You are here
Regulating Ethics in a Bust
Tuesday, April 21st, 2009
Robert Wechsler
Booms and busts are common not only in a financial system. They are
also common in government ethics.
Booms are when things are good, when local politicians seem worthy of our trust. Busts are when we find out that things aren't what they seemed. In other words, when there's a scandal.
In an Economist guest article last week, economist Raghuram Rajan wrote about the problem of regulating during economic busts, which is the norm. Much of what he says applies to improving a local government's ethics program after a scandal, which is similarly the norm.
Here's how Rajan describes the situation:
Bust-time is actually the time when financial regulation is least needed, Rajan argues. It is also the time when government ethics reform is least needed, because things are out in the open, people are watching, and officials are sensitive to appearances of impropriety.
It's when a few years have passed, when people are trustful and officials are overconfident again, that improved ethics programs are most needed. But it is often then that disclosure is weakened, that officials stop asking for advisory opinions, and that funding as well as transparency dry up.
Rajan argues that to create stability throughout the cycle, new regulations have to be comprehensive. In finance, if three areas are heavily regulated and one is not, investments will tend toward the area that is least regulated. That is true in government ethics, as well.
If, for example, there is a scandal involving a lobbyist, lobbyist laws are often improved, with other areas left the same. In a local government that has a weak ethical environment, this will only move unethical activity out of the hands of lobbyists.
The entire ethical environment has to be dealt with at once. But in a scandal situation, this is almost never done. The most recent war is fought, with maybe a few other tweaks for good show, and that is it.
As with our economy, fixing one part of a local government's ethical environment does not improve the whole. The occasion of a scandal is hard for ethics reformers to pass up, because this is often the only time that people will listen to them. But they should make it clear that a partial solution is not a solution at all. A comprehensive, ongoing, fully funded, and well-led ethics program is necessary not only to prevent future scandals, but to give the community the ethical environment it wants and deserves.
Robert Wechsler
Director of Research-Retired, City Ethics
---
Booms are when things are good, when local politicians seem worthy of our trust. Busts are when we find out that things aren't what they seemed. In other words, when there's a scandal.
In an Economist guest article last week, economist Raghuram Rajan wrote about the problem of regulating during economic busts, which is the norm. Much of what he says applies to improving a local government's ethics program after a scandal, which is similarly the norm.
Here's how Rajan describes the situation:
in the midst of a bust ... is when
righteous politicians feel the need to do something ... and regulators
have their backbones stiffened by public disapproval of past laxity.
Bust-time is actually the time when financial regulation is least needed, Rajan argues. It is also the time when government ethics reform is least needed, because things are out in the open, people are watching, and officials are sensitive to appearances of impropriety.
It's when a few years have passed, when people are trustful and officials are overconfident again, that improved ethics programs are most needed. But it is often then that disclosure is weakened, that officials stop asking for advisory opinions, and that funding as well as transparency dry up.
Rajan argues that to create stability throughout the cycle, new regulations have to be comprehensive. In finance, if three areas are heavily regulated and one is not, investments will tend toward the area that is least regulated. That is true in government ethics, as well.
If, for example, there is a scandal involving a lobbyist, lobbyist laws are often improved, with other areas left the same. In a local government that has a weak ethical environment, this will only move unethical activity out of the hands of lobbyists.
The entire ethical environment has to be dealt with at once. But in a scandal situation, this is almost never done. The most recent war is fought, with maybe a few other tweaks for good show, and that is it.
As with our economy, fixing one part of a local government's ethical environment does not improve the whole. The occasion of a scandal is hard for ethics reformers to pass up, because this is often the only time that people will listen to them. But they should make it clear that a partial solution is not a solution at all. A comprehensive, ongoing, fully funded, and well-led ethics program is necessary not only to prevent future scandals, but to give the community the ethical environment it wants and deserves.
Robert Wechsler
Director of Research-Retired, City Ethics
---
Story Topics:
- Robert Wechsler's blog
- Log in or register to post comments
