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| Pranab Bardhan: Our corruption, their corruption | | Unlike India, corruption in authoritarian East Asian regimes is less damaging to the economy |
| Pranab Bardhan / Nov 26, 2009, 00:36 IST |
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Recently, the trial in a case of corruption against a billionaire Party official along with many of his associates and accomplices (public servants, judges, policemen and gangsters) in Chongqing, one of China’s fastest-growing cities, brought to limelight the politician-business-criminal nexus, that is not unfamiliar to India. Corruption is pervasive in both countries, and in that context I have often been asked how, in spite of all the corruption, the Chinese economic performance has been so much better than India’s. (Similar questions used to be asked of the phenomenal economic growth in South Korea and Taiwan since the 1960s, in the middle of their rampant corruption).
Of course, in this matter, East Asia is not unique in history. In European history, the entrepreneurial class grew out of the sales of monopoly rights, tax farming and other forms of privileged access to public resources. In the US “gilded age” of late 19th century, the widespread corruption of state legislatures and city governments by business interests and those seeking franchises for public utilities has gone along with economic growth.
But it is interesting to speculate on the several ways in which our corruption is qualitatively different from that in East Asia and on their differential economic effects.
First, in China the lines of authority are more well-defined and streamlined, whereas there is multiple veto power of different authorities on a given decision in India. An apocryphal story has it that one high official in New Delhi once told a friend: “If you want me to move a file faster, I am not sure I can help you; but if you want me to stop a file, I can do it immediately.” So, even after paying bribes, one is never sure in India if the job will get done. This ability to “stop a file” at multiple points, part of a checks-and-balances system (originally installed by the colonial government suspicious of native officers, continued after Independence), acts as a damper on collusive corruption, but has ended up making our corruption rather dysfunctional.
An offshoot of this system is institutionalised suspicion, which undermines incentives for bold decisions in the Indian bureaucracy. If a top bureaucrat does good work, the legitimate rewards are few, but if the decision leads to a project that fails, s/he will be hounded by the Central Vigilance Commission or the Central Bureau of Investigation (as it is often difficult for the latter to distinguish between decisions which simply did not work out and decisions which may have corrupt motivations). Thus the Indian civil service is highly risk averse and does not easily take innovative decisions. Institutional inertia rules, particularly because these officers, in any case, spend only two or three years on a given posting — why rock the boat?
Second, in China, official rewards and career promotions are more directly linked to local economic performance than in India, so the officials involved do not usually lose sight of the overall performance record, even as they line their own pockets. On my visits to Beijing, I have often privately asked my Chinese friends to give me their rough estimates of misappropriation of project value from the frenzied, large-scale public infrastructure programmes. None of these estimates exceeded 10 per cent.
I am reminded of another apocryphal story I once heard in Belgium that goes like this: In an international conference in Belgium, at the reception in the evening, an African minister took his host, a Belgian minister, aside and asked him how on his official salary he could afford to build the large mansion where the reception was being held. The Belgian minister took his African guest to the window and said, “See that road there? — 10 per cent”. Then, as usually happens in such stories, in a year or two, there was a similar conference in Africa where at the reception given by that African minister at his home, the Belgian minister asked how his host could build the huge palace on his income. The African minister took his Belgian guest to the window and said, “See that road?” The Belgian minister looked this way and that way, and said, “I don’t see any road here”. The African minister smiled and said, “100 per cent”. I presume in China politicians do not steal 100 per cent, as their career promotion depends on the over-all economic performance of the area they are in charge of.
Third, in the past authoritarian regimes of South Korea and Taiwan, the political machine and its corruption were more centralised, which is less distortionary in its effects than decentralised corruption. Like the efficiency of “lumpsum taxation” in public finance theory, lumpsum bribery distorts fewer decisions at the margin. Indonesia under Suharto was by most international measures more corrupt than India, and yet overall economic performance was much better. It is possible that Indonesian corruption at that time was more centralised (controlled largely by the first family and the top military leadership) and thus somewhat more predictable, whereas in India corruption was (and is) a more fragmented, often anarchic, system of bribery, as is now the case in post-Suharto Indonesia.
Finally, as elections become more expensive, politicians in India have to be on the lookout for serious money to an extent not necessary in China and other authoritarian regimes. Donations to election funds from the corporate oligarchy (and from real estate business), often under the table, have become more important. The corrupt impact of this on policy (including in matters of allocation of land, monopoly rights on natural resources or telecommunication spectrum or those of regularisation of all kinds of unauthorised constructions and environment-polluting enterprises) is much too evident. Of course, in this respect our corrupt election financing has brought about results that are similar to what Chinese authoritarian crony capitalism has achieved through unaccountable political processes. At least in India, one hopes, there are institutional processes and checks (through elections, courts, right to information, etc.) in place which are somewhat more effective.
The author teaches at the University of California, Berkeley College of Letters and Science
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