Welcome to another episode of Ideas Untrapped podcast. My guest on this episode is Raymond Fisman, who is the Slater Family Professor in Behavioural Economics at Boston University. He is one of the foremost researchers on corruption and institutional behaviour in the last three decades, and I have been looking forward to talking to him. The main theme of our conversation was the re-election of Donald Trump as the new U.S president and his swift embrace of corporate oligarchs as his new inner circle and power proxies. We also discussed why corporate America is rushing to fall in line and "kiss the ring". This was an enlightening conversation for me, and I do hope you find it useful as well. I also hope to have Raymond back on the podcast for a more global exploration of the topics he covered.
Transcript
Tobi: Hi, everybody. This is Ideas Untrapped Podcast.
My guest today is Professor Raymond Fisman. He's the Slater Family Professor in Behavioral Economics at Boston University. He's a brilliant, brilliant economist that I've been looking forward to talking to for a while. It's a pleasure to have you, Raymond.
Raymond Fisman: It's a pleasure to be here. I'll tell my children that someone said I was brilliant. They'll find that very funny.
Tobi: I think the interesting place I would say to start is what was your reaction to the inauguration two days ago? [This conversation was recorded on January 22, 2025 two days after Donald Trump was inauguarated for a second time as the President of the United States of America] I mean, in some kind of mildly amusing horror, like, I would say I was at the open blatant embrace of the core of American government of oligarchy and downstream of that, corruption. What were your thoughts?
Raymond Fisman: Yeah, I think it's a little hard to know where to begin because there is so much to say and literally relevant news and so far as self-dealing is concerned, as well as obsequiousness of business elites in the U.S. is coming so quickly that if we had this conversation six hours from now, there'd probably be yet more to say about it.
On the one hand, I would say that it was horror, not mildly amused, except that it does almost transcend satire, what's going on, like, you can't make it up sort of thing. But something that I want to be very careful to emphasise throughout is that I really don't want to pin this on a particular party or make this about partisanship, as opposed to we have an individual who has been elected to the highest office in the land, that I think is doing a lot that runs counter to good government. And those are the issues I want to emphasise.
And I do think that we've seen a lot of troubling signs. I did not watch the inauguration. I'm following the advice of my friend, Marianne, who said that to stay sane, she just reads the news in a physical newspaper. Otherwise, it just comes at you too often and too fast.
But some of the things that have emerged in recent days that are really quite troubling are signals that the U.S. is moving towards a much more, if you like, personalistic approach to policymaking. And there's always been a role for connections in the way the U.S. is governed. But it does feel like it's just going to a different scale.
The most recent and high profile example is that of TikTok, where Trump had been in favour of a ban of the app, he met with the CEO and before that, a billionaire Republican mega donor, and he flipped his position on it. Now he is going to be TikTok's saviour. So that's on the one side. On the other side, you see TikTok entirely aware that they need to engage in flattery. So, you know, they personally thanked Trump for his intervention Monday morning after it was brought back from a very brief ban and now has a 90 day extension. But again, Trump has sworn to save it.
So it's this kind of very personalised, very public favour trading is clearly sending a message to business that they need to fall in line in order to remain profitable in Trump's America. And you can easily, or I shouldn't say easily, you can imagine sliding into a system in which we have something closer to what's termed competitive authoritarianism, where you do hold elections, but the media, as well as the levers of government, are so commanded by the party in power that oppositions are playing from such a disadvantage. We've seen this emerge to some degree in India. We've seen it emerge in Hungary. We've seen it with X. We've seen it with other sites. We've seen it, to some extent, with Facebook very recently. You can see it potentially emerging in the U.S.
So I do see a lot of troubling signs, and it is certainly a collective project to push back against these trends.
Tobi: One thing that I was surprised, you might not be, given that do work in this area is how quickly people fell in line once Trump won or it looked like he was going to be the next president and you know you had this scrambling for people to get face time in Mar-a-lago to book hotels and to basically make deals and then it does make me wonder that, yeah, like you said, the U.S. is shifting to a more personalistic type of governance. But do you think that the quickness or the way that this shift is rapidly happening before our eyes has something to do with perhaps grievances in whatever form with good governance generally or impersonal bureaucracies? You know, because there's so much gripe about the elites or the deep states and how they have failed. And this is how the people are getting the power back. But of course, we know that's not what it really is. But what exactly about the status quo stopped working to give us this shift we are seeing to a new equilibrium?
Raymond Fisman: I'm sure there are many things and one always runs the risk of naming the thing that you think is most important, or even worse, the first thing that comes to mind, and presenting kind of a monocausal case. So I'll say that I'm going to name the thing that I think is most important. It's the first thing that comes to my mind. I'm sure there are many factors that are pushing in this direction, including what you described, people being perhaps dismayed - that it's going to be related to what I say, including what you say about the seeming gridlock of the U.S. government.
But what troubles me most and what I think is perhaps enabling the most is increased polarisation, which is more extreme in America than elsewhere, but is also a global phenomenon. It shows up very clearly in the data. The extent to which people identify as left versus right has been steadily widening over the past few decades. And somehow it tinges everything, including people's views of good governance, with a partisan lens.
So somehow all that has come to matter is, is he my guy or is he not my guy? As opposed to, is this an honest, competent guy or a dishonest, incompetent one? So somehow people's views, people's attention is entirely drawn to partisan questions, rather than good versus bad government questions.
The fact that businesses fell in line so quickly, it is kind of hard to fault them, given the opening example of TikTok. That seems to have already reaped tremendous dividends for the company. If I take at face value, the stock price of Tesla as some summary measure of how valuable it is to have the president's sympathies. It went up by around 30% in the week following the election. There are lots of companies that appreciated in value for reasons that can easily be tied to policies. For-profit prison companies went up by a lot. That's because of anticipated immigration policies. Other carmakers, and especially electric carmakers, did not do so well. So what's special about Tesla, that's not like a big secret. It's that its biggest shareholder, Elon Musk, was a tremendous financial and personal backer of Trump. So if you say, well, being well-connected to this government is worth 30%, that's a pretty good incentive to fall in line.
I will note as an aside, or maybe not as an aside, something that's very directly related. So my PhD thesis was on the value of political connections in Suharto's Indonesia in the mid-1990s. And my thesis looked at what happened to the value of well-connected companies when there were threats to Suharto's health. And if you take the results of my PhD thesis at face value, connections in America now are worth something comparable to what they were worth back in mid-90s Indonesia, which at the time was viewed as one of the most corrupt countries in the world.
Tobi: I mean, a recent example in Nigeria is a particular oil company that was in trouble for a while, running to about five years, was on the edge of bankruptcy and could not even publish its annual reports. And after the the last election, we've had a new government now for 18 months. After the last election, due to the perceived closeness - I mean, it's an open secret - of this same company to the new president, it's recovered tremendously. Its financial fortunes have recovered tremendously to the point that during the Christmas party last December, this same nearly bankrupt company hosted the three biggest musical artists in Nigeria to its annual Christmas party.
So I read the Indonesia paper a long time ago, and one thing I want to draw your attention to, maybe with a bit more of an international lens, is the role of ideas here. I know you talked about partisanship, and I hope we'll get to unpack that a little later. So there is a general acceptance now, especially in the subfield of what we call development economics or international development scholarship generally, that some form of corruption is not so bad, right?
Since you… I don't know how much you followed that field, but a lot has happened since your paper. You know, there's this subfield of political science meshed with economics that talks about political settlements. Scholars like Mushtaq Khan have said that, well, some corruption can be beneficial to growth and not all corruptions are bad. You can see the flavour of that with what is happening with Donald Trump, right? Because, I mean, again, a couple of weeks ago, I read an article in The Economist's which I consider to be embarrassing, was more or less making the same point that, hey, listen, folks, corruption is not as bad as you think, because there are evidence to some exceptions. So do you think that these situations where you have economies that are sufficiently big to challenge traditionally big Western economies, like China, like India, like Brazil, who we might describe as, you know, relatively more corrupt than Western countries, but who seem to be doing so well, you know, because when you talk to a lot of Silicon Valley guys, they talk about China and how they get things done and how it is impossible to build or do anything in the U.S. because of bureaucracy.
So, are we seeing the influence of ideas here that, well, corruption might not be the worst thing in the world as long as we can get some growth, we can build new nuclear reactors and build new roads and have high-speed railways? So is that a bit of what we are witnessing here?
Raymond Fisman: Yeah, I mean, there's an awful lot in that question. So at the risk of taking a bit of time to respond to Let me make a few observations. So first of all, you're absolutely right that the idea of efficient corruption has been floating around in the literature and out there in the so-called real world for some time. There's the classic article by Nathaniel Leff that refers to Brazil specifically and contrasts it with Chile. And that's, I think, a useful starting point for this view; which is precisely as you described, that you have “bad” government policies, bad in quotes here, but bad for growth, and thank goodness for corruption because it affords some workaround.
Now, the most standard response to that view, which I think also has some legitimacy, the grease-the-wheels view of corruption, is the so-called endogenous regulation perspective, which is definitely worth mentioning in this broader discussion; which is that once bureaucrats and politicians know that the way that they can extract payments is by creating onerous and burdensome rules, they just make more and more rules because that's the way they extract their side payments.
So you can end up with hopeless amount of red tape where businesses spend even more time dealing with bureaucrats and still pay bribes than in a corruption-free world. So this is a debate that remains in progress 30, 40 years after the Nathaniel, more than 40, a half century maybe after the Nathaniel Leff article. And you can easily marshal evidence on either side of this view.
The second point, you mentioned China. I think just empirically, it is worth observing that, you know, I give the case of Indonesia. I can even within Indonesia say, well, here's the good and here's the bad of it. Suharto took over in the mid-60s. He was a brutal dictator. So what I'm about to say is just about the economy. It's not about human rights abuses or torture or other horrors that took place under Suharto. The country grew very fast for 30 years under his rule. And if I take as my main overall view that, yeah, all else equal, less corruption is better than more corruption, we do have to confront these uncomfortable case studies of Indonesia under Suharto. It is also worth noting that he put in place a system such that when the regime fell in 1998, it had a GDP drop of 15% in a single year.
So in some sense, it was a fragile foundation that the economy was built on. Going to China, you see the same thing. Whatever you think of the country's most recent anti-corruption crackdown dating back to the early 2010s, from the 80s to the present, the country has grown tremendously in a system that was widely viewed to be quite corrupt. We definitely want to understand, and there's been a lot written on what might make China corruption different, from, say, Haiti corruption.
I pick Haiti not at random. There was this devastating anecdote. I believe it's Baby Doc, not Papa Doc, who at some point there was a railway that connected Port-au-Prince to the second largest city in the country whose name is escaping me. This is a productive asset for the economy, but for long-term prosperity. But for short-term gain, Papa Doc sold the railway ties to a multinational company that boxed up the metal and shipped it overseas.
That's like the ultimate short-termist thinking that a so-called roving bandit in the economics literature, someone who's not thinking about harvesting benefits year after year after year. So the question of, broadly speaking, is corruption good or bad, I feel like there are relatively few people who will say, all else equal, I want more corruption. I think there are relatively few people when they take the broader view of here's the evidence on Brazil versus Chile, China versus Sweden, etc., say, yeah, we want to add some corruption to the system.
But we're not really taking all else equal, are we? We're saying, well, we have this system in Indonesia, that The system in China, again, whatever you think about their social or other policies, have grown tremendously. China's brought an enormous number of people out of poverty. We need to understand what worked in that system. Now, the last thing I'll say on this is if we come back to the U.S. So, first of all, there's some of what you're describing in what seems to be going on with Elon Musk where he seems to be actively lobbying to have government litigation against him dismissed for environmental violations and so on.
So whether you think that the rules are set too tight, such that, oh, great that we can be unshackled from all of this pointless red tape, or whether you think, oh, now he's free to kill us all with whatever he's releasing into the atmosphere for the sake of greater financial return, that I'm not going to take on. But it does fit with your broader narrative of the trade-offs. I think what troubles a lot of people is when you get into a system of personalistic policymaking where profits are determined and part of a longer conversation would involve how this might fit in with the China model especially. When the system is set up such that profits are dictated by favour-seeking and personal connections, that's what companies invest in.
You don't invest in building the best electric car. You invest in making the best connections to government. And if you want to link to the larger economics literature, in a way, this is what the Nobel Prize was awarded for this past year on the role of extractive institutions and development. Sorry for that long answer, but what you asked, there's really many pieces to it. I've tried to give just the briefest of surveys of a response.
Tobi: Yeah. And one thing that does worry me, and maybe this is not a direct question, but I would like your reaction to it. What does worry me is the overseas effect. I know that, yes, Americans have a lot to be worried about. But, you know, in situations where some of the domestic rules against corruption in places like the United States and the UK have also helped to fight or, at least ,keep corruption at bay in many economies, Nigeria included.
There are many laws in the U.S. that prevent American companies working in Nigeria from, I mean, engaging in certain things and certain practices, whether it's environment or bribery and so many other things that they are used to doing in the 80s and 90s. And if we have a situation where companies can leverage personal relationships with executive to sidestep those rules. I fear they will also be unshackled internationally and we just might be back to some bad old days.
Yeah.
Raymond Fisman: So again, there's a lot that is embodied in this question, but I'll still try to be brief. So what you are describing, I think very legitimately, is the fact that, okay, Swedish companies don't pay bribes in Sweden. But what's Skanska doing when they're operating overseas, which they do a great deal? And for a while, Transparency International tried to produce a bribe-payers index, which was meant to evaluate the extent that companies based in particular countries felt more empowered to pay off public officials outside of their own countries. That proved to be hard to do for reasons I won't get into. It didn't last very long. But I do think this question of what is the role of multinationals operating in Nigeria, operating in Brazil, operating in Colombia, what is their role in promoting or enabling a corrupt system is really an important and understudied one.
On the very specific question of US companies, i was very concerned in 2016, as I think many people were. Enforcement of these foreign anti-bribery laws, I think the sense is mixed. So we do have some very high profile cases, Siemens being the biggest. But as I said, I don't think this is extremely well studied, so it's hard to kind of give an overall well or less well enforced. We do know that Foreign Practices Act enforcement in the U.S. did ramp up in the 2000s.
I think there was a lot of concern that in 2016 it would fall off a cliff. And it didn't really. So despite any worries we might have had about Trump meddling in the Justice Department, that one didn't really seem to come to pass. Am I worried again in 2025? A hundred percent. And I guess we'll have to see. As with many instances in which there are legal constraints, but also, I guess I might say moral constraints, this is my excuse to say that some of the responsibility rests not with the U.S. government, but rests with U.S. business people. And dare I say, even the institutions like Boston University or Columbia University, where I used to work at the business school, in educating people who will run the businesses that operate in Nigeria or Colombia or Brazil. And that, again... business education and whether we can and should try to inculcate a sense of business principles is probably for another conversation.
Tobi: So I want to return to the partisanship question, which is, I think it's generally accepted that some contest is necessary, if not perhaps mandatory in a democracy. But what are the ways in which partisanship drive polarisation. Because for me personally, I worry about this too. I mean, the last elections we had in Nigeria was super online and hyper-partisan, right? It's not so clearly ideological as it is in the US in the case of right versus left. In our own case, it's usually ethnic, which I would argue is even far more dangerous because there may be violence. There's threats of that in the U.S. as well.
Raymond Fisman: Yes, I was going to say. And also, I will say that it feels almost tribal in the U.S. in terms of people just like aligning themselves or identifying, that's the right word, they identify with one group or the other. So I'm not sure how different it is. As you were describing it, that's what I was thinking. It feels very identity based.
Tobi: Yeah, so I want to learn from you. I know that there might not be a simple answer to this. There rarely ever is in social science anyways. So how does something as necessary and even essential, you know, having a viable, active opposition, you know, partisanship generally, then drive polarisation to the point where people are unable to agree on certain basic rules of how a government should work. I mean, something that really shouldn't be up for debate.
Raymond Fisman: So I'm going to give more of a descriptive commentary than say anything about what we could hope to do. I think it's actually quite important to recognise that if you go back a half century, exactly, again, as you described, the hand-wringing and concerns went in the opposite direction. There's a great essay by an eminent political scientist from the 70s talking about how these concerns, these worries since the 1950s, that the two parties were just becoming too much alike. So people didn't actually have viable options. There was just one option, which was the dead center. And in a way, it's easy to see how something like the median voter theorem, which describes this force that drives parties to the average voter preference, how it could emerge in that world.
Since then, people have amended the median voter model to account for the fact that we can also have this splitting apart. I want to actually mainly just make one observation that comes from an economist who was a politician for some period of time and worked in politics, or maybe two observations, which is one of his great frustrations was that issues are not valuable unless in a polarised system. And this just drives further polarisation. You can think about this as all feeding on itself. An issue is only valuable politically if it's a wedge issue. So, for example, if everyone can agree that we need better science education in schools, then no party is going to take that up as their cause. Whereas more religion in schools, that's something for which it can be us versus them, a means of differentiation. It is also not a bad thing for the parties themselves. Think about a model of monopoly. You really love to have your captured market because then you can lead the quiet life of the monopolist. You can be lazy and stupid because they're going to vote for you anyway. So it's in the party's interest to do this. So we do see, tempted to say, absurd versions of this in U.S. politics recently, which is the Democratic Party funding to extreme Republicans to try to get extreme candidates to into the general election because that way they're sure to win. They don't have to try to get voters because the opposition is so far to the extreme that it makes it easier to win the election.
And so how we got here and how we will escape from it, I'm tempted to say either that's not my department. I'm really focused on good government issues as opposed to understanding polarisations, or it's above my pay grade, like this is, as far as I'm concerned, the great challenge facing U.S. society. But I also do see it as essential precisely because it's distracting us. It's getting us to focus on religion in school rather than science in school.
Tobi: Two questions before I let you go. One is, yeah, I know that you are Canadian also, But I was reading Joseph Wallace's paper a while back, talking about the distinction between venal and systematic corruption and using America as a case study.
Raymond Fisman: Sorry, I missed the first one. Something in systematic?
Tobi: Yeah, venal and systematic.
Raymond Fisman: That's what I thought you said.
Tobi: Yeah. So this isn't particularly a new territory for the U.S., as historians would say. So what can you say that America can learn from its history to deal with what is happening now?
Raymond Fisman: Yeah, I'm going to try to end on an optimistic note, which is that I think this is something that people were concerned about in 2016 as well, and it really never came to pass. And so I do think we just have to remain alert to these concerns. As an American or a Canadian I can still say whatever I want, I can still write whatever I want, I can still try to persuade whomever I want that my perspective has merit and there are many places in the world where I cannot do that. And so in a world or in a country where we still maintain these civil liberties, it still feels more possible to find our way back to a system of constructive exchange on what really matters.
I do think what concerns me, and this brings us back to the very beginning, is if we are moving towards what some have called competitive authoritarianism, what Sergei Guriev and Dan Treisman call spin dictatorships, I think of those as being not entirely different from one another we're potentially moving to a system where, again, like, I can say whatever I want to say but no one's listening. They're tuned into whatever Elon Musk or Donald Trump is saying. So we'll see, there's still a long way to go before America loses its democratic processes and institutions but it's entirely possible that we can stumble down that path.
Tobi: My final question, please feel free to answer as long as you want. A couple of weeks ago, you wrote an essay in the New York Times about the Department of Government efficiency that will be run by Elon Musk. And generally, the attitude amongst a lot of people that might not even be hyper-partisan has been one of optimism that, oh yeah, the government can use some efficiency. A lot of my friends, even here in Nigeria, mostly work in tech, are also optimistic that, oh yeah, this would be a model that is presumably exportable as a governance model for other parts of the world. What's your central critique, especially drawn from that piece? What is the flaw, central flaw, in the idea of running a government like a private business?
Raymond Fisman: To be clear, I'm all in favour of government efficiency. I don't want to equate that to, as you described, and as it's too often equated to, running government like a business. Because a business, its primary purpose is to maximise profits for some residual claimant on that profit, shareholders or the owners. Whereas a government has a much more complicated, job, which is, for example, catching terrorists, setting up schools, building roads that serve everyone, to benefit entire communities. And in general, the jobs that businesses do are relatively simple because there's generally a clearer mapping from action to desired outcome, which is higher profits. The jobs that governments take on tend to be a lot more complicated and harder to measure the outcome and give incentives for success.
And so if we decide, oh, we're going to run the U.S. government the way we run Tesla, which involves measurable outcomes for every action we might take, it's a standard problem in business as well, you end up distorting efforts to achieve something you can measure rather than something that you want. Part got cut out of that article was I wanted to mention Boeing, that this sort of thing happens in businesses as well. You're in the business of building really great planes, which is a complicated thing. Do involves lots of, again, relationships and long-term planning. And you bring in a CEO that's really just focused on shareholder profits. You stop focusing on the more complicated long-term agenda, and all you do is focus on this single, easy to measure, but not necessarily most important thing.
I'm not sure that I gave the best description of that. I guess I would refer your listeners to the New York Times article, where I had lots of time to sit down and spell out with care the argument here.
Tobi: Yeah, I'll put up a link to that article in the show notes. So final question, which is a bit of a tradition and maybe some upbeat ending to the overall gloomy tone of this podcast is what's the one idea that you are excited about at the moment that you would like to see spread everywhere? You like to see other people get excited to be your idea, maybe from someone else you admire or any other source.
Raymond Fisman: Oh, goodness me. I wish you had prepped me for that so I don't have to answer off the top of my head. So I'm going to end up giving an answer which isn't necessarily like this is the thing as opposed to this is the thing that I was thinking about this morning, which is that I do think people need to feel more empowered to influence organisations in the direction they want them to go in. And so what makes me think of this is, as reading this morning about shareholder democracy, if we all want ExxonMobil to behave differently as a company, if we all want Siemens to behave differently as a company, who gets to decide, if it's the owners, then I get a little voice. And just as I vote in every election, I really should take much more seriously my job as a steward of ExxonMobil and Siemens. And hopefully all of our little voices will add up to something bigger. And maybe that's the larger point, is we need to take more seriously our little voices and how they impact some larger societal outcome.
Tobi: Thank you so much, Raymond. It's been fantastic talking to you. Any other thing you would like to share that you'd like us to know that you've been thinking about lately?
Raymond Fisman: No, thank you very much. This last one relates to… I've been working on a book on whether business will save the world or destroy it. The answer obviously being neither. And yet there are people who believe very strongly in one of these two views. And so I'm excited to try to communicate to the world how these two different groups come to these very different conclusions and what we might do if our objective is to make business the greatest force for good.
And that's partly where my answer to what's your big, important idea, that's partly where that comes from.
Tobi: I mean, when your book is out, maybe I'll get you on for another episode.
Raymond Fisman: It would be a pleasure.
Tobi: I did enjoy the last one I read, which was the one with Tim Sullivan, The Org. I did enjoy that very much.
Raymond Fisman: Thank you very much.
Share this post