The risks and rewards of corruption
The recent CBI raids and allegations of disproportionate assets of a prominent Haryana politician to a tune of Rs. 1500 crore have barely evoked any interest among political pundits and media. There is such cynicism prevailing about politicians, that most people tend to believe the worst about 'them'.
But we have to acknowledge that corruption is all-pervasive in our society. The much-talked about corruption perception index of Transparency International places India pretty low in terms of integrity in public office. A CMS-TI study in 2005 estimated that the monetary value of petty corruption in 10 sectors alone is of the order of Rs. 21,000 crores per annum. When you consider the collusive or 'grand' corruption and all the sectors of the economy, easily ten times this amount is collected in bribes annually. The 3 million trucks in road transport industry provide an illustration.
Typically, each truck pays about Rs. 200 per day as bribes at check posts, octroi centres, and other places. Thus, petty corruption in truck transport alone accounts for over Rs 20,000 crores per annum! Clearly, corruption amount of Rs 200,000 crore every year is a realistic estimate by any standard.
The disclosure of assets of candidates which came into effect in 2002 with Supreme Court intervention has created some unusual situations. Many politicians known to be wealthy, but corrupt disclose very little income or assets, whereas honest politicians with legitimate income disclose much more. The net result is, disclosure of assets has become somewhat ludicrous, and often distorted. There are still many honest politicians and public servants. It would be extremely debilitating to our democracy to paint all public servants - elected or appointed - by the same brush.
Huge, unaccounted and illegitimate election expenditure, mostly incurred by the candidates as an investment in politics as business, demands multiple returns to sustain it. Even a casual analysis shows the multiplier effect of illegitimate election expenditure on corruption: risk premium is high in politics; provisioning for the next election has to be substantially higher than the previous one; a high return on risky investment is the natural expectation; the many party 'cadres', who in mass-based parties are actually mercenaries, need to be rewarded with access to public money and opportunities to make a 'living' at cost of state or society; and the many intermediaries in the vast cycle of corruption demand their own pound of flesh, thus multiplying the corruption proceeds several fold. Direct theft of public money through treasury malpractices is both rare and easy to detect and punish. In a robust and open democracy, complex systems need to be evolved to sustain such a web of corruption. Transfers and postings of officials and even junior employees often has a price. At times some form of auctioning actually take place, and the positions go to the highest bidders. The bids can be one-time payment for a tenure, or monthly payment of a guaranteed amount.
The expensive private political advertisements in language papers and bill boards extolling the virtues of this municipal chairman or that MLA, not to speak of state party basses and chief ministers is an indication of the huge expenditure which goes into politics as investment in anticipation of multiple returns. Such large expenditure by political wannabes for self-aggrandizement or pleasing political godfathers significantly adds to the corruption load on the system.
This tragic vicious cycle of corruption is undermining competition, jeopardizing vital services, diminishing quality of lives, distorting public life, and impeding economic growth. Bhanoji Rao and Srinivas Kolluru estimate that our growth rate will increase by about 1.65% at current investment levels if our integrity reaches Singapore levels. Competition and choice in the economy have successfully curbed corruption; telephones is a good example. Transparency and technology have been effective in reducing supply. But technology succeeds only when processes are reengineered. Land records computerization in AP did not reduce corruption in land registration; but in Maharashtra there was greater success. Recently issuing driving license and renewal has become largely corruption-free, thanks to sensible process reengineering coupled with application of IT.
But there are core areas which cannot be taken out of state control. Already justice system is 'privatized' by armed gangs taking law into their hands, and providing rough and ready 'justice' for a price through brutal means. In fact, this state failure has vastly complicated our politics and inducted murderers into legislatures. Therefore, the standard libertarian mantra of 'privatization' does not address the problem adequately. It only tends to shift corruption from the economic areas of decision making to the core areas of state functioning. Therefore, while efforts should continue to curb the supply of bribes, we need to look hard at the demand side.
One simple solution is to make it much harder for corrupt public servants to enjoy the fruits of their perfidy. For instance, the Law Commission, in its 166th report (1999) recommended confiscation of properties of corrupt public servants. Jammu and Kashmir recently enacted such a legislation. Such a law effectively enforced along with strict curbs on benami transactions (as advocated by Law Commission in its 57th report in 1973) will reduce the rewards of corruption drastically, and increase the risks hugely. This is a relatively simple and easy measure which should find broad acceptance across the political spectrum.
A lot more needs to be done to transform the political culture and to change the electoral system in order to make it possible for honest men and women assume public office without illegitimate expenditure. But the first sensible step is to make the corrupt pay.
But we have to acknowledge that corruption is all-pervasive in our society. The much-talked about corruption perception index of Transparency International places India pretty low in terms of integrity in public office. A CMS-TI study in 2005 estimated that the monetary value of petty corruption in 10 sectors alone is of the order of Rs. 21,000 crores per annum. When you consider the collusive or 'grand' corruption and all the sectors of the economy, easily ten times this amount is collected in bribes annually. The 3 million trucks in road transport industry provide an illustration.
Typically, each truck pays about Rs. 200 per day as bribes at check posts, octroi centres, and other places. Thus, petty corruption in truck transport alone accounts for over Rs 20,000 crores per annum! Clearly, corruption amount of Rs 200,000 crore every year is a realistic estimate by any standard.
The disclosure of assets of candidates which came into effect in 2002 with Supreme Court intervention has created some unusual situations. Many politicians known to be wealthy, but corrupt disclose very little income or assets, whereas honest politicians with legitimate income disclose much more. The net result is, disclosure of assets has become somewhat ludicrous, and often distorted. There are still many honest politicians and public servants. It would be extremely debilitating to our democracy to paint all public servants - elected or appointed - by the same brush.
Huge, unaccounted and illegitimate election expenditure, mostly incurred by the candidates as an investment in politics as business, demands multiple returns to sustain it. Even a casual analysis shows the multiplier effect of illegitimate election expenditure on corruption: risk premium is high in politics; provisioning for the next election has to be substantially higher than the previous one; a high return on risky investment is the natural expectation; the many party 'cadres', who in mass-based parties are actually mercenaries, need to be rewarded with access to public money and opportunities to make a 'living' at cost of state or society; and the many intermediaries in the vast cycle of corruption demand their own pound of flesh, thus multiplying the corruption proceeds several fold. Direct theft of public money through treasury malpractices is both rare and easy to detect and punish. In a robust and open democracy, complex systems need to be evolved to sustain such a web of corruption. Transfers and postings of officials and even junior employees often has a price. At times some form of auctioning actually take place, and the positions go to the highest bidders. The bids can be one-time payment for a tenure, or monthly payment of a guaranteed amount.
The expensive private political advertisements in language papers and bill boards extolling the virtues of this municipal chairman or that MLA, not to speak of state party basses and chief ministers is an indication of the huge expenditure which goes into politics as investment in anticipation of multiple returns. Such large expenditure by political wannabes for self-aggrandizement or pleasing political godfathers significantly adds to the corruption load on the system.
This tragic vicious cycle of corruption is undermining competition, jeopardizing vital services, diminishing quality of lives, distorting public life, and impeding economic growth. Bhanoji Rao and Srinivas Kolluru estimate that our growth rate will increase by about 1.65% at current investment levels if our integrity reaches Singapore levels. Competition and choice in the economy have successfully curbed corruption; telephones is a good example. Transparency and technology have been effective in reducing supply. But technology succeeds only when processes are reengineered. Land records computerization in AP did not reduce corruption in land registration; but in Maharashtra there was greater success. Recently issuing driving license and renewal has become largely corruption-free, thanks to sensible process reengineering coupled with application of IT.
But there are core areas which cannot be taken out of state control. Already justice system is 'privatized' by armed gangs taking law into their hands, and providing rough and ready 'justice' for a price through brutal means. In fact, this state failure has vastly complicated our politics and inducted murderers into legislatures. Therefore, the standard libertarian mantra of 'privatization' does not address the problem adequately. It only tends to shift corruption from the economic areas of decision making to the core areas of state functioning. Therefore, while efforts should continue to curb the supply of bribes, we need to look hard at the demand side.
One simple solution is to make it much harder for corrupt public servants to enjoy the fruits of their perfidy. For instance, the Law Commission, in its 166th report (1999) recommended confiscation of properties of corrupt public servants. Jammu and Kashmir recently enacted such a legislation. Such a law effectively enforced along with strict curbs on benami transactions (as advocated by Law Commission in its 57th report in 1973) will reduce the rewards of corruption drastically, and increase the risks hugely. This is a relatively simple and easy measure which should find broad acceptance across the political spectrum.
A lot more needs to be done to transform the political culture and to change the electoral system in order to make it possible for honest men and women assume public office without illegitimate expenditure. But the first sensible step is to make the corrupt pay.
posted by JP at 11:10 PM
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