Rudy Giuliani and Broken Windows Chapter 1 of The Common Good ROBERT REICH AUG 4 Friends, On Tuesday, federal prosecutors indicted former President Trump for mounting a broad, three-pronged attack on democracy, using a trio of conspiracy theories that each “targeted a bedrock function of the United States federal government: the nation’s process of collecting, counting, and certifying the results of the presidential election.” Six co-conspirators were included in the indictment. Although unnamed, the most prominent was clearly Rudolph Giuliani. Separately, in a civil suit last week in Georgia, Giuliani conceded that while acting as a lawyer for Trump, he made false statements by asserting that two Georgia election workers had mishandled ballots while counting votes in Atlanta during the 2020 election. Giuliani’s concession came in court papers filed as part of a defamation lawsuit that the two workers had brought against him, accusing Giuliani and others of promoting a video that purported to show the two election workers manipulating ballots while working at the State Farm Arena for the Fulton County, Georgia, Board of Elections. In a two-page declaration, Giuliani admitted that his statements were “false.” Giuliani served as mayor of New York City from 1994 to 2001. During those years, he led New York’s so-called “civic cleanup” by applying what was known as the “broken windows” theory of crime control. The theory was first propounded by political scientist James Q. Wilson, who noted that a broken window in a poor community, left unattended, signals that no one cares if windows are broken there. Because nobody is concerned enough to enforce the norm against breaking windows, the broken window becomes a kind of invitation to throw more stones and break more windows. As more windows shatter, other aspects of community life also start unraveling. The unspoken norm becomes: Do whatever you want here, because everyone else is doing it. As crime rates fell steeply in New York City, well ahead of the national average pace, Giuliani was widely credited. But the picayune law enforcement also harassed the city’s poor. Notably, Giuliani’s “broken windows” policy was highly selective. It did not include white collar crime. Two decades later, Giuliani was engaged in one of the worst window shattering acts in American history — an attack on democracy and the rule of law itself. LET’S TAKE A DEEPER DIVE into the “broken windows” theory and see how it relates to the common good. Think of the common good as a pool of trust built up over generations — a trust that most other people share the same basic ideals. This pool of trust has great value. It makes everyone’s lives simpler and more secure. But precisely because it has so much value and is maintained voluntarily, it has been possible for some individuals to exploit it for their own selfish gain. In any social system, it’s possible to extract benefits by being among the first to break widely accepted unwritten rules. Envision a small town where people don’t lock their doors or windows because of the unwritten rule that no one steals. Under these circumstances, the first thief to commit robberies operates at a huge advantage. He can effortlessly get into anyone’s house. That first-mover advantage disappears as soon as people catch on and start locking their doors and windows. Modern societies are filled with tacit rules that can be exploited by people who view them as opportunities for selfish gain rather than as social constraints. “I never thought anyone could do that” is the typical response of everyone else — to whom it literally never occurred that someone would take advantage of the unwritten rule. After the exploitation occurs, the rule inevitably changes to the equivalent of “people do steal, so lock your doors and windows.” Thereafter everyone else has to take steps — often inconvenient, time-consuming, or costly in other ways — to prevent the exploitation from recurring. Sometimes laws have to become far more detailed and complex. The first high-priced tax attorney to discover an ambiguous provision in the tax code that allows his wealthy client to save a bundle has a first-mover advantage, until the code is amended with a more detailed provision blocking the maneuver. But as a result, everyone thereafter has to grapple with a tax code that’s a bit more complicated. Multiply this by every high-priced tax attorney looking for ambiguous provisions, and you discover why the tax code has become as complicated as it is. Trust can disappear altogether. If honest used car dealers can’t differentiate themselves from dishonest ones, they may figure there’s no point in making sure their cars are reliable. Eventually, no one trusts used car dealers. If a few members of Congress retire to become well-paid lobbyists for industries they once oversaw, other members of Congress will have fewer qualms about doing the same. Eventually, so many turn to lobbying that the public stops trusting members of Congress to act in the common good when they’re in office. If exploitation isn’t contained, competitive forces can erode standards. After one pharmaceutical company jacks up the price of a lifesaving drug, CEOs of competing companies with lifesaving drugs will be pressured by their investors to do the same. If one corporation awards its CEO an unprecedented large pay package, other companies will be under pressure to match it. Political standards can similarly erode. If a candidate is elected because he broke the unwritten rule not to flood the internet with fake information about his opponent, future candidates will feel less hesitant to flood the internet with fake information. If a presidential candidate refuses to release his tax returns and suffers no consequence, future candidates will feel less obliged to release theirs. Once norms are broken without consequence, further breakage ensues. If there are no consequences, norm-breakers can reap enormous gains while the costs of the norm-breaking are shifted to everyone else — locks that have to be purchased; laws that have to become more detailed; monitors, accountants, and security personnel who must be hired; added red tape that hobbles all transactions; and the enmity and distrust that can begin to envelop an entire economic and political system. AS I SHALL SHOW, around five decades ago, a few people with wealth and power began exploiting social trust in order to gain even more wealth and power. The exploiters said, in effect: “I’m going to amass as much wealth and power as I can, whatever it takes. Being decent and responsible is for losers.” Then, seeing how easily it was done and how richly they were rewarded, others followed. Broken windows led to broken everything. The unwritten rules that once defined and enforced the common good began to erode. Here’s a rough timeline of the breakdown, starting in the 1960s. I end the timeline in 2017, the year Donald Trump moved into the White House, in order to show how much Trump was a symptom, rather than the cause, of a breakdown that began years before. 1964: Gulf of Tonkin. Lyndon Johnson justifies a sharp escalation of the Vietnam War by falsely claiming that North Vietnam launched an “unprovoked attack” against a U.S. destroyer on “routine patrol” in the Gulf of Tonkin, followed by a “deliberate attack” on a pair of U.S. ships. 1971: The Pentagon Papers. A leaked Defense Department report shows that while the Johnson administration promised not to expand the Vietnam War, it secretly did so. 1971: Lewis Powell memo. The future Supreme Court justice summons business leaders to use their economic muscle aggressively to gain political influence. 1972–74: Watergate. The headquarters of the Democratic National Committee at the Watergate complex in Washington, D.C., is broken into by a covert operation set up by Richard Nixon’s White House, followed by cover-ups by Nixon and his top assistants. Nixon also maintains an “enemies” list and uses the FBI to harass those on the list. 1980: The Abscam scandal. After an FBI sting operation, seven members of Congress are convicted of accepting bribes in return for various political favors. 1985: Carl Icahn makes a hostile takeover of TWA. The raider then sells TWA’s assets to repay the debt he used to purchase the company. 1986–95: The Savings and Loan scandals. More than 1,000 out of 3,234 savings and loan banks fail, at a total cost to taxpayers of $132.1 billion. Several politicians are implicated for taking bribes. 1986–87: The Iran-Contra scandal. President Ronald Reagan’s national security team conspires to sell American weapons to the Iranian Revolutionary Guard and, after marking up the price fivefold, skims the proceeds of those sales and gives them to the anticommunist Contra rebels in Nicaragua. This is a direct violation of federal law cutting off aid to the rebels. Reagan initially denies it occurred. Several years later, President George H.W. Bush pardons the major Iran-Contra perpetrators before their criminal trials are scheduled to start. 1987: Robert Bork’s rejection. After a vicious confirmation battle over Republican Bork’s nomination to the Supreme Court, he is defeated by virulent partisan opposition. 1990: Michael Milken conviction. The corporate raider, who headed the junk bond division of the Wall Street investment firm Drexel Burnham Lambert, is convicted following a guilty plea on felony charges for violating U.S. securities laws. 1990: Keating Five scandal. Five senators are found to have obstructed an investigation of the savings and loan industry after they received political contributions from these businesses. Democratic House Majority Whip Tony Coelho resigns from Congress after revelations of unethical conduct involving the savings and loan industry and junk bonds. 1992: House banking scandal. House members are found to have benefited from special banking privileges. Four former congressmen are convicted of criminal wrongdoing. 1993–98: Whitewater scandal. Charges of illegal activities involving land deals financed by the Clintons during the 1980s lead to convictions of several Clinton friends, business associates, a municipal judge, and the governor of Arkansas. 1995: Dan Rostenkowski scandal. House Ways and Means Committee chairman Rostenkowski is convicted of embezzlement. 1995: United Way scandal. The charity’s longtime CEO, William Anthony, and two other top officials are convicted of stealing from it to support lavish lifestyles. Other local United Way CEOs are subsequently convicted of stealing from the charity. 1995: Government shutdown. A breakdown in negotiations between President Bill Clinton and House Speaker Newt Gingrich over the federal budget causes the first-ever shutdown of the entire federal government. 1997–98: Newt Gingrich reprimand. The House reprimands and fines House Speaker Gingrich for improper financial deals. He subsequently resigns. 1998: The Rampart scandal. Widespread corruption in the Los Angeles Police Department’s anti-gang unit implicates more than 70 police officers for unprovoked beatings, planting false evidence, unprovoked shootings, stealing and dealing narcotics, bank robbery, perjury, and covering up evidence of these activities. 1998–99: Clinton impeachment. Bill Clinton is impeached for perjury and obstruction of justice for falsely testifying that he did not have sexual relations with White House intern Monica Lewinsky. Clinton is then acquitted in the Senate trial. 1999: Financial derivatives. The Clinton administration is asked by the chairman of the Commodity Futures Trading Commission to regulate financial “derivatives.” Pressured by Wall Street, the administration refuses. 1999: The Glass-Steagall Act. Clinton joins with congressional Republicans in repealing the act, which since the 1930s had separated commercial banking from investment banking. 2000–2007: Wall Street gambles. Taking advantage of deregulation, major Wall Street banks underwrite risky mortgages, mix them in with safe securities, and resell the packages to unsuspecting investors. Major credit-rating agencies, eager to maintain their relationships with the banks, give the packages AAA ratings. 2001: The war against terrorism. Five days after the September 11 attacks, Vice President Dick Cheney warns that the White House will need to go over to ‘‘the dark side’’ to fight al Qaeda. Among the dark places the White House goes are a top-secret program code-named Stellar Wind, under which the National Security Agency eavesdrops freely in the United States without search warrants, and the use of torture on suspects, in violation of the Geneva Accords. 2001: Red Cross scandal. In the wake of the attacks, the Red Cross raises more than a half-billion dollars, promising all donations will go to victims and their families. A congressional investigation reveals that roughly half of the donations are reallocated to other operations of the Red Cross. Red Cross’s head, Bernadine Healy, resigns. 2002: Corporate looting and inside-information scandals. Several major companies, including Adelphia, Tyco, WorldCom, and Enron fake profits and hide debt off the books. Former Enron CEO Jeffrey Skilling is sentenced to prison. Martha Stewart serves a brief prison sentence for insider trading. 2002: Arthur Andersen scandal. The accounting firm is convicted of obstruction of justice for shredding Enron-related documents. The firm subsequently folds. 2002: Auction house price-fixing scandal. Sotheby’s and Christie’s auction houses, controlling 90 percent of the high-end auction market, are found to have engaged in a price-fixing conspiracy. Sotheby’s chairman, billionaire Alfred Taubman, is fined and jailed. 2003: Dot-com bubble scandals. After the “dot-com bubble” bursts, the SEC finds that every major U.S. investment bank assisted in efforts to defraud investors, such as urging investors to buy shares in dot-com companies that the banks’ own analysts were privately describing as junk. All leading public accounting firms admit negligence in executing their duties, and pay fines. 2003: Weapons of mass destruction. The George W. Bush administration claims that Saddam Hussein’s regime has weapons of mass destruction, as the reason for invading Iraq. No such weapons are ever found. 2005: Jack Abramoff scandal. Political lobbyists Abramoff and Michael Scanlon overbill Native American tribes seeking to develop casino gambling on their reservations and give gifts and campaign donations to members of Congress in return for votes. Representative Bob Ney and two aides to Tom DeLay are directly implicated. 2007: Goldman Sachs conflict of interest. While promoting risky mortgage-related securities to its clients, Goldman Sachs places large bets against those same securities. 2007: Bear Stearns goes belly-up. The bank’s offshore hedge funds specializing in mortgage-related securities collapse. Credit-rating agencies suddenly downgrade hundreds of subprime mortgage-backed securities. Banks, securities firms, hedge funds, mutual funds, and other investors are left holding suddenly unmarketable mortgage-backed securities whose value plummets. 2008: Lehman Brothers collapses. The bank’s fall triggers a U.S. government announcement of a bailout of major Wall Street banks. 2008: Bernie Madoff’s Ponzi scheme. Madoff is arrested for operating a Ponzi scheme, the largest financial fraud in U.S. history, estimated to be $64.8 billion. 2008–10: The Wall Street financial crisis. Over 9 million homeowners lose their homes to foreclosure. Almost 9 million Americans lose their jobs. Yet not a single major bank executive goes to jail or is even indicted. CEOs of the largest Wall Street banks award themselves large bonuses. 2009–17: Travis Kalanick. In a quest to build Uber into the world’s dominant ride-hailing entity, founder and CEO Kalanick flouts transportation and safety regulations; capitalizes on legal loopholes and gray areas to gain a business advantage over competitors; promotes and protects top performers even when they verbally and sometimes sexually abuse employees; poaches self-driving car technology from Google; uses software to evade law enforcement; violates the privacy of riders; and plays dirty tricks on competitors. Kalanick is finally fired by the company’s board. 2010: Partisanship soars. After Republicans gain control of both houses of Congress, Mitch McConnell, the GOP’s highest-ranking member of Congress, says his “number one aim” is to unseat Democratic president Barack Obama. 2010: Deepwater Horizon oil spill. BP’s rig explodes and spills oil into the Gulf of Mexico in the worst oil spill in history. 2012: Samson scandal. United Airlines reinstates a money-losing air route between Newark Liberty International Airport and Columbia, South Carolina, at the behest of David Samson, chairman of the Port Authority of New York and New Jersey, who has sway over the Newark airport and a vacation home near Columbia. United’s CEO Jeffery A. Smisek is subsequently fired over the scandal but receives a severance package totaling $28.6 million. 2013: Government shutdown. The federal government is shut down again, for lack of agreement on funding it. 2013: SAC Capital scandal. The giant hedge fund pleads guilty to insider trading, paying $1.8 billion in fines, but the fund’s founder, Steven A. Cohen, walks away unscathed. 2013: Bridgegate. New Jersey officials with ties to Governor Chris Christie close lanes leading to the George Washington Bridge, causing traffic jams apparently designed as political payback against Fort Lee’s mayor Mark Sokolich, who did not support Christie for governor. 2013: Doping scandal. After more than a decade of denials, famed cyclist Lance Armstrong confesses to doping. 2013: Soccer scandal. As part of a wide-ranging federal investigation into soccer-related improprieties, Chuck Blazer, who had been executive vice president of the United States Soccer Federation, pleads guilty to 10 counts of corruption, including racketeering, wire fraud, and money laundering. 2014: General Motors ignition scandal. The company recalls nearly 30 million cars worldwide due to faulty ignition switches. The problem was known to GM for at least a decade prior to the recall, but GM had done nothing to remedy it. At least 124 deaths and 275 injuries result. 2015: Martin Shkreli. He raises the price of a single pill of Daraprim, which treats a parasitic infection that can be deadly when it afflicts unborn babies and people with HIV and AIDS, from $13.50 to $750. 2016: Chicago police scandal. The Justice Department finds that the Chicago Police Department has used excessive force against African American residents. The report comes two years after the killing of Laquan McDonald by Chicago police officer Jason Van Dyke. 2016: Price-gouging by Mylan Pharmaceuticals. The firm ratchets up the price of its EpiPen emergency injection kit, containing only about $1 of the drug epinephrine, to $609 a box. Mylan has an effective monopoly on the lifesaving product. The company’s revenue skyrockets to $11 billion. In 2016, Robert Coury, Mylan’s chairman, receives compensation of $97 million (including vesting of prior stock options, $160 million). 2016: KPMG scandal. Partners at Big Four accounting firm KPMG, including the head of its auditing practice, fail to report leaked information they have received about inspections planned by KPMG’s regulator, the Public Company Accounting Oversight Board, which was established after the accounting scandals at Enron. The information has enabled partners to know in advance which audits will be inspected so they can make sure any targeted audits are clean. 2016: Greg Gianforte scandal. On the eve of his election to the House of Representatives, Montana’s Greg Gianforte beats up a reporter who asks him a question he dislikes. 2017: Baltimore police scandal. The Justice Department finds that the Baltimore Police Department has systematically abused its power with regard to African American residents. The report comes more than a year after the local police shooting of Freddie Gray. 2017: Wells Fargo scandal. Top executives at Wells Fargo Bank are found to have pushed bank employees to create multiple new accounts for customers who didn’t request or want them and sell them auto insurance they didn’t need. *** This list is not intended to be a scientific sample. Not every breach on the list is as serious as every other. Some were blatantly illegal, some were abuses of power, others were exploitations of ambiguities in laws, and the rest were considered by many to be unethical. And, as I’ve said, I’ve intentionally left out Trump and his squalid administration, as well as Rudy Giuliani and Trump’s other enablers (as well as other moral breakdowns and scandals since then). The incidents on the list shocked many people into saying something like, “I didn’t know anyone could do that” or “that’s just wrong.” All were the result of people seeking personal gains in wealth or power at the expense of the common good. All contributed to accumulating cynicism and distrust. It’s not as if America was free from wrongdoing before the 1970s. Consider Warren G. Harding’s dizzyingly corrupt administration, or the baseball scandal of 1919 when eight members of the Chicago White Sox were accused of intentionally losing the World Series in exchange for money from gamblers. There have been corruption and racism in police departments extending back to the 19th century. In the 1950s and 1960s, CEOs reassured the public that DDT, asbestos, tobacco, automobiles, and toxic waste dumps like Love Canal were all harmless. What’s new is the escalation of it all. No one who has lived through the last five decades can have failed to notice the breakdown. The effect, in the words of Daniel Patrick Moynihan, has been to “define deviancy down.” Conduct previously considered wrong has come to be seen as normal. Trust in every major institution of America has declined. Cynicism prevails. Next week we’ll look at Trump and the philosopher he says he deeply admires, who also happened to think the common good is bunk: Ayn Rand. *** These weekly essays are based on chapters from my book THE COMMON GOOD, in which I apply the framework of the book to recent events and to the upcoming election. (Should you wish to read the book, here’s a link). Subscribers to this newsletter are keeping it going. If you are able, please consider a paid or gift subscription. And we always appreciate your sharing our content with others and leaving your thoughts in the comments.