Academic journal article AEI Paper & Studies

American Leadership in the Age of Authoritarian Corruption

Academic journal article AEI Paper & Studies

American Leadership in the Age of Authoritarian Corruption

Article excerpt

Wednesday, June 19, 2019

Chairman Graham, Ranking Member Feinstein, and distinguished Members of the Committee, thank you for inviting me to testify on what I believe to be one of the most important economic and security topics of our time--kleptocracy and how to mitigate it using economic transparency.

Ending the anonymous shell company is a key first step. Doing so requires a national beneficial ownership registry, which should be made available only to law enforcement agencies with proper Congressional oversight and professionals that can be held accountable for misuse or mishandling of the registry. Overtime, beneficial ownership transparency that maintains strict privacy rights will produce the following benefits: (1)

* More effective economic sanctions enforcement (2)

* More efficient law enforcement in money-laundering cases (3)

* More level playing field for American small businesses (4)

* Decreased compliance costs for US financial institutions (5)

* Decreased perceptions of corruption in the United States (6)

What is the overall strategy?

Economic transparency is a non-violent, asymmetrical weapon in the growing clash of democracy and authoritarianism. It is a powerful tool that is in lockstep with the character of our nation and is something we must come to understand as strategic in the post-Cold War era. Rapid interconnectivity brought by technological advances and globalization incubated a nexus of authoritarianism and corruption that threatens liberty everywhere. The best strategy for combatting this nexus is to begin taking small steps toward increasing economic transparency at home, with the goal of consolidating gains in liberty where it already exists.

Why greater economic transparency now?

The end of the Cold War was the beginning of a new era, one where conflict occurs less in proxy wars and grand ideologies, and more in trade wars and boardrooms. For the foreseeable future, turmoil around the world will be driven by competition between free societies and corrupt authoritarianism. Rightly so, the checked and balanced nature of decision-making in America has delayed our official entry into the fight, but the tipping point is coming.

The effects of authoritarianism are amplified and obfuscated by growing economic interconnectivity. Illicit economic activity now crosses sovereign borders, spreads corruption, and funds nefarious activities within the United States and other rule of law-based democracies at unprecedented levels. Combatting authoritarianism and addressing the dark networks that support its consolidation are unavoidable strategic challenges to global security.

Greater economic transparency under the rule of law is the best strategy for fighting authoritarian corruption without sacrificing the democratic values that make the American spirit a beacon of hope for oppressed people around the world. Rules-based economic transparency is one of the many ways that America displays moral leadership, and it is what makes our nation one of the most prosperous on earth.

What is kleptocracy?

Corruption is woven into the institutional fabric of all authoritarian regimes. (7) But what is meant by the statement that authoritarian systems are institutionally corrupt?

Political leaders everywhere prefer to stay in office. To stay in office, leaders must provide a defined group with some package of either public or private goods in exchange for their support. (8) Leaders in democracies, such as the United States, need the support of large numbers of voters. This is why elected officials offer voters public goods in the form of good policies--education, national defense, tax cuts, or health care--in competition for votes. Free and fair elections allow for open debate and competition between proposed or previously enacted policy packages.

Leaders in authoritarian regimes, such as Russia, (9) need the loyalty of smaller groups to stay in power, which allows them to offer loyalists customized packages of private goods--such as cash, homes, or access to state resources--instead of good (and costly) public policies. …

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