Must They Use Bribery to Keep Overseas Business Competitive?

If there is anything more erosive of organized society’s expectation of justice than a pattern of crime by its more powerful elements, it is a weakening of support for the standards by which such conduct is condemned. A recent issue of The Washington Monthly raises such an alarm.

On the cover is a teaser: “The Case for Overseas Bribery.” Now the Monthly, like some other liberal journals, has taken to giving itself the image of “unpredictability.” This is supposed to reduce reader boredom and interest a broader clientele in directions other than a constancy of values. But, arguing for the right of American multinational corporations to bribe overseas was, I thought, taking the marketing strategy a bit too far.

The Monthly’s chief editor and founder, Charles Peters, called reassuringly to say that while he stands behind the article (signed by James North, a pseudonym), he was in no way for overseas bribery. It is just that he was against U.S. law prohibiting our corporations from bribing as long as others in the overseas business arena were bribing.

Such one-sided probity, he argues, reduces our exports and adds to our balance of payments and inflation problems. Either all countries should agree to stop allowing bribing for business or the U.S. should continue to permit our companies to grease the wheels. Moreover, Peters argues, the mores of many foreign countries are different from those of the U.S. Officials and influence peddlers blatantly extort the payoffs before the deals can be made.

Such ethnocentrism is unbecoming to a seasoned skeptic as Charlie Peters; it also dilutes the association of available evidence with clear thinking.

First, U.S. companies didn’t learn about bribery from foreigners. From city to state to federal governments, companies have been greasing their way to profits for decades. Procurement contracts, property tax abatements and political elections have attracted the illegal payoff. Scandals like the housing finance crimes in many cities or the General Services Administration’s corruption involve corporations as initiators as well as beneficiaries. Also, many companies have bribed one another to get sales.

All this is important to help to dispel the myth that U.S.-based corporations are innocently succumbing to a custom of overseas extortion. It takes two to tango and these companies have not been known as passive partners.

A forthcoming book on Lockheed’s endemic bribery culture, entitled “The Grease Machine” (Harper & Row, New York), documents the sophisticated and premeditated planning undertaken by that company to win sales for its planes abroad. Author David Boulton, using internal company documents as evidence, shows that bribery in the tens of millions of dollars resulted in highly damaging impacts on innocent parties and national interests.

For example, Lockheed’s skilled bribery teams elbowed out an almost certain sale of planes by Grumman to Japan in favor of the Lockheed Starfighter–one of the most crash-prone planes in aviation history.

This was accomplished by enlisting the expensive assistance of ultra-right-wing Japanese militarist fixers whose policies were directly opposite those of the U.S. government. Grumman lost the sale of a superior plane and Lockheed fostered interests inimical to its own country’s principles.

At one point, Lockheed’s money men in Indonesia discovered that they were being outbid in the bribery game by one of their wholly owned subsidiaries. After striving to outbid the Pentagon for sales to that country through detailed payoffs, this in-house competition almost demoralized the men from Burbank.

“The Grease Machine” describes how corporate payoffs undermined our national security policies, heaped the wrong or defective claims on allies, bilked the U.S. taxpayer, covered up shoddy engineering, circumvented U.S. embargoes on sales of certain weapons to certain countries and, incidentally, deceived shareholders about the true financial operations of their company.

There are problems with corporate bribery overseas other than the mere fact that such behavior is illegal in almost every nation as it is in our country. When large U.S. corporations sell on the basis of cash under the table and less on the merits of their products and services, the ante keeps going up. The condition is not static. Instead of competing over excellence and price, companies burrow deeper into conspiracy, subversion and mayhem. The question “Where does it all end?” must be asked by those who rationalize the bribery game.

Since the ante keeps going up, it is obvious that small business exporters cannot stay in the running if they desire. Overseas bribery is unfair and illegal competition as far as small American businesses are concerned.

The Monthly’s article is totally unpersuasive in its assertion that insisting on “exporting ethics,” in its words, is costing the U.S. billions in lost exports. Most U.S. exports, in dollar volume, are in two areas–food exports and technologies where U.S. companies are in the vanguard, such as computers and armaments. And when one U.S. manufacturer tries to winout over another U.S. manufacturer through bribes, is the balance of payments involved?

Furthermore, corporate bribery has a dynamic which usually catches up with itself in ways that harm the company both in this country and the country of payoff. U.S. exposure of corporate bribes overseas has led to overseas prosecutions or ousters of bribees, public revulsion and a reinforcement of good people who recognize that there are laws against such crimes that should be respected. Congressional committees and the new Foreign Corrupt Practices Act will continue to publicize the standards of decent business operations.

Far from being mere unrequited moralism, the new law will advance the prospect of other nations singly and collaboratively cracking down on this commercial cancer. Eschewing America’s leadership in this area means the ends justifying the means until the means extinguish the ends. History is replete with the tragic results of “doing what everyone is doing wrong until everyone stops doing it.” Charlie Peters should reread his history books and discover some predictable verities.