Beware the Rise of Scamerica

– May 19, 2021 Reading Time: 5 minutes

Scams, frauds, flim flams, and grifts are nothing new to America. In fact, confidence games were old hat when Clifton Wooldridge published his 1906 classic, The Grafters of America: Who They Are and How They Work, which describes common cons in fin de siecle Chicago. The recent death of notorious investment scamster Bernie Madoff should remind Americans that if it sounds too good to be true, it probably is.

As America descends into policy disarray, the scamming of others is increasing. Wire fraud is rampant, as is the impersonation of government workers, apparently because Americans now expect government officials to accost them for quick cash at least occasionally. I focus here on a much more insidious type of scam that also seems to be on the rise, something that I will politely refer to as “substandard work,” but that in informal adult conversation usually goes by a fecal four-letter word followed by “job.”

Much of the substandard work being conducted across the country right now ultimately is the government’s fault, specifically a set of policies seemingly deliberately designed to induce Americans not to work: extra unemployment pay; major school systems remaining virtual until fall; bizarre summer camp masking requirements. The first entices lower income people to stay out of the labor market and the latter two make parents think twice, or thrice, about returning to work.

As a result, many usually reliable businesses cannot find any workers, much less good ones. Robin Jones, a regional manager for a major fast food chain in the Upper Midwest, recently told me that April and May of this year have been the tightest labor market he can remember in his 43-year restaurant career, which includes stints in Arkansas, Missouri, Montana, South Dakota, Tennessee, Texas, and Wyoming. His back is giving out because his desk job has turned into a role as a stopgap line worker in the cheap taco wars. While he does what he can, he is only one man. The extreme dearth of workers means much longer wait times than usual and substandard service overall.

A restaurant in a resort town in New Jersey recently purchased a robot called Peanut to deliver food to customers. It reportedly “can open kitchen doors, deliver orders to tables, and bus the dishes when everyone is done eating.” It works until it breaks down and doesn’t demand tips.

The labor shortage is hardly restricted to food services. The pool business pictured below, for example, had a good reputation until recently, when it charged a friend of mine $260 to remove the cover from her pool. Just a regular cover. U.S. dollars, not Zimbabwean ones. Inflation is relatively high, but it ain’t that high! If the company had added some suddenly hyper-expensive chlorine to the pool, maybe it would have been okay but it appears the workers were inexperienced newbs flummoxed by simple problems. They removed and stored the cover successfully (bravo!) but couldn’t figure out how to get the pump pumping, got frustrated, and left. But they didn’t want to tell their new boss about their pathetic failure so they charged for the full spring opening service even though they didn’t provide it. Not so smart.

All manner of employee malingering and moral hazard appear to be on the rise because every low wage worker knows that they can get fired one morning but hired elsewhere that same day, usually at higher pay. Although full official statistics are available only through 2019, it appears that sexual harassment and other types of employment-related complaints have increased of late. Some of the increase is due to stricter laws and enforcement and more awareness of workplace harassment issues but some may be due to employees hoping for a quick, lucrative settlement, confident that they will be able to find work elsewhere even if their claims are found meritless after investigation. Even remote workers are pressing harassment claims. Unwarranted harassment complaints are simply a more sophisticated type of pilfering than taking home office supplies or using Zoom rooms for personal use, which is also likely on the rise.

Unlike the hapless pool company described above, some companies deliberately overbill lots of their customers less flagrantly, in the hopes that many won’t notice or care enough to complain. When some inevitably ask for refunds, such companies stall repayment or simply credit customers on the next bill and thereby finagle free loans. Investment bank Morgan Stanley got spanked for overbilling in 2017 but if inflation increases nominal interest rates will rise along with it, or if lending tightens due to various new banking regulations now in the works, more companies may give in to the temptation of cheap short-term financing by overbilling.

Yet other companies with even deeper problems push boundaries between sharp business practices and outright fraud. They need to book business today or go under tomorrow and hence are unconcerned about bad reviews or negative publicity in the short run.

One such company that I personally recently fell victim to is a long distance moving and storage broker based in America. A portion of my possessions eventually made the long trip from South Dakota to the east coast but pickup was two weeks late, which cost me dearly, and dropoff was delayed several times as well, which inconvenienced my poor, hard working spouse. Maybe some bad luck was actually involved but over the month it took to complete the job, the moving broker told me more half-truths than Fauci has about Covid. An industry insider revealed to me its original sin: when they get a mark, I mean customer, on the phone, they pretend like they have scheduled a pickup when in fact they have simply estimated when they expect to be able to sell the contract to a long-haul shipper, who then gets blamed for the inevitable delays.

Large, unexpected increases in the prices of inputs, from gasoline to timber, means that many construction contractors are also getting hit hard. They want to pass along the added costs, so owners need to watch out for “change order artistry,” sundry excuses contractors use to increase the contract price. When owners push back hard on change orders the contractor might not show up at all, or do substandard work/use substandard materials, so often it is better to negotiate a new price or not contract in the first place until some stability returns.

The recent ransomware attack on Colonial Pipeline is more malicious than substandard work but the purported perpetrator, a shadowy group called DarkSide, claims to be a business that gives its “customers” incentives to improve their cybersecurity protocols. While the precise vector of the ransomware infection remains unknown or under wraps, Covid restrictions and/or the tight labor market is likely the root cause of the colossal cluster. As AIER’s Peter C. Earle pointed out last year, lockdowns make countries more vulnerable to attack and, as freezing Texans learned this past winter, more vulnerable to natural shocks as well.

Natural immunity and vaccines have scotched Covid, at least in the U.S. If only Americans would develop immunities against overreaching government! Right now, Uncle Sam is more likely to stab you in the back than to have your back. Scamerica will grift ever more fraudulently until government sheds its paternalistic mask and once again lets children be children, employers employ, innovators innovate, teachers teach, and workers work.

Robert E. Wright is the (co)author or (co)editor of over two dozen major books, book series, and edited collections, including AIER’s The Best of Thomas Paine (2021) and Financial Exclusion (2019). He has also (co)authored numerous articles for important journals, including the American Economic Review, Business History Review, Independent Review, Journal of Private Enterprise, Review of Finance, and Southern Economic Review. Robert has taught business, economics, and policy courses at Augustana University, NYU’s Stern School of Business, Temple University, the University of Virginia, and elsewhere since taking his Ph.D. in History from SUNY Buffalo in 1997. Robert E. Wright was formerly a Senior Research Faculty at the American Institute for Economic Research.