The Volkswagen diesel scandal is revealing several layers of corruption. It turns out lots of people within Volkswagen and outside the company knew about the company's cheating and law-breaking, including folk at the highest regions of the European Union. For several years there was a conspiracy of silence not just within the company, but also among its competitors, European regulators, and even parts of the media. That car journalism comes out looking poorly should not surprise: it tends, like sport-journalism, to be more akin to cheer-leading than genuine reporting.
Already in 2011, the EU knew that Volkswagen was using some kind of defeat device. It proved itself incapable of acting on this information (see also here). Not to put too fine point on it: but this kind of behavior undermines the whole point of having a class of richly paid Eurocrats partially removed from democratic control; they are supposed to have an esprit de corps that makes them function in the public's interest without being vulnerable to corruption. By 'corruption' I do not mean bribery (although one wonders what will be learned about revolving doors, etc.); rather I mean a quiet willingness to sacrifice the public interest in the name of powerful economic interests.
While there is not much philosophical significance about business cheating, this is an especially interesting case because of two reasons: first, the ownership structure of Volkswagen is, in many ways, an exemplary instance of the so-called Rhineland model of capitalism in which companies are run in the service of stakeholders and in which long-term shareholders (including the government of Lower Saxony, long-term institutional share-holders, and family voting blocks) are supposed to protect management from short-term, corrupting, demands of stock markets. The Rhineland model is, in part, a managed conflict model in which various stakeholders routinely find themselves and can expect to find themselves in zones (or boardrooms) bargaining and cooperating on a host of issues. They are, thereby, encouraged to generate trusting relationships because, to use game theoretic language, one-time defection ruins one's chances for cooperation down the road. Putting it like this, while undeniably misleading in lots of ways, also calls attention to the structural weakness of the Rhineland model: all those not participating in the repeated rounds of bargaining are most easily sacrificed. These polluting diesel engines have non-trivial consequences on drivers' and non-drivers' health and safety.
Second, while one should always be skeptical about sentences that include 'ethics' and 'capitalism' in the same sentence (and I like markets!), it reminds us that systemic deceit can thrive even in large bureaucratic organizations that face ongoing scrutiny (of consumers, regulators, competitors, etc). In many ways that is very unsettling. When one is confronted by, say, the Maddoff scandal one is kind of reassured that it involved a small group acting in great deal of secrecy and demanding secrecy from others (as my friend Erin Arvedlund first reported). But systemic deceit tells us that there is lots of active and tacit complicity to go around among folk that were neither at the (let's stipulate) exploited bottom of the economic food-chain, nor only at the ultra-greedy top. It's no surprise that Germany's whistleblower laws are among the worst.
I call it 'yuppie corruption,' because Volkswagen was selling something too good to be true to folk receptive to its promise: a reasonably affordable --- that is, affordable to folk with advanced degrees servicing the 1% --, sporty car that is environmentally kosher. Undoubtedly class action law suits will establish that these consumers really, really had no way of knowing that they were being duped; I won't shed tears for Volkswagen as it gets bled dry by lawyers and regulators (even though undoubtedly it will hurt innocent suppliers and workers), but even so if it is too good to be true, it really is too good to be true unless, of course, you don't want to know (or, perhaps I should say 'pay for'?) the truth.
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