Let Off Lightly

South Korea's culture in this respect has now been badly exposed. Its courts have sentenced one ex-President, Chun Doo-hwan, to death and another ex-President, Roh Tae-woo, to life imprisonment, for leading a coup and taking bribes. It also sentenced four leading businessmen including the founder of Daewoo and Samsung's chairman to jail plus fines. When the South Koreans do things they don't do them by halves! When they grow they grow fast. When they take bribes it is in millions of dollars and when they are punished it is not with light sentences.

Are there any lessons for India in this episode? It is obvious now, that the politics-business interaction in South Korea was insidious and corrupting though highly effective in producing growth. It was a very small club of leading businessmen and army generals who shaped the economy. It is still a pretty undemocratic country and has little respect for human rights. In none of these should India learn anything from South Korea. But there is a temptation to connive in corruption on the grounds that it works in producing economic growth.

 

There are two points on this. Firstly, it may work for a while but eventually it distorts by creating cosy oligopolistic clubs. As Japan is also finding out, there is a limit to the efficacy of State-sponsored competition. Sooner or later cosiness takes over. South Korea is now facing the challenge of throwing open its economy to global competition. If for nothing else at least to reduce corruption. The OECD has already been pointing out to South Korea that it cannot aspire for a membership and still maintain controls. Prosperity has to be eventually earned in open competition.

Secondly, as far as India is concerned, we have had 40 years of cosiness and corruption without the benefits of economic growth. India's development path was based on State business partnership, with the private sector in a junior role. But even while damning the monopoly practices, the State gave a lot of protection to the private sector, with quotas and licences and subsidised interest rates and forex allocations. It was a wasteful as well as a corrupting exercise. Indian big business is still chary of liberalisation because, as John Hicks said long ago "" the best of monopoly profits is an easy life. It is the small and medium enterprises which had to bear the brunt of the cost of subsidising the big boys and still compete. The least liberalisation could do is to get big business off the backs of the small and medium business.

But this would require market determined interest rates, with no subsidies. We have however built up a political system, which under the name of socialism, subsidies the privileged. The privileged in turn keep the political system well oiled. Liberalisation will, if anything, reduce the scope for corruption once the State has withdrawn from all the licences and regulations. In the transition however liberalisation has provided a bonanza for the political system to make fortunes previously undreamt of. Thus India has had corruption with socialism and is continuing to have corruption with the liberalisation process. How soon it gets rid of corruption depends upon how effective the courts can be.

While India has tough anti-corruption laws, it is in enforcing them that delays occur. These delays are partly due to the willingness to act against corruption and also the ability to act. There is a structural fault here. While the South Korean system has inherited from the US courts an active public prosecutor culture, the British system which India has inherited separates the investigative and the prosecuting roles. The Italian and French systems puts the magistrate in the investigative and prosecuting role. The British system originates from a class culture, where the two sides of any civilian case are treated much more symmetrically and the accused can get away with a lot by hiring clever lawyers. This lacuna of the British system has meant that in the UK as well the prosecution of financial fraud has been quite ineffective, compared to the American system, as the BCCI case showed.

So I expect that pursuing the corrupt, whether politicians or businessmen or holy men (special to Indian culture), is going to be difficult. The laws' delays which Hamlet moaned about are for ever with us. A South Korean type judgement may cleanse the system once and for all by shocking people into changing their behaviour but one should neither expect such a judgement nor any drastic change in behaviour. After all there is no concept of sin in Hindu culture only of adharma. I don't know if it is adharma for a politician to take bribes or for a businessman to offer one. Even if it were I am sure there are enough swamis and gurus to debate on that point. Meanwhile, the corrupt will get off lightly.