Wednesday, November 7, 2012

Corruption Is In Blood , Keep Apart Exceptions

Agenda for reforms: Six reasons why the current narrative about graft is wrong and how to really tackle corruption

By T T Ram Mohan
At last, somebody has had the courage to talk sense about corruption. Deepak Parekh, chairman of HDFC, has been quoted as saying, "Corruption is not going to go away from our country... I think the manner in which he (Kejriwal) is going about it is not right." Bravo, Mr Parekh.
Your remarks won't endear you to the middle class, which has worked itself into a rage over corruption, but they needed saying. Parekh has uttered one plain truth about corruption.
There are a few others that are worth listing:
1. The link between corruption and economic growth is weak. Since we disapprove of corruption, we would like to believe that corruption must badly hurt the economy.
Alas, research does not establish conclusively that corruption drags down growth. Anecdotal evidence supports this hypothesis. Think China, where the fabulous wealth of party leaders is now coming to light, India and, in an earlier era, Korea, all fastgrowing economies.
2. Corruption does not necessarily involve violation of rules or laws. Many people assume that corruption has to do with violation of laws or rules. But corruption does not always involve such violations.
Very often, the politician or bureaucrat expects to be paid even when a contract is in conformity with rules and even for releasing payments on time. This is known as 'speed money' and it is meant to prevent harassment or delays. Corruption is not always about 'scams' or violations of laws and hence much of it can go undetected.
3. People in government can amass wealth by means that are legal even if it involves their using their privileged positions. Corruption involves a quid pro quo. However, people in government can amass wealth without any explicit quid pro quo in their dealings with businessmen.
A chief minister's son who starts a business will have orders pouring in, without the minister having to intervene. He will have advantages, in terms of getting approvals from authorities, that ordinary mortals cannot dream of.
Thus, those in power can make big money without indulging in corruption. In a paper in EPW (May 26, 2012) , Abhay Pethe and others show that politicians in the Mumbai region have accumulated assets through what they call 'honest graft', such as buying property in areas where they know major infrastructure projects will come up.
The idea that corruption is all about taking bribes for favours is mistaken. It is the more sophisticated forms of corruption that lead to greater riches in any society, and there is little recourse against these under the law. Petty corruption can be checked, not the sophisticated variety.
4. It is incorrect to suppose that corruption is best fought through investigation and punishment. Kejriwal and others believe that a strong Lok Pal is the answer to corruption. Our experience with law enforcement and the judiciary suggests otherwise.
Corruption is better addressed through transparency, clear rules for decision making and e-governance. The RTI Act is probably a superior answer to corruption than the proposed Lok Pal.
5. Limiting the role of government does not limit corruption. Most people associate corruption with government. They believe that if the role of government is restricted, it will limit the scope of corruption. This is astonishingly naive.
Corruption thrives in the corporate sector as well. And some of the biggest opportunities for graft relate to the sale of government land and natural resources to the private sector.
A state that mishandles ownership of public assets is also likely to mishandle their transfer to private hands. Privatisation is no answer to corruption. It only creates another avenue for graft.
6. Corruption has more to do with the economic structure of society than with individuals being good or bad. Kejriwal and company think there is something terribly wrong with the present set of politicians. They dream of remedying this by bringing into politics a new set of superior individuals.
Others tell their countrymen to be less greedy and corrupt, exhortations that have failed for centuries. Such solutions miss the crucial point: corruption is a manifestation of an underlying malaise, namely, an iniquitous economic structure.
In such a structure, those at the top will benefit from both legal and illegal corruption. Any answer to corruption must attack the economic structure itself.
Addressing inequalities in society may be a more sensible way of tackling corruption than bringing in tough anti-corruption laws or appealing to our values.
Yet people who profess revulsion at corruption have no qualms about supporting economic measures that widen inequalities or criticising measures aimed at reducing these.
Corruption is not just about bad guys who give or take bribes; the greater corruption involves nice guys who are comfortably ensconced in a predatory economic structure. That structure is as old as mankind, it only keeps changing its forms.
Antigraft crusades can slow down the wheels of the economy in the short-run, as decision making in government is paralysed. In the long run, such crusades end up de-legitimising the institutions of democracy and pave the way for dictatorship, which makes corruption even worse.

World Economic Forum: Corporate India says tackling corruption key to GDP growth

GURGAON: Concerns over corruption ricocheted at a gathering of high profile business leaders in Gurgaon, where the participants raised a cautious toast to the recent reforms initiated by the government.
At a time the country's two biggest political parties appear determined to shrug off charges of graft against their senior leaders, Godrej Industries Chairman Adi Godrej drew a direct link between economic growth and graft as he addressed the World Economic Forum on Wednesday, the second day of the three-day meet.
"Tackling corruption is key to GDP growth. If we reduce corruption by 50%, GDP growth will go up by 1%," said Godrej, who is also president of the industry body Confederation of Indian Industry.
Leading corporate lawyer Zia Mody cautioned that even the recent decision to allow foreign direct investment in multi-brand retail may not have the desired impact in the face of largescale corruption. "What's the point of opening up FDI in multi-brand retail if, at the state level, there's corruption and the policies cannot be implemented in a transparent way?" asked Mody.
"It's a huge roadblock in implementation of reforms." Bajaj Group CMD Rahul Bajaj exhorted the main opposition, Bharatiya Janata Party, to support the Congress-led government at the Centre on reforms.
"After two-and-a-half years of inaction, we are happy to see some measures by the government...but now they need to implement these," said Bajaj, adding, "The principle opposition party has to support them and unless that happens it will be very difficult to say where we are heading. So, as of now, we are waiting and watching."
Harvard University Professor Geeta Gopinath was more direct in her criticism of the government. "It is not a mystery why growth has slowed down. Reforms have happened only on a sporadic basis when the government has feared that ratings are going to go down," she said.
"Reduction in poverty has been much lower compared to growth. One sector that needs to be reformed is manufacturing, so that it generates more employment. The country's labour laws are extremely rigid. Reforms have to happen every year on a consistent basis, and not every 30 years."
The participants, however, lauded the increasing use of social media and measures for e-governance, which, they said, were contributing to a greater sense of transparency. The silver lining, the members said, was that social media and citizen empowerment, crowd sourcing of data on corruption and measures for e-governance were instrumental in exposing abuses of power.
"Why leave it (tackling corruption) to government alone? Leaving it to the government has not succeeded," said Vinod Rai, Comptroller & Auditor General of India, who investigated the 2G telecom scandal.

Accord Constitutional status to CBI, CVC: Vinod Rai

GURGAON: The government should have the courage to accord constitutional status to agencies like Central Vigilance Commission, Central Bureau of Investigation and the proposed Lok Pal to make them effective instruments for fighting corruption, Comptroller
 and Auditor General VinodRai has said.

Accord Constitutional status to CBI, CVC: Vinod Rai

"If you really want some of these institutions 
to deliver, you must take a risk and have the courage to make them constitutional," Rai said at a session on inclusive governance at the World Economic Forum on Wednesday.He said without constitutional status, agencies like the CBI often face charges that they are working at the behest of the government. "Look at CBI. Often people say it is not independent of the executive and is a handmaid of the government. Similarly, the CVC, which is much feared and much maligned, is only a statutory body and not a constitutional one," he said. 
Rai said it is important to give constitutional status to the proposed Lok Pal to enable it to function effectively. "The Lok Pal should have a guaranteed constitutional mandate," he said. Corporates, too, should be made accountable and transparency should be introduced in their functioning, the CAG said, adding that it was welcome news that some top corporates were coming together to fight corruption. 
"We need to focus on what we can do as individuals and companies (to check corruption) and also publicise it so that others can join and this becomes a movement," Infosys executive co-chairman Kris Gopalakrishnan said. There are a number of examples of individuals, like the CAG, making extra effort to make the system better, Gopalakrishnan said. 
"We need to scale this up. In a democracy, we have to work through the political system. We have to create institutions that are strong and put pressure on the government by mobilising public opinion," he said. Eicher Motors managing director and chief executive Siddhartha Lal said corruption has been growing "exponentially" in the country where, until recently, it was a zero risk and infinite returns proposition. "But now, the risk has started coming in and returns have declined," he said. 
Lal said he is optimistic of the growing public opinion against corruption, which has the potential to change things. "It is darkest before dawn. Because of growing public opinion, I have a feeling that something is going to happen," he said.

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