New Stimulus idea: Promote fraud to create jobs!

This is the idea that a delegate from Russia seemed to espouse as he commented in a meeting yesterday.

I was asked by the Marriott School to speak to a small group of delegates from Russia who were interested in understanding fraud and corruption. As we talked about the effects of fraud and corruption on an economy, one of the delegates (a lawyer) kept smiling and commenting that unethical business conduct leads to job creation!

It's true that when people are unethical in business, you need to increase controls including people and systems to monitor, prevent and detect the conduct. However, this does not lead to economic gain overall. After several explanations of how corruption creates friction in an economy, I was amazed that he persisted in this thought. He continued to smile and espouse this job creation from unethical business conduct over and over again even though we tried to explain how corruption can cripple an economy.

I tried to explain how corruption in an economy has crippled many third world countries such as Haiti. I've been to Haiti and seen people who are willing to work hard for $3 a day but who can't find work because viable businesses can't survive there because the costs of bribes and corruption are so extreme. As a result 90% of the people are out of work.

The argument of this lawyer is about like saying we ought to promote violent crime so we can create more jobs for police officers, builders of jails, jail keepers, emergency room workers and so on!

I've tried to imagine what our economy would be like if people had a high standard of ethics. If people followed the golden rule to treat others how you want to be treated, the economy would be very different. I must agree with the Russian lawyer that many people would find their jobs were not in demand. This includes police officers, auditors, fraud examiners, virus detection software programmers, alarm system companies, lawyers, etc. The list goes on and on. Unfortunately, I think the future is only getting brighter for careers in these areas.

I believe that the drain on the economy from all the economic effort needed to protect us from being exploited and hurt by one another is tremendous. I also believe that the drain is getting bigger with time. I can only imagine that a high standard of living could be accomplished for all with much less work if we didn't need to spend so much energy protecting ourselves from one another.

Yes, it's true that unethical business conduct leads to job creation. In fact, it also leads to a lower standard of living for every economic input. So, if we now have to work 50 or 60 hours a week to have a reasonable standard of living, I believe the same standard of living would probably require about 10 hours a week of working in a society that lives the golden rule. If corruption increases, either we will need to work more or our standard of living will decrease in order to support all the jobs needed to protect ourselves from the corruption.

That's not the stimulus package I want to see!