radically transformed has to do with the economy: the spectacle promoted by policy enforcers culminated in the decimation of countless companies, markets and jobs, deepening the Brazilian recession and bringing enormous suffering precisely to the people who would supposedly benefit from such a spectacle.

The collapse of companies or their strangulation was celebrated, even with laughter in message groups, when, in fact, the sequential effect of the erosion of productive chains hits the most economically fragile population, that citizen who is not a public servant like the policy enforcers, who don't have financial reserves like economic criminals and don't have solidarity networks like politicians masters of fraud. From an economic point of view, the media-addicted anti-corruption policy has become what Fábio Konder Comparato classifies (with regard to another institutional fallacy, the failed policy of “technology transfer between rich and poor countries”) as “a typical of mismatch between means and ends”. How to structure an anti-corruption policy that is positive for the economy, and not a fundamental part of the crisis, which encourages and deepens it?

 

The failure of the fight against corruption as a spectacle and catharsis: three mistaken premises

One of the common sense assumptions of those responsible for conducting the failed anti-corruption policy is a kind of childish interpretation of the relationship between corruption and economic growth: “put an end to corruption and economic growth will appear”. This premise justifies, therefore, carrying out very daring acts, including some notably arbitrary ones, because, at the end of the rainbow, a pot of gold will appear which, as a “greater good”, will benefit everyone, making it clear that the ends (growth economic) justify the means (breaking companies and markets, generating unemployment, disrespecting evident rules of positive law, ignoring the separation between careers in the State and the electoral-party system, etc.). The political economy that serves as the premise for this behavior is childish, because no consistent economic reasoning authorizes the claim that corruption and economic growth have a unilateral relationship or an essentialist contradiction between them.

On the contrary: the three most fantastic experiences of matching and economic overtaking in the modern world system thrived precisely in notably corrupt environments, amalgamating, together with disloyal and morally condemnable practices, immense economic vitality.

The British monarchy, since the XNUMXth century, in its tireless struggle for internal security, domain of the seas, search for wealth and capital to sustain internal industry, deliberately financed pirates, corsairs, thieves and buccaneers of all kinds, who, when well-off, successful in their task of bleeding the Portuguese, Spanish, Dutch and French routes, they were graced on the island with material wealth and social ascension. One of the results of this work of public interest brought by the English corge was, in addition to the nickname of “perfidious” to Albion, also an immense accumulated capital and power that, organized by the laws of navigation of the Tudor period, make up the antechamber of the Industrial Revolution that will make England “the empire where the sun never sets”. [ii]

This impressive escalation will in fact only be replaced by another moment in which corruption coexisted with (and markedly encouraged) an enormous economic growth: the conglomeration of the American economy in the mid-nineteenth century, which saw the emergence of immense industrial complexes and financial institutions, with robust political power, giving rise to the implacablerobber barons”, the Robber Barons.[iii] Dominating and verticalizing the oil, steel, credit, transport and many other sectors, the robber barons did not paralyze in the face of resistance from competitors, employees, political opponents or religious recommendations: they crushed all their enemies, with a row impressive number of “service providers”, which included judges, public prosecutors, teachers, delegates, union representatives, journalists and politicians at all levels, culminating, including, in the formulation and execution of an openly imperialist foreign policy, which, in the name of expansion of the US economy, never hesitated to destroy other democracies, assassinate legitimately elected leaders, finance genocidal dictators and cover up networks of corruption around the world. Corruption and economic growth were – and are – an amalgamation in the construction of US hegemony.

The rise of China, commanded by the PCC - Chinese Communist Party, is another clear example that corruption and economic growth cannot be treated with childish mental methods, such as those that guide the practices of those responsible for the application of the Brazilian anti-corruption policy that we must reformat . In the management of its approximately 150.000 state-owned companies, among which there are around 50 economic groups among the 500 most relevant in the world, corrupt practices are absolutely ingrained and present, giving rise, even, to the curious fact that, every ten years, there is usually a public campaign to fight corruption that has taken place... in the last ten years, which, coincidentally, were also ten years of spectacular economic growth. Corruption and growth, together, are integral parts of the movement of the Chinese economy, even giving rise to the expression “robbery barons of Beijing”.[iv]

In this way, corruption can coexist with astonishing economic growth, or even be one of its causes; and, at the other end, fighting corruption may not have any relevant positive impact or, on the contrary, when such a policy is implemented in a disastrous and poorly informed manner, it may generate a negative economic impact. The relations between corruption and the economy are much more complex than the unilateral pattern mobilized, expressly or implicitly, by the main operators of the spectacular anti-corruption policy in recent years.

Corruption must be fought not because it prevents economic growth, but because it becomes a vector of a specific type of economic fabric, notably concentrating power and reducing alternatives and pluralities. The practice of corruption drives economic power to achieve greater economic power, by obtaining greater political power, which tends to increase the power of corrupt politicians, who become more powerful in politics because they have greater economic power. This circular causation is infernal, because it drives monopolies and oligopolies in economics and politics, whose internal tendency is their own perpetuation and the adverse selection of those not aligned with corruption, gradually expelled or captured. In the end, the plurality of choices tends to diminish or disappear, and corruption is thus revealed not as an impediment to growth, but to economic development, taken, in Celso Furtado's deepest sense, as an expression of the creativity of a given collectivity.

The anti-corruption policy, therefore, cannot be isolated from the economic development policy, much less placed above it. If the anti-corruption policy is one of the elements of an economic development policy, it cannot be combined with the destruction of companies, technologies and accumulated tacit knowledge, or with the destruction of jobs and the histories of entire families that have no connection with the corruption.

Removing the infantile political economy that serves as an implicit premise for the spectacular Brazilian anti-corruption policy (“ending corruption equals economic growth”) means increasing the cognitive and argumentative cost of its relations with so many other variables of economic development.

 

The premise of structural subordination to the US

Another deleterious premise of the current anti-corruption policy is its structural subordination to the interests of the United States, whose anti-corruption policy, internationalized and notably imperial, is an inseparable part of its industrial policy and market domination around the world.

One of the strategic objectives of US anti-corruption policy is to ensure the dominance of US companies and, therefore, the Department of Justice (DoJ) investigates global corruption by building (i) a hyper-extraterritoriality of its own right, and (ii) with remarkably selective actions, chasing corrupt companies of other nationalities and leaving North American ones out. Such US economic groups, after exhausting or decimating their competitors, are able to buy foreign-condemned women in the basin of souls; the case of the French company Alstom is exemplary, but there are countless other cases, such as that of Petrobras itself, which spent more on indemnities for minority shareholders in New York than the amount effectively diverted from the company by its corruptors in Brazil.[v]

Such selectivity deliberately practiced by the US deepens and perpetuates, through the anti-corruption legal discipline uncritically welcomed among us, a flow of wealth from the periphery to the center of world capitalism. The submission of Brazilian law, our institutions and, more broadly, our own economy, to the US, materializes through informal, personalized and often built networks of cooperation outside the law, proudly displayed by the leaders of anti-corruption policy, which they like to show themselves close to the CIA or the FBI, as if this were a sign of moral distinction – and not of political submission or, many times, of pure and simple illicit act.

 

Discipline and legal experience without criteria for the defense of economic sovereignty

The legal discipline and experience of combating corruption went against the Federal Constitution, not only in relation to the basic guarantees of due process of law, but also with regard to the Economic Order that, in our case, determines in articles 3, 170, I, and 219, among many others, vectors for the action of the State – and, obviously, of its instruments of action, the public servants – that say with the construction of economic sovereignty and care for the “internal market, national heritage” (art. 219). Unlike the US attorneys, who work under the premise of increasing the global economic power of US groups, our operators expressed satisfaction with the bankruptcy of Brazilian companies on several occasions – including when this decision would come from the US, a fact not only revealing of an indelible condition of mental colonialism or lack of appreciation for the economic fate of millions of Brazilians affected, but also of frightening distance own sponte of the Brazilian Constitutional Economic Order.[vi]

A legal experiment was started (i) which is judged to be outside or above Brazilian economic sovereignty, revoking, in practice, the Constitution, and (ii) assuming, in this clumsy reasoning, that the salaries of the servants who apply such policies are not paid for by the health of the Brazilian economy and its ability to tax, but rather by some ethereal or imaginary entity, such as the “global economy”, “business ethics” or something like that.

 

Proposals for the reconstruction of anti-corruption policy: democratization, economic complexity and sovereignty

The reconstruction of anti-corruption policy involves perceiving the various errors, explicit and implicit, in which our current legal discipline and experience have become enmeshed, so that another exercise of institutional imagination is possible.

One of the axes of this reconstruction is to increase the rigor of “control over the holder of control”, with a solid policy of transferring corporate control of companies involved in corruption, which serves the purposes of economic development, generating new opportunities and serving as an impetus to virtuous cycles, not catastrophes like the one we are still experiencing.

Markets are legal institutions and can be made from objectives introduced in ordering devices, not being different with the market for the sale of control of assets involved in corruption. When trying to win competition in the market by illicit means – which operate prohibited bridges between private and public interest, state or party –, the corruptor will lose his company, whose control must be sold in an operation modeled by indicators that contribute to the development national law, thus subordinating the anti-corruption legal discipline to the purposes set forth in arts. 3rd., 170 and 219 of the Constitution.

The alienation of the controlling power of the company involved with corruption can become a redefining moment of the Brazilian economic fabric, provided that axiological vectors related to (i) economic complexity, (ii) economic democratization and ( iii) economic sovereignty.

The buyer of control must be linked to goals of increasing "economic complexity" and investments in technological innovation, with the objective of raising Brazil's position in value chains, with (a) medium and long-term investment commitments in research and development of new products or processes, (b) scale increase and (c) search for new markets abroad.

Simultaneously, it is necessary to introvert in the legal discipline of the market for disposal of control of corrupt companies the criterion of “economic democratization”, of dilution of the controlling power, promoting (i) shareholding dispersion, (ii) the insertion of employees in the hierarchies of control of these companies, (iii) the geographic distribution of business activities on regional scales and (iv) job generation goals (including to alleviate the mistakes that the recently ended anti-corruption policy bequeathed us in recent years).

Finally, giving global meaning and coordinating the two previous criteria, the disposal of the controlling power of the corrupt company must, fulfilling the criterion of “economic sovereignty”, be carried out exclusively for the national acquirer, in the same manner practiced by the USA (with the Committee on Foreign Investment in the United States - CFIUS, Section 301 or the Defense Production Act) or by China (with its protective five-year plans for its large national conglomerates). The legal discipline of combating corruption must be a guarantee instrument for sectors and strategic national companies to remain under the control of Brazilians and national capital, much more permeable to the planning provided for in art. 174 of the Constitution.

The idea that, in order to combat corruption, you can do anything is itself conducive to corruption: the legal order is corrupted and valuable economic aggregates are broken. The fight against corruption must be an instrument of national development, not its executioner.

* Alessandro Octaviani Professor of Economic Law at the USP Law School and former member of CADE's Tribunal. Author, among other books, of Studies, opinions and votes on economic law (Ed. Singular).

Originally published on the website of Counsel.

 

Notes


[I] Just as brief examples, see the press releases: (i) NEXO Jornal. “STJ annuls convictions of Palocci and 12 others in Lava Jato”. In: Nexus Newspaper, December 2021. Available at: https://www.nexojornal.com.br/extra/2021/12/01/STJ-anula-condena%C3%A7%C3%B5es-de-Palocci-e-outros- 12-in-the-Lava-Jato. Accessed on 23.03.2022/75/XNUMX; (ii) CASTRO, Juliana; GAMBA, Karla. “STJ condemns Deltan Dallagnol to pay R$XNUMX in compensation to Lula for PowerPoint”. In: Jot, March 2022. Available at: https://www.jota.info/justica/lula-deltan-dallagnol-indenizacao-stj-22032022. Accessed on 23.03.2022.

[ii] Among numerous descriptions, cf. ARRIGHI, Giovanni. The Long Twentieth Century: Money, Power and the Origins of our Times. London: New York: Verso Books, 2010, p. 191.

[iii] Cf., for an initial and dynamic presentation, JOSEPHSON, Matthews. The Robber Barons: The Great American Capitalists. New York: Harcourt, Brace and Company, 1934. Cf. Also. SCHLESINGER Jr., Arthur M. The age of roosevelt (volume III): The Politics of Upheaval (1935-1936). Boston, MA: Houghton Mifflin, 1988.

[iv] ANG, Yuen Yuen. “The Robber Barons of Beijing”. In: Foreign Affairs, July/August 2021. Available at: https://www.foreignaffairs.com/articles/asia/2021-06-22/robber-barons-beijing. Accessed on 23.03.2022/XNUMX/XNUMX; TURLAND, Jesse. “China's 'Zero Tolerance' Anti-corruption Campaign Snares Former Hangzhou Party Secretary”. In: The Diplomat, February 2022. Available at: https://thediplomat.com/2022/02/chinas-zero-tolerance-anti-corruption-campaign-snares-former-hangzhou-party-secretary/. Accessed on 23.03.2022. OCTAVIANI, Alessandro; NOHARA, Irene. State-owned: state-owned companies in the world; history in Brazil; legal regime; bids; governance; species; strategic sectors; state functions. Sao Paulo: Thomson Reuters Brazil, 2019.

[v] See PIERUCCI, Frédéric; ARON, Mathieu. the american trap – a worldwide Car Wash. São Paulo: Kotler, 2021. REUTERS. “Alstom settles and will pay a fine of US$772 million for corruption”. In: G1 Economy, December 2014. Available at: https://g1.globo.com/economia/noticia/2014/12/alstom-faz-acordo-e-pagara-multa-de-us-772-milhoes-por-corrupcao. html. Accessed on 22.03.2022. Legal Consultant Magazine. “'Lava Jato' discussed sharing Odebrecht's money with the US and Switzerland”. In: Conjur, February 2021. Available at: https://www.conjur.com.br/2021-fev-22/lava-jato-discutiu-divisao-dinheiro-odebrecht-eua. Accessed on 23.03.2022. Petrobras paid almost US$3 billion in favor of the company's minority shareholders, in a collective action settlement before the New York Court. According to the company, the damages suffered by the crimes of corruption revealed by Lava Jato were estimated at R$ 6,2 billion. JORGE JR., Walfrido Warde; VALIM, Raphael. Vultures, Dupes, and the Threat of Great Company Destruction. São Paulo: Contracurrent Publisher, 2021, pp. 24-26.

[vi] Cf. Union of Metallurgists of the ABC. ""kkkk" is Dallagnol's answer about breaking up a company with 150 workers". In: SMABC, February 2021. Available at: https://smabc.org.br/kkkk-ea-resposta-de-dallagnol-sobre-quebrar-empresa-com-150-mil-trabalhadores/. Accessed on 27.03.2022/XNUMX/XNUMX; Legal Consultant Magazine. “'Lava Jato' discussed sharing Odebrecht's money with the US and Switzerland”. In: Conjur, February 2021. Available at: https://www.conjur.com.br/2021-fev-22/lava-jato-discutiu-divisao-dinheiro-odebrecht-eua.

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