VW: The syndrome behind the scandal

"What were they thinking?" This is the question an editor of the Globe and Mail newspaper in Canada asked me to address, in a commentary about the Volkswagen scandal. They published it on Wednesday, in a slightly different form.

"What was Volkswagen thinking?" This question makes a big assumption: that the Volkswagen people were thinking, about anything beyond their greed. About decency, about our environment, about their progeny.

OK, so you will not be buying a Volkswagen. A Chevrolet instead? Watch out for the ignition. Or how about a Toyota? Just duck as the airbag comes your way. Do you, by any chance, see a pattern? Have we been thinking?

In Europe, the U.S., Japan, and most everywhere else, something is going on. There is a level of sheer corruption that transcends the automobile industry. How about banking in the U.S. and Europe? How about politics, most everywhere? Now Brazil is receiving a lot of attention, while the utter corruption of U.S. politics—private money in public elections, a level of lobbying out of control—carries merrily along.

A good deal of the corruption is criminal, and so can be prosecuted. So why don’t we prosecute corporate criminals and not just corporate crimes? And why don’t we set the fines to indicate that corporate crime doesn’t pay? If you wish to steal, don’t grab somebody’s iPhone. The government will throw the book at you. Devise some financial manoeuver—a little more clever than a Ponzi scheme—to defraud many people of much money. If you wish to get away with manslaughter, don’t do it as the driver of a car; do it as the designer of the car. Executives and engineers in General Motors knew that people were dying as a result of their inaction on those ignition switches, yet they have walked off scot-free.

Far more insidious, however, is the legal corruption, because it is so prevalent. Goldman Sachs allegedly manipulated the market for recycled aluminum so that it could siphon off $5 billion by moving ingot from one warehouse to another. What were they thinking? That’s easy: five billion dollars.

The company claimed to have broken no law. That is precisely the problem. Our societies are being destroyed by this legal corruption. University professors are in cahoots with pharmaceutical companies that think nothing of charging hundreds of thousands of dollars for life and death products that cost them hundreds. And economists who cannot see past markets support such nonsense. Are they thinking at all? Some markets! This is actually the exploitation of monopolies called patents whose prices are not being regulated. And these are not just any old monopolies: people have to die for want of these products, for the sake of obscene profiteering. What kind of a society tolerates this?

Are you seeing the pattern? It’s not a scandal; it’s a syndrome. Shocking as it may be, the Volkswagen affair is just a blatant case of an accelerating trend. Expect it to get worse, because right now we are living in a world where predatory capitalism is triumphing.

In 1989, pundits declared that capitalism had triumphed. Wrong. Balance triumphed. The developed countries of the West were balanced back then. Think of the United States post-war—higher levels of taxation, fairer distribution of wealth, generous welfare programs—and with all that, remarkable development, political and social as well as economic. The communist states of Eastern Europe collapsed because they were utterly out of balance, with so much power concentrated in their public sectors.

It turns out that the Berlin Wall fell on us: predatory capitalism has been triumphing since 1989, throwing much of the world out of balance, on the side of private sectors. They are dominating government and much of society, with the consequences described above.

What were they thinking at Volkswagen? Very likely that governments are impotent, or coopted, or lack the staff to regulate and prosecute. OK, so this particular company was particularly dumb. But how many others are close behind, just a bit smarter, to keep out of the spotlight?

Remember “The End of History”,  the widely accepted claim in 1989 that human society had reached perfection, thanks to our relentless greed? Well, watch out: unless we get our act together, here it comes.

© Henry Mintzberg 2015. See Rebalancing Society for more on this. See also critique of the Fukuyama claim in "The end of thinking?"

UPDATED: Sept. 24, 2015 2:25pm