The Secretary of FTI, Arvind Ilamaran, recently wrote the following article in Freedom First.
Corruption – the most successful service industry in India
Those facilitators who form the crux of the State are the primary players in this ever continuing conundrum. But is it right to say that the fire of corruption is kept alight fuelled by the greed of the powerful alone? We have always seen corruption to be a negative phenomenon with respect to a common man, but is it so? When a whole nation is professedly against the notion of corruption how does it manage to flourish? It is a natural law that, for something to continuously survive, its preconditions need to exist.
What Makes Corruption Survive?
So, what are the preconditions of corruption? A benefactor, a beneficiary and a benefit. Benefit or the bribe can be of monetary or non-monetary form. Conventional wisdom says that the benefactors are the public and the beneficiaries are bureaucrats, politicians and other State agents (police, judiciary etc.). People could have stopped this malice at any point of time by simply not being the benefactors for, only in very few cases is money made to be forcibly paid under physical threat. In other words if you see the act of bribery as an act of voluntary economic transaction, we realize that bribe is one of the goods being exchanged for a certain service offered by the beneficiaries. From this perspective the beneficiaries are the State agents who offer a speedy and efficient public service, which they should have otherwise provided without the need of any bribe.
The administrative machine of our State is so complex that getting quick service is actually a privilege. And this privilege comes at a certain cost in the form of bribe. One cannot deny that if bribery were to be totally abolished and if every State agent acted according to the word of the law, people would not get quick service keeping in mind the plethora of procedures, regulations etc. imposed by the State on the people. The disharmony between economic, social and political development in the nation is the primary reason for this scenario. A common man today cannot stand in line for weeks and run from one office to another to get signatures from tens of people to get his job done. The world is moving very fast and the Indian economy has become fast enough to compete at a global level. But the lack of innovation and improvement in administrative service is costing us dearly and forms the foundations of corruption.
Corruption – An Issue of Demand and Supply
The reason why corruption will not disappear by enacting Lokpal or to be more abstract, by checking the actions of State agents is because in economic terms, this is nothing but supply regulation. That is, there is a demand in the social market for goods and efficient governance. This demand is catered to by officials who know the loopholes of the laws and regulations for which bribe is the fee. In actuality, this extra service being offered by the officials or politicians is beyond their job description for if they acted as required by rules, such a speedy response to public demand would be impossible. By regulating officers, we are regulating supply while the demand in the form of a need of good governance always exists. What we do not realize is that the economy always finds a way to supply a demand. If one mode of supply is depleted another is devised. The same will happen to corruption in India as well. By regulating officials, we are providing more incentives for other interest groups and interest-vested individuals to take advantage of loopholes in the laws of the land.
Need for Quality Governance
Quality governance is the demand. Public needs it, officials provide it and bribe is the price. This tenet when not understood leads to the misconceived perception that those who take the bribe stand more to gain from those who give the bribe. But even if punishment is enforced on those who give bribe, we are again meddling with the consumer base without effectively doing anything to diminish the nature of demand. The reason why I previously spoke of disparity between economic, social and political growth is that the Indian public has been a very active participant in the economic growth of the country thereby influencing the supply-demand mechanism and institutions which cater to these mechanisms to suit the needs of society.
Take for example any industry where people are active participants such as telecommunication, banking, e-shopping etc, the direct interaction between buyers and consumers results in change of price structure, commodity availability and catering to changing demands in an ever innovative way profiting both parties. But in the case of governance, we have two issues, firstly the role of government itself and secondly the archaic administrative apparatus of the nation. I shall not dwell on the former for it is an argument for ‘limited government’ and needs an elaborate discourse but as for the latter, in our nation, government sets the platform for all functions, be it primary, secondary or auxiliary. The political development in India is greatly stunted due to lack of active participation by civil society primarily during elections and almost nil thereafter. What this implies is that the changing demands of the people go unattended due to a lack of voice to ask for it. Voting is a quasi-active participation due to its ephemeral nature.
During elections, we exchange vote for promise of good governance. Note that vote is exchanged for merely a promise of good governance and not good governance itself. Whether someone after getting elected to power is able to keep the promise is one issue but what happens when s/he does not? In that case another party claims to provide the same service, but the bottom line is that voting doesn’t ensure good governance. Why? Anyone you elect in today’s scenario doesn’t have public service as their agenda and quality governance is not their vision. They also know that with the limited alternatives we have politically, even if they get defeated, next time they will get power the time after that. This becomes a strategic Schelling Point* among the political players and finally people end up losers. The only way to ensure good governance is by active participation by those creating the demand for it – the people.
People’s Participation – the Only Solution
By avoiding active participation in politics, we forego the only mechanism (political power) we have to bring about an institutional change required for good governance. By foregoing that, we try to satisfy the need for good governance by buying it from those who sell it (bureaucrats and politicians) at a certain price (bribe) depending upon the market value of that service. In essence, we have created the largest service sector in Indian market – only it lacks legitimacy. That’s why Gurucharan Das made the famous claim that the only way to defeat corruption is by legitimizing bribery! [Sanjeev: I entirely disagree with this claim]
For the above reasons, Lokpal is a waste of time and energy and the only way to defeat this national disease is by active participation in politics. If you want the change, demand it, fight for it and may be you shall get it. I joined Freedom Team of India to make my voice heard, to fight for the quality governance I deserve. Depending upon your conviction join any political group or start your own but just remember that battles are not won by standing at the sidelines.
* [Schelling point is “that which gives a group of like-minded individuals their common purpose.”]
There are many reasons why the Jan Lokpal bill has to be questioned. Some are related to its design (see the summary of submissions made to the Parliamentary panel on this topic). But there are many others.
Sharad Bailur points out a number of other relevant issues on his FB note (I agree broadly with the extracts below from his note, with a few qualifiers that I've provided within parentheses).
The Lokpal/Janlokpal, as a solution is, at best, bound to fail, and, at worst, can cause a complete general paralysis of governance as a cost of the new rectitude imposed from above.Here is why: Put yourself in the shoes of a government servant. You have been (reluctantly or inefficiently) doing the work assigned to you lubricated by bribes up to now. Tomorrow a Lokpal (pristine and uncorrupt and a firm devotee of Anna) ensures that your bribe gravy train comes to a dead halt overnight. Will you still do the work? Or will you stop doing the work? On the one hand the ‘carrot’, the bribe is no longer available; on the other a big stick is now held over every move you make.There is no clear way to punish a government servant for not doing his work. You cannot get rid of him. His job is secure under a government mandated law.This makes any efficiency on the part of the Lokpal in doing his job a perfect recipe for instant and total paralysis of governance. As it is ‘pre-audit’ by the CAG for any and all expenditure at governmental level is one such road-block. A ‘pre-audit’ sought from the Lokpal on each and every action before it is put into effect by every single department all over the country can paralyse the Lokpal within days and bring all governance to a halt in less than a week.If ‘Economic Determinism’ works, as it must, the Lokpal itself will become the fount of corruption. For the citizen there will be an additional layer of bribing to be done to get his work done. This is quite apart from the constitutional questions and the threat to democracy that the Lokpal poses.As a general rule, any law that has an aspect that adds to the moral stature of individuals in society, is a law that plants the seeds of corruption. Even a law against murder is not a law against an individual because, isolated, he can do nothing, however murderous his thoughts may be. It is for the protection of society and the other individuals who are part of it that the laws against murder are needed. Where this fine distinction has been ignored, the law should be repealed. Before the promulgation of any law therefore, this aspect must first be ‘pre-audited’. The problem with the Lokpal/Janlokpal is that they seek to control individual behaviour.It should be obvious to anyone that the clearing away of this vast thicket of laws cannot be allowed to take place to be replaced by uninhibited anarchy. It needs to be replaced by more efficient enforcement of the laws that must remain; those that form the essential bedrock of any civilized society.Towards the end of more efficient enforcement of existing laws I have the following suggestions to make:
- Make all appointments in any government or semi-government organisation mandatorily dependent upon performance. This should include the Police. This means that the present mandatory protection in service that public servants and employees of government and semi-government owned organizations are entitled to, must cease. In essence all such appointments should be made subject to dismissal from service for non-performance on the same lines that prevail in the private sector.
- Change the laws on election expenses to make them compulsorily transparent and make donations to political parties legal and/or, alternatively, let the government fund all election expenses by reimbursing candidates on the basis of the number of votes polled by them individually.
- Make the cost of flouting laws much higher in terms of punishment.
- Why can we not get rid of industrial licensing altogether? Or for that matter the Shops and Establishments Act? We can have specific enforcement to prevent abuse in industry or in shops and establishments but there ought to be no need for licensing for factories (only zoning or pollution control rules), restaurants, hotels and bars or private clubs so long as they obey rules regarding cleanliness, public behaviour, proximity to schools, or for obstruction of traffic. What about the licensing and laws that affect the building industry? Except for zoning rules and rules about water and electric supply that affect people other than those who are constructing or living in the buildings, the rest are superfluous. [Sanjeev: A good point but I'd retain licensing for at least the high risk industries. E.g it shouldn't be possible to establish a nuclear plant or produce toxic chemicals without rigorous licencing requirement]
- Another instance: I would suggest the abolition of the entire licensing system imposed upon the driving public. This may sounds radical but if it is backed up by traffic policemen being compelled to perform – or else; and if the cost of infringement is unacceptably high in terms of punishment to those who flout it, the issue of the infringement of road rules can be solved without anyone having to go through the process of securing a licence to drive – thus taking care of a major cause of corruption at the level of the RTO. [Sanjeev; this is indeed radical, but raises an important policy option for further analysis]
I'm reproducing below an important article published last week by the Liberty Institute. Please read this carefully if you are SERIOUS about elimination of corruption.
Of course, if you are only interested in drama then enjoy the show being put up by Anna Hazare talkies. I must say that this man is turning out to be quite a savvy politician, having smashed the UPA's resolve into a rubber ball that bounces from one end to the other each day. Clearly this government is SUPER-INCOMPETENT, with no capacity to think straight or to act straight.
Note that if Hazare was contesting elections, I'd understand his strategies. But he claims to be interested in removing corruption. That doesn't add up - for he is chasing after shadows.
On the other hand, while Hazare so successfully chases after shadows (!), I'm offering a DEAD SERIOUS REMEDY for corruption and a way to dramatically increasing India's prosperity. But the solution I offer is much harder. And few, it seems, are capable of understanding it, or rising to the occasion.
Well, do read Barun's and Mohit's views below. Very well researched piece:
Chasing Black Money: In search of red herrings
- legally earned income on which taxes have not been paid
- illegally earned funds, such as bribes, and contracts whose face value does not reflect the transactionvalue,
- earnings from criminal activities
- real estate registration fees that are reasonable – less than 1%; or flat fees per unit area
- policy framework that reduces the discretionary authority of administrators and politicians
Sector 12, Dwarka, New Delhi 110078. India
Websites: www.InDefenceofLiberty.org| www.EmpoweringIndia.org
Mr Barun Mitra is the director of Liberty Institute, an independent public policy think tank in New Delhi.
Mr Mohit Satyanand is a management consultant, investor, columnist, and is the Chairman of the board of Liberty Institute.
Corruption in India can't be removed without first implementing fundamental electoral reforms. Without such things it is like a balloon. If sqeezed on one side, it simply moves to other places. Btw, that is what is GUARANTEED to happen with Lok Pal bill (about which Anna Hazare the innocent dreamer is making such a fuss) without first ensuring that good people are able to enter politics.
When ONLY the corrupt are eligible to become MPs and Prime Minsters, the possibility of removal of corruption is zero.
What is happening today is that RTI and other methods have put pressure on day-to-day sources of corrupt money. So the government has to use public sector undertakings in a bigger way than ever before.
The Opposition members, including Gurudas Dasgupta (CPI), Murli Manohar Joshi and Shahnawaz Hussain (both BJP), asked the government to “come clean” on how large aircraft orders were given, why the losses mounted heavily after the merger two State-run airlines and “giving away” of profitable routes to private and foreign airlines. [Source]
I gather that these large orders for new airplanes were given when the existing fleet was underutilsed!
And why not! It is, after all, YOUR money. It is meant to be looted. That's what socialist governments are for.
No wonder the Air India is bleeding billions of dollars today, most perhaps going to Swiss accounts (or wherever else these things are "banked" by Congress).
The idea of bulk corruption – which has been the staple of the Congress party ever since I know of it (since at least the early 1980s), appears now to have moved to Air India and other public sector undertakings -not that these organisations were ever free of large-scale corruption.
This racket can only be ended if the government of India GETS OUT OF RUNNING ANY BUSINESS.
Air India must be privatised - urgently. Else it will continue to be misused as a source of CORRUPT MONEY by the government.
Public sector undertakings = super-incompetence, super-corruption.
वहां की जनता हो भिखारी
(Translation: When a country's government engages in business (or trade), its citizens inevitably become beggars.)
Came across an interesting hypothesis in a FB note. He argues that Indians have a "transactional" culture and therefore Indians have rarely fought - preferring instead to buy and sell kingdoms.
Is this true?
[Addendum: Corrigendum dated 15 August 2011. Sharad Bailur, to whom I erroneously attributed this hypothesis initially, has clarified: "Please go to my Note and read it carefully. All I have done is quote an e-mail I got from my brother. This is not my original writing. Second even my brother got it from somewhere else. So attributing the view to me or even to my brother is not correct. ... I quoted it merely in order to elicit a discussion."]
Also, could those who know about history please tell me whether such things are unique to India (as this view suggests). I suspect there would be many examples in the world where kingdoms were bought and sold, not just in India. Where such things did not happen, I suspect there would need to have been "fervour" – religious, nationalistic, or egotistic.
Second, the fact that rulers are treacherous does not mean that citizens are treacherous so these things do not represent the entire country. Corrupt actions among the powerful do not imply a corrupt national culture. Just because the rulers of independent India are THOROUGHLY corrupt does not mean that Indians have a corrupt culture. Instead, these actions confirm that incentives matter. It also confirms why there is so much corruption in India today – because we have our incentives all wrong.
In sum, I suspect that this hypothesis is not valid, although I'd welcome your thoughts.
Indian history tells of the capture of cities and kingdoms after guards were paid off to open the gates, and commanders paid off to surrender.This is unique to India… !!!Indians' corrupt nature has meant limited warfare on the subcontinent. It is striking how little Indians have actually fought compared to ancient Greece and modern Europe.The Turks’ battles with Nadir Shah were vicious and fought to the finish.In India fighting wasn't needed, bribing was enough to see off armies.Any invader willing to spend cash could brush aside India’s kings, no matter how many tens of thousands soldiers were in their infantry.Little resistance was given by the Indians at the “Battle” of Plassey. Clive paid off Mir Jaffar and all of Bengal folded to an army of 3,000.There was always a financial exchange to taking Indian forts. Golconda was captured in 1687 after the secret back door was left open.Mughals vanquished Marathas and Rajputs with nothing but bribes.The Raja of Srinagar gave up Dara Shikoh’s son Sulaiman to Aurangzeb after receiving a bribe.There are many cases where Indians participated on a large scale in treason due to bribery.Question is: Why Indians have a transactional culture while other 'civilized' nations don't?
Came across this here. Ambedkar's views on this matter:
What perturbs me greatly is the fact that not only India has once before lost her independence, but she lost it by the infidelity and treachery of some of her own people. In the invasion of Sind by Mahommed-Bin-Kasim, the military commanders of King Dahar accepted bribes from the agents of Mahommed-Bin-Kasim and refused to fight on the side of their King. It was Jaichand who invited Mahommed Gohri to invade India and fight against Prithvi Raj and promised him the help of himself and the Solanki Kings. When Shivaji was fighting for the liberation of Hindus, the other Maratha noblemen and the Rajput Kings were fighting the battle on the side of Moghul Emperors. When the British were trying to destroy the Sikh Rulers, Gulab Singh, their principal commander sat silent and did not help to save the Sikh Kingdom. In 1857, when a large part of India had declared a war of independence against the British, the Sikhs stood and watched the event as silent spectators.
The ridiculous idea that hanging the "corrupt" (as they do in China) can reduce corruption has been fully exposed in an article that shows the DEEP levels of corruption in semi-socialist China – and how their methods end up PUNISHING THE HONEST.
The government of China has become a BLATANT EXTORTIONIST, using its might to imprison a totally innocent, hard working industrialist.
Let me cite a few extracts from this article on this miserable case of corruption in China. I do so with the hope that Indians who are enamoured of the idea that corruption can be stopped by "punishing" the corrupt will learn two key lessons:
a) When the WHOLE system is corrupt, the HONEST will be punished (AS IS THE CASE IN INDIA), not the corrupt
b) Even if someone who is corrupt actually gets punished, it is not going to reduce corruption EVEN SLIGHTLY – since the underlying causes of corruption remain untouched. The solutions to corruption are different, but I won't repeat them here.
Now, listen to this:
Communist Party's feared and ultra-secretive internal discipline commission swept down through Guangdong province and carried out what was probably the most aggressive anti-corruption blitz in modern Chinese history. Of all China's murky channels of Chinese justice – as every Chinese cadre knows – few are more arbitrary, more secretive and more unpredictable than when the Communist Party decides to go after its own.
There are very few accounts of what takes place in these sustained internal Party interrogations known as shuanggui, except that they take place outside the purview of any law. Scholar Flora Sapio says the extra-judicial interrogations are designed to extract confessions because investigators ''lack the human and financial resources'' to gather evidence in a more professional way.
Usually, shuanggui is designed to avoid open court trials so as to control the public flow of information.
''Corruption is universal but you can only target some examples so that the others can be warned,'' the official said.
''In China you know everyone has some connection with corruption, so if you detain one person and investigate you will certainly find some wrongdoing.''