Goldman Sachs and Sex Trafficking: The Acute Discovery of a Chronic Condition

"Other people are doing it" doesn't cut it as a defense for facilitating child prostitution

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Jin Lee / Bloomberg / Getty Images

A trader works in the Goldman Sachs Group Inc. booth on the floor of the New York Stock Exchange in New York, December 30, 2011.

Goldman Sachs has hit rock bottom and started to dig. Just when you thought the investment banking firm couldn’t look any less appealing, we learned over the weekend, from a damning New York Times report by Nicholas Kristof, that it is a minority stakeholder of Village Voice Media’s Backpage, an online peddler of child prostitutes. Following on the heels of a protest outside the Village Voice Media offices, Goldman Sachs acted quickly to ditch its investment of 16 percent of the company.

“We had no influence over operations,” Andrea Raphael, Goldman spokeswoman, reassured the public about its relationship to Backpage. But as Mr. Kristoff suggested, hang on just a quick second. It turns out a Goldman director sat on the board of Backpage’s parent company for “many years” and yet there was not even a hint of protest that the company’s Backpage site had been linked to sexual trafficking in 22 states. Goldman executives apparently grew “uncomfortable” with their part ownership in Backpage as early as 2010 but never bothered to encourage the company to purge its escort ads or even pressure them to check age and consent until political pushback and public opprobrium grew deafening. Nor, to be fair, did any of the other minority stakeholders. But there’s a reason board members are called “directors.” They’re supposed to be involved in the running of their companies.

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It’s always entertaining to watch corporate America engaged in what doctors call the “acute discovery of a chronic condition.” The apologists are offering the usual schoolyard excuses: no fair, everyone else is doing it, etc. Hilariously, General Counsel for Village Voice Media, Elizabeth McDougall, claimed that shutting down Backpage would be ‘counterproductive,’ merely sending traffic, so to speak, to other, presumably less civic-minded sites. This is a claim people make a lot: if you take away one opportunity to do harm — tighten gun control measures, for example, or erect suicide prevention barriers on a bridge — people will just take their impulses elsewhere. But the research suggests otherwise.

(One of the most famous examples is the precipitous decline in suicides following the removal of carbon monoxide from the gas supply in Britain; suicide rates by other forms did not increase. We also know that countries with low rates of murder and suicide by handguns do not have compensatorially higher rates of murder and suicide by, for example, knives, ropes, or candlesticks.)

Ms. McDougall insisted that the “realities and complexity” of human sex trafficking don’t merit calls to shut down Backpage. She called such an effort “not only unsupported but irresponsible.”  Yet, according to testimony from Ernie Allen, President of the National Center for Missing and Exploited children, 2,695 cases of suspected trafficking were reported by Backpage to officials in 2011 alone.

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Well, thank heavens we have the stiff-spined executives at Village Voice Media to look out for underage victims of sexual trafficking. Only the worst kind of cynic would suggest they were just protecting their 70 percent market share, right?

The Goldman defenders would also have us believe all of this brouhaha is a distracting ‘edge’ case – a rare misstep that shouldn’t drive policy decisions. Unfortunately, this is no extreme anomaly but standard operating procedure in a reckless industry. The problem is that we insist on seeing the market as an impersonal, machine-like force, failing to recognize that it’s shaped by people who are subject to the same failings of impulsivity, sexism, and bad character as any other human enterprise. It’s also worth recalling that our famously ‘rational’ financial markets are in fact rooted in some pretty primitive human realities, one of which is the link between testosterone and financial risk taking. That’s right: men with higher levels of testosterone are more likely to take financial risks that, with hindsight, appear reckless or immoral.

We need to acknowledge human frailty in decision-making that affects public welfare so we aren’t caught by surprise, again and again, when egregious things happen. Some people are claiming that because unnamed others are doing bad things, Goldman and Village Voice should be let off the hook. But why should we tolerate this pathetic rush to the bottom?

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