Corruption is an economic phenomenon with an ethical aura. It can occur on different scales and can be petty corruption, to corruption that affects the government on a large scale and becomes a part of everyday structure of the society. Systemic or endemic corruption is primarily due to the weaknesses of an organization or process. It can be contrasted with individual officials or agents who act corruptly within the system. Factors which encourage systemic corruption include conflicting incentives, discretionary and monopolistic powers; lack of transparency, low pay and a culture of impunity.
In another context, corruption is the misuse of entrusted power by heritage, education, marriage, election, appointment or whatever else for private gain. This covers not only the politician and the public servant, but also the CEO and CFO of a company, the notary public, the team-leader at a workplace, the administrator in a private school or hospital, the coach of a cricket team or anyone for that matter.
Major corruption comes close whenever major events involving large sums of money, multiple ‘players’, or huge quantities of products like food and pharmaceuticals, often in disaster situations, are at stake. Contrary to perception, corruption flourishes in situations involving high technology, since no one understands the real quality and value of products, or in situations that are chaotic such as natural disasters like earthquakes, floods, droughts, or the purchase of a technologically advanced aircraft, where only a few can understand the technologies implied in development and production of such aircrafts, or where the number of actions is very large, for instance in betting stations as in cricket where the results can easily be manipulated.
If corruption is judged purely on the basis of business economics, macro-economically it costs money to society which should be considered as a loss. From the micro-economic point of view, for the bribing entrepreneur, it is profitable. The payer of a bribe secures a desired transaction which if evaluated on purely commercial grounds, strictly speaking, should have been assigned to someone else. That will harm individual entrepreneurs and transactions; it will harm the national economy and also the world economy.
In such a scenario, can corruption be good as well? We all understand that corruption exposes the flaws in society. Though people of different walks of life understand corruption differently, it is relative, based on what is codified in law, so when corruption occurs, we know what needs reform in society. Reform can come in the form of paradigm shift or a change in policy. Everything that is illegal is corrupt, but not everything that is corrupt is illegal. Corruption is merely anything outside the established social norm.
Discussion of corruption is extremely difficult as it is a hidden phenomenon in our societies. Both parties in exchange of power for privileges want to keep their transaction secret. That makes it so difficult to establish how wide and deep corruption penetrated our economy and social life. Moreover, what for some is no more than ‘a friendly turn’ is for others ‘misbehaviour’. What in one place can be friendliness is unacceptable elsewhere. Normal behaviour at a particular hour of the day may be unacceptable at another hour.
Chris Blattman, Professor in the Harris School of Public Policy at the University of Chicago, says, ‘while overall wealth is associated with lower levels of corruption, there is very little evidence that corruption leads to slower economic growth’ The problem with most development polices is that everything is important. Everything matters for development. However, herein lies the roots for corruption.
Why might this be so? One reason: Most of us fail to imagine that corruption can also grease the wheels of prosperity. Yet in places where bureaucracies and organizations are inefficient or where entrepreneurs and big firms struggle to import or export or comply with regulation, corruption could improve efficiency and growth. Bribes can act like a piece rate or price discrimination, and give faster or better service to the firms with highest opportunity cost of waiting.
The example that is always given to illustrate such a case is the transport of fresh vegetables. Is the payment of an insignificant amount of money at the check post, which can speed up a border check, on the perishable cargo in the truck or ship, allowed? He is not doing anything unlawful; he is doing what he has to do, but he does it a bit quicker or earlier. As a result, there will be a considerably bigger chance for these vegetables to reach their market fresh. The assumption is that without such ‘facilitating payment’, that truck or that ship may be detained for many more hours or even days, causing the cargo to turn bad, which will result in large financial losses.
It’s important to understand that we live in an imperfect world, and a bit of controlled corruption can function as a lubricant to overcome some of our worst problems. Maxim Mironov of the Graduate School of Business University of Chicago, infers in a study on corruption that corruption which is uncorrelated with other governance characteristics is positively related to GDP growth in countries with poor institutions. He further infers that residual corruption is positively correlated with capital accumulation and productivity growth in developing countries. The empirical findings of the research actually support the theory that corruption helps in overcoming inefficient barriers.
Like everything is defined and redefined to be consistent with times, the global coalition against corruption, in the last decade of the past century, began calling corruption ‘bad business practices’, which is a moral judgment, and not an economical one. On the contrary, some in the business community consider corruption to be ‘good business practices’, as they make more money using corruption as a business tool.
The theories behind the fight against corruption are moving from a Principal agent approach to a collective action problem since Principal-agent theories seem not to be suitable to target systemic corruption. The India against corruption movement organised by Anna Hazare, and some other social activists, involved in Team Anna, a strand of the anti-corruption movement fought for a Jan Lokpal Bill that gained momentum in the country, during 2011. The Lokpal Bill was passed in December 2013. The Jan Lokpal Bill, also referred to as the Citizen’s Ombudsman Bill, an anti-corruption bill, was drawn by civil society activists, seeking the appointment of a Jan Lokpal, an independent body to investigate corruption cases. Whatever happened to this Bill that people agitated for, citing inadequacies in the Lokpal Bill. In the ultimate analysis, corruption corrodes the fabric of society. It undermines people’s trust in political and economic systems, institutions and leaders. It can cost people their freedom, health, money and sometimes their lives.
Fighting corruption, the current government seems to be on track with political reforms, including financing of political parties and elections, economic reforms, regulating markets and the financial sector, financial controls including budget, bookkeeping, reporting, parliament, local administrators and councils, registration, free access to information and data, maintaining law and order, improving and strengthening of the judicial systems. Even institutional reforms that include tax systems, customs, and public administration in general are being attempted. However, revealing all sources of funding to political parties must be a part of this process as is the need to link voter ID’s to Aadhar eliminating the scourge of impersonations and non-existent voters.
Whatever the method, we know that corruption will not disappear from society. Hence our efforts must be to restrict corruption and to protect as much as possible the poor and weak in our societies. In the end all corruption costs are paid by the consumer and the tax-payer. They are the people who need protection.
Corruption is as old as human history. When people organized themselves into groups with powerful leaders, those leaders have sometimes abused their power. A study using game theory, evolutionary biologists Francisco Ubeda and Edgar Duenez actually found that people cooperate to form a society, even though the ones in charge are corrupt since they believed that it keeps their society together and in part because, they don’t want to be punished by law enforcers. However, the moot point is where do we draw the lakshmanrekha?