American Governance Is Not Corrupt Enough

Elon's conflicts on interests, and why Trump is moving us in the right direction

In June 2020, former Los Angeles City Councilman José Huizar was indicted on federal corruption charges. The case was related to the activities of Chinese billionaire Wei Huang, whose company had bribed Huizar to secure approval for a major downtown development project. Huizar would be sentenced to 13 years in prison, while Wei remains a fugitive in China. The company provided over $1 million in benefits to the councilman, including luxury trips, casino gambling chips, and a $600,000 collateral for settling a sexual harassment lawsuit.

These gifts were intended to facilitate the proposed redevelopment of the LA Grand Hotel into a 77-story mixed-use skyscraper at an estimated cost of approximately $1 billion. The project aimed to transform the existing 13-story hotel into a 1,108-foot tower, which would have been the tallest building in Los Angeles and the tallest structure west of the Mississippi River. The development was to include 242 condominiums, 599 hotel rooms, and 28,700 square feet of retail space along Figueroa Street.

Wei purchased the hotel back in 2010, and started bribing Huizar in 2013. Now, we’re sitting here in 2025, and the LA Grand Hotel continues to operate as a 13-story establishment, with no plans to move forward with any expansion.

The LA Grand Hotel

If there is one economic failure of modern American society, it is that we do not build nearly enough. Meanwhile, federal authorities imprisoned a Los Angeles councilman for trying to do a small part in alleviating this problem. At the same time, local officials never go to jail for doing too much to hinder development, as long as they are not directly profiting off their actions.

We ban bribery based on the theory that, when making decisions, we want government officials using their own judgement and listening to voters and organized constituencies rather than trying to financially benefit themselves. Often, this is a safe assumption. However, as with any crime, the optimal amount of corruption is not zero, and the costs of overzealous prosecutions and the red tape created in the name of good governance can be high. Moreover, when the political system is ideologically corrupted or captured by interest groups, financial corruption can actually be a good thing, as I believe it would have been in the case of the LA Grand Hotel. Wei had brought along some of the same practices he had previously used in China, and for all the faults that nation has, it is much better than California at building things. In China’s Gilded Age, Yuen Yuen Ang argues that part of the reason China approves so many projects is that local officials are allowed to directly profit off development. The potential financial benefits in the US to building more structures, particularly for housing, are so massive that there is good reason to think that developers being able to pay off local officials would be an improvement over the current system.

Funnily enough, in his sentencing memorandum, Huizar’s attorneys asked for leniency on the grounds that he actually opposed development in other cases.

Of course, Mr. Huizar represented more than downtown. His constituents in El Sereno and Boyle Heights had markedly different priorities, which Mr. Huizar duly protected. The residents of these neighborhoods rightfully feared gentrification and losing their homes. In contrast to his approach downtown, Mr. Huizar worked to ensure that his constituents in east Los Angeles were not victimized by predatory development that did not serve their interests.

Mr. Huizar’s approach to the Elephant Hill open space in El Sereno exemplifies how he was no mere shill for development for development’s sake. Elephant Hill, one of the largest remaining open spaces close to downtown, was a natural target for developers. A Newport Beach-based developer purchased the plot in 2003 and sought to construct a new subdivision, which the City Council had approved prior to Mr. Huizar’s election in 2005. But after he reached the council, Mr. Huizar became a fierce advocate against the development, even though the developer’s lobbyist had held multiple campaign fundraisers for Mr. Huizar. As part of the council, Mr. Huizar reversed the Board of Public Works’ approval of permits necessary to begin construction. Mr. Huizar continued his opposition to the development until orchestrating the city’s decision to purchase the property and use it as a park, thereby maintaining the space in perpetuity. As described by a community organization opposed to the development, Mr. Huizar provided “steadfast leadership as he champion[ed] residents’ public safety and environmental concerns related to this development.”

We are told that an area was “a natural target for developers,” and instead of taking that as a signal there is social need for more housing, it’s used as a reason to prevent anything from being built. The document also denounces “gentrification,” which is synonymous with making an area wealthier. The fact that keeping your area poor can be treated as a mitigating factor in a California court shows just how much the politics of the state have gone off track.

Our Politicians Aren’t Very Rich

I think that what this story demonstrates in a clear form is that American society can in some ways benefit from more classic corruption, that is, business interests paying for outcomes that they want. But before we have that conversation, it is useful to address some flawed assumptions about where our main problems come from and understand that our elite are not really that corrupt according to the traditional definition of the term.

There is a widespread belief among populist inclined observers that politicians are unjustly benefiting at the expense of the public. Elon Musk, for instance, has been tweeting out numbers, often made up, demonstrating how supposedly wealthy various Democratic figures are. Rightoids on Twitter have recently been asking how Elizabeth Warren can be worth $12 million, which isn’t that much when you consider she’s 75-years-old and has been working all her life, has a husband who makes six-figures, and bought a house in Boston a long time ago.

As of 2020, the median net worth among members of Congress was just over $1 million. That year, the average member was around 60 years old. Being a millionaire at that age is not that impressive of an accomplishment in America, as 8% of adults are in that club. Although I can’t find exact numbers regarding what percentage of 60-year-olds are millionaires, I would estimate that it must be around 20-30%. So if members of Congress are only perhaps twice as likely to be millionaires as Americans of the same age, that isn’t shocking at all. If you narrow things down to Americans of the same age and education, it’s possible that the median member of Congress isn’t significantly wealthier than the broader population when controlling for relevant characteristics. A median net worth of $1 million for a group of 60-year-old Americans who nearly all graduated college simply isn’t that much.

One specific accusation populists often make is that politicians are benefiting from insider trading. The media runs with stories about individual members who beat the stock market. However, the most rigorous study I know of shows that between 2004 and 2008, the average member of Congress did worse than they would have with a passive investment fund. One analysis that has made the rounds online informs us that a third of members who reported a financial disclosure beat the S&P 500 in 2023, which means two-thirds did not.

It must be noted that it’s debatable how bad insider trading actually is. As many economists argue, the practice accelerates the incorporation of valuable information into stock prices. Prices adjust more quickly to reflect the real value of a company, making markets more efficient. Moreover, insider trading doesn’t cause a direct harm in the way that theft or fraud does. If an insider buys shares before news is public, the seller gets the market price at the time, which they were willing to accept. Unlike fraud, the practice doesn’t create false information; it just reveals information faster.

Despite all this, a large majority of Americans support a ban on members of Congress trading individual stocks. If you believe there is a brain drain out of the legislative branch, passing such a law would add to the problem. The base salary for a member of the House of Representatives is $174,000, and they are in effect required to maintain two homes, one in DC and another in their district. Already, our legislators do not make all that much money and could become a lot wealthier doing something else. If low pay means that the quality of members of Congress is lacking, then perhaps the last thing we want to do is foreclose opportunities for making passive income while individuals are serving.

Regardless of what one thinks about these arguments, there isn’t much evidence that a lot of insider trading is going on anyway. You’d expect about a third to half of members to beat the S&P 500 just by chance, and the world looks like it would if practically no insider trading were going on. If some of it is happening, this does not rise to the level of a problem any reasonable person should worry about.

Another line of evidence showing American governance is not corrupt comes from looking at how small the sums of money are in famous bribery cases that get prosecuted. In 2014, former Virginia Governor Bob McDonnell was convicted on federal corruption charges for accepting over $175,000 in loans and luxury goods from a businessman seeking government favors. When New York City Mayor Eric Adams was indicted on federal charges of bribery, fraud, and soliciting foreign campaign donations, prosecutors alleged that he accepted over $100,000 in bribes from Turkish nationals in exchange for using his position to expedite the opening of a consular building without proper inspections. The costs of investigating and litigating these matters are surely higher than the bribes themselves. If prosecutors are going after politicians for corruption cases involving a few hundreds of thousands of dollars, it indicates that they probably don’t have all that much to do.

Of course, one could say that the point of prosecuting shoplifting isn’t simply to punish any one individual, but to create a deterrent effect. It wouldn’t do to say that it’s not worth going after a thief if the costs of arresting and locking him up are higher than the value of the merchandise he stole, because if you did not punish such crimes at all, they would be a much bigger problem. But, as we’ve seen, corruption is not necessarily a bad thing. For all we know, the Turks were right about their consular building. A politician being paid a million dollars to let a project go ahead that costs a billion dollars, as in the case of the LA Grand hotel, is almost sure to be a good deal for society, and prosecuting such activity is probably a net social loss.

Elon Musk’s Righteous Crusade Against the Regulatory State

Recently, the New York Times ran a report about Elon Musk’s conflicts of interest involving his work with DOGE and influence throughout the Trump administration. It points out that there are currently more than 32 investigations or cases across 11 agencies involving Musk companies. The reader is of course supposed to be shocked by this, and see the conflicts of interest involved as inherently bad.

Yet on the merits alone, I find myself rooting for Musk in each case that the article discusses. Some of the investigations and lawsuits involve civil rights or labor laws. Yet unions are essentially cartels formed by groups of workers to harm the rights of other workers, businesses, and the broader public. Civil rights law has gone beyond trying to ensure people are treated fairly, and focuses on social engineering and mandating reverse discrimination. See here for a previous discussion about the details of a racial discrimination lawsuit filed against Tesla that led to a judgement of tens of millions of dollars.

In addition to disputes over unions and civil rights, the NYT article mentions government activities such as making sure that SpaceX launches do not disturb bird habitats. A Wall Street Journal op-ed from last year discusses the kinds of things the company has been forced to put up with in recent years.

Tensions between SpaceX and its federal regulators have spilled into public view. The Federal Aviation Administration is seeking $633,009 in civil fines, alleging that the company neglected necessary paperwork for two 2023 launches. SpaceX has refuted those claims in a letter to Congress, arguing that the FAA is engaged in an arbitrary and politicized prosecution from an agency unable to keep up with the demands of commercial spaceflight. CEO Elon Musk has vowed to sue the FAA for “regulatory overreach.”

The issue underscores a larger problem: The FAA’s issuing a launch license to SpaceX constitutes a “major federal action” under the National Environmental Policy Act, requiring a full environmental review and often subsequent mitigation measures. For SpaceX programs alone, this has included monitoring the discomfort of the seal population outside what is now Vandenberg Space Force Base, funding “educational outreach” about a surrounding area’s “cultural heritage,” and ensuring that the company’s operations don’t disturb the wintering grounds of the piping plover.

We can set aside claims of political persecution on behalf of the Biden administration and assume that the government has been doing its job properly. This is still a ridiculous way to regulate a company trying to send rockets into space. I’m unsure how you even trade off the value of a bird habitat versus the value of letting SpaceX go ahead with its launches. But if humanity is going to move forward, some wildlife is going to need to be left behind. We’re not yet in any danger of running out of birds. If you’re worried about the well-being of animals, the problem I would start with is factory farms, not rocket launches.

Often, modern environmental law doesn’t even try to engage in these tradeoffs. It simply keeps delaying and raising costs for the sake of more studies, research, and mitigation measures. The National Environmental Policy Act, for example, is silent about how you should balance economic growth and environmental concerns; it only requires that you keep studying and talking about the topic, regardless of what kind of decision is ultimately reached on a project. You end up with a perverse system in which environmental groups file lawsuits demanding more studies despite them having no interest in what those studies actually find, as the entire point is to delay projects and make them prohibitively expensive.

All of these regulations across different areas of law pile up, leading to never ending streams of lawsuits and investigations that cost a company time and money. One doesn’t need to make the assumption of political persecution under the Biden administration, as even without it we can see that the laws as written and interpreted are clearly ridiculous enough and too tilted towards safetyism and harm prevention over allowing the private sector to undertake and finish important projects. Of course, it would be naive to actually assume that there are no biases in which firms federal bureaucrats decide to go after. This is yet another reason to think carefully about which regulatory powers to hand over to the government.

Looking over Musk’s conflicts with the administrative state, it is difficult to find cases where he is clearly in the wrong. Now with Trump in office, he has much less to fear from the federal government, and this is a good thing. By placing officials into positions of power who are less favorably inclined towards regulations, he benefits businessmen who are similarly situated. The NYT is correct to point out that Musk’s conflicts of interest are much more extreme than what we’ve seen in any previous administration. They’re wrong, however, to think that they are necessarily worth worrying about. Trump has crippled both the EEOC and NLRB, to the benefit of the economy as a whole.

Do government regulations in the aggregate do more harm than good? Does a blind approach of just slashing regulations right and left lead to good outcomes in the end? It’s hard to answer these questions with certainty since no person can be familiar with any more than a fraction of what the government does. What I am confident, in saying, however, is that Musk appears to be in the right in every conflict that the New York Times finds fit to mention, and if there were other examples that made him look bad, the authors would have surfaced them in an article like this. This is unsurprising, as there are wide swaths of federal law, namely civil rights in the context of employment decisions and the recognition of unions as worker cartels, that simply should not exist. Environmental goals can in theory be more justifiable, but when you’re harassing a $350 billion company – which is single-handedly responsible for operating the majority of active satellites circling the earth – over the comfort of seals, you’ve lost the plot. It’s not like we’re even talking about clearing a forest here or taking some habitat necessary for a species’ survival. We’re dealing with theoretical sound disturbances.

Giving Elon Musk control over the federal government isn’t the only case of the Trump administration being softer on corruption than its predecessor. The president recently signed an executive order temporarily halting the enforcement of the Foreign Corrupt Practices Act (FCPA) for 180 days. This law, enacted in 1977, prohibits American individuals and entities from bribing foreign officials to gain or retain business. The executive order directs Attorney General Pam Bondi to cease initiating new FCPA investigations during this period and to review existing cases to ensure enforcement aligns with American economic interests and national security. The administration argues that current FCPA enforcement hampers US companies' competitiveness abroad, as they are restricted from engaging in practices that may be common among international competitors.

One may wonder what good it does to try to stop American businesses from making deals abroad using the same methods as others. If foreign countries are corrupt, what concern is that to the American federal government? What counts as corruption is something that often gets litigated even within the United States. In the case of former McDonnell, the Supreme Court ended up unanimously ruling that the federal government’s broad interpretation of bribery laws was unconstitutional, as it did not require a clear quid-pro-quo. It’s strange to think that our government is well equipped go around the world declaring itself the arbiter of what counts as corruption in Kazakhstan and Gambia, or that this is the best use of its limited resources. As with the case of Elon Musk’s companies, here’s another situation where we can use more corruption, or at least a softening of anti-corruption zeal.

Corruption isn’t only a good thing when it lets local developments go forward. We can use more of it in foreign policy. Liberals love to mock Trump and Jared Kushner for talking about building expensive beachfront property in Gaza. I don’t know how anyone can believe that the Palestinians wouldn’t be better off by thinking in terms of raising property values than religious goals or national aspirations. Palestinians have a very dumb and inferior value system, and although the West is powerful enough to force more rational behavior onto them, it doesn’t due to left-wing opposition. In a society where religious fundamentalism and violent nationalism are powerful forces, there is a clear case for aligning with those whose goal is to increase property values as providing the best way forward. We can see how much Palestinians have benefited from the international community supporting their non-material goals all these decades.

Good Versus Bad Corruption

Of course, just as it would be absurd to seek to eliminate all forms of corruption everywhere, we would be foolish to deny that it can ever be a problem. Certain societies definitely have too much of it, as does ours in certain contexts. Therefore, we need a framework in which we can differentiate good versus bad corruption.

This is no easy task, and there are pitfalls in both directions. All one can do is try to find some general principles to apply. I think that one fundamental division we can make is between places where government has control over business, and those where business can manipulate government. The former kind of corruption is a lot more dangerous, and in fact often leads to the second kind. This can be seen in an 1843 Magazine article that provides important insights into the way things work in Russia. It centers around the story of the firm Wildberries, which was founded by the married couple Vladislav and Tatyana Bakalchuk and has often been seen as the Russian equivalent to Amazon.

As its success grew, the business inevitably attracted the attention of the Russian state, which sought to exert influence over the booming enterprise. To avoid prosecution, Tatyana secured the backing of a Dagestani politician, a move that led to a forced merger with a well-connected firm that ultimately took control of Wildberries’ assets. Her husband Vladislav, opposed to the takeover, sought protection elsewhere — publicly turning to Ramzan Kadyrov. His plea for support was made public through a Telegram video featuring the Chechen strongman himself.

Tensions escalated into outright violence when rival factions loyal to the husband and wife respectively clashed outside Wildberries’ Moscow headquarters. The confrontation ended in gunfire, leaving two dead. What started as a thriving partnership in business and marriage unraveled under the pressures of state intervention. In Russia’s business world, success isn’t just about market performance — it requires connected government officials to protect the enterprise.

The reason that government initiated corruption is worse than the opposite is that there is practically always a major power disparity between the state and the private sector. If the CEO of Amazon doesn’t like you, maybe he can stop delivering packages to your house, even though this practically never happens (yes yes I know about this one isolated incident that was soon corrected). If you choose to work for Bezos and he doesn’t treat you well, you are free to stop and take literally any other job in the world. Meanwhile a midlevel bureaucrat at the IRS can launch an investigation into your company or personal finances, threatening you with bankruptcy or jail if you don’t comply, without any proof of wrongdoing. Even if you are ultimately cleared, there is no limit to how much of your time the government can claim, and you will be on the hook for legal fees.

Think of the power disparity between Wei Huang and the LA City Council in the case discussed above. The Chinese billionaire was seeking permission to enter into voluntary contracts with other people. He couldn’t force any construction worker to build his skyscraper, anyone to buy his condos, any business to rent office space, anyone to shop at any of their stores, or any guest to stay in his hotel rooms. Meanwhile, the LA City Council had the right to veto, delay, or make more costly every one of these transactions. Its members had the right to kill the entire project if, say, they did not like how the firm treated its workers, even though any worker who took a job on the construction site would have been there voluntarily and not have had his rights violated in any conceivable way due to having one more employment option. Government is a necessary evil, and perhaps it could not be otherwise, but if our laws and institutions are this flawed, it makes sense to look for workarounds. We should feel fortunate enough that we live in America where you can buy off a councilman for $1 million, unlike in Russia where government officials would’ve just taken control over the entire project and probably screwed it up anyway. But if we want to be even cleaner than that and reduce the amount of bribery in governance to zero, we’ve gone too far and fewer important projects will be able to go forward.

We can contrast Trump to Elon Musk, with the president generally being a representative of the bad kind of corruption. While Musk wants to do things like manufacture electric vehicles and invent workable brain implants, Trump at this point of his life makes money mostly from scamming his followers. Musk is upset at the administrative state for standing in the way of his legitimate goals, while Trump doesn’t like the fact that he was prosecuted for trying to stage a coup, stealing classified documents, and obstructing justice when authorities tried to get them back. Elon Musk’s corrupt practices are good for society, while Trump’s generally are not, and we should probably accept more of the former only. Texas Attorney General Ken Paxton is one case where prosecution is called for, as there are no redeeming features in how he has been abusing his power. That said, Paxton’s activities, all of the money Trump has made scamming his followers, and even the 2020 coup attempt have not been nearly as damaging to society as the worst anti-growth policies, which can be mitigated by the Musk or Wei Huang brand of corruption.

When business tries to influence government, it is sometimes engaging in self-defense against misguided regulations or looking to placate corrupt politicians. This is clearly the case when it comes to Elon Musk, and many who are in a similar situation. Not everything business wants to do is virtuous, of course. If a firm seeks to use government to shut down its competitors, this should not be encouraged, and even here once again it is government having this power in the first place that is the problem. When it comes to prosecutorial discretion, an inevitable part of our system, and perhaps judicial interpretation, whether any illegal corruption is pro-social or not should always be a consideration.

In addition to differentiating between which way influence flows, we should also identify areas where government has clearly failed to look out for the public good, and instead has created a legal structure that serves the ideological goals and parochial interests of individuals who are fundamentally wrong on the issues. Union bosses and activist attorneys make money off current regulations as rent seekers, and although their activities aren’t thought of as corrupt in the way the term is traditionally used, the damage they do is immense. In the areas of civil rights and labor relations, the state should not be involved, and we should for the most part want corporations and the rich to influence policy any way they can. The government more plausibly has some role to play when it comes to zoning and protecting the environment, but it has gone way too far, and a general orientation towards more liberty in these areas is also the correct approach. The balance may have been different at say the beginning of the Industrial Revolution, when there were practically no environmental laws to speak of and the air in major cities was clouded by smog, but we’ve clearly overcorrected, and need to find a way to return to a more proper balance, if not in the law than in how government works at a practical level.

All of This Is Very Emotionally Unsatisfying

Ideally, I would like a non-corrupt government that understood the benefits of liberty and free markets and took cost-benefit analysis seriously. It would reject overly burdensome regulations on principle, and act on that basis.

Unfortunately, that is not the world we live in. Forces hostile to progress have captured the state and its institutions and do too much to prevent socially beneficial activity. This isn’t the result of any kind of conspiracy, as in many cases, our problems trace to laws that have had widespread popular support. Often, those laws have resulted in unintended consequences that have been taken advantage of by ideologues and those who have found opportunities to profit off them, a problem that no single person or institution is well positioned to fix.

Intellectuals like to imagine a world where people do the right things for the right reasons. I am no exception. I want to put my ideas out into the world, then see influential people be convinced by them and act accordingly. More often, the realities of politics are much uglier. A government official wants to take a certain negative course of action, but is then hindered by a coalition of individuals and groups that each have their own reasons for their position. When Democratic-run jurisdictions overreached on lockdowns and masking in response to covid, the backlash came from both those who understand cost-benefit analysis and conspiracy theorists who believed that the disease was released as part of the Great Reset. Both were necessary for rolling back restrictions.

Free market policies are similarly the result of an alliance between intellectuals and rich guys who are just trying to protect their own interests. Libertarians are a small minority among educated elites, and until they win in the marketplace of ideas, they’re going to need self-interested politicians and businessmen on their side to effect change. This doesn’t mean that intellectuals, or influencers more broadly, can do little more than hitch their wagon to the agenda of self-interested businessmen. They provide the language and moral framework through which those closer to the centers of power act. The intellectual environment ensures that some forms of influence peddling are blessed, while others are looked down upon.

Believers in liberty should not give up on the marketplace of ideas. But for now and at least into the foreseeable future, corruption in many cases remains the handmaiden to liberty. The Trump/Musk co-presidency is rule according to the whims of two extremely ambitious and power hungry men, one of them a genius with generally pro-social goals and correct in his disputes with the regulatory state, even if the motivations of bureaucrats are well intentioned and far from corrupt.

Outside of traditional ideological conflicts, law enforcement should think more carefully about how to use its prosecutorial discretion in corruption cases. Zoning is one area where current governance should be seen as having been corrupted by ideology and parochial interests. We should be pushing for legal changes. In the mean time, recognizing the issue of restrictions on building for the crisis that it is should encourage law enforcement and prosecutors to focus their attention on things other than developers using whatever tools they have at their disposal to try to move projects forward.