Column: Tackling corruption seriously

Written by Meghnad Desai | Updated: Mar 31 2014, 10:16am hrs
Every political party is promising to fight corruption. Corruption threatens to be the dominant theme of the election. There have been debates and discussions in the civil society and in political platforms about what to do about it. Kaushik Basu, when he was the Chief Economic Advisor to the Union government, tried to model it as a two-person game between the bribe-giver and the bribe-seeker and proposed methods of tackling it. The UPA has finally legislated for Lokpal. The Kejriwal government sacrificed itself for its own Jan Lokpal Bill. Thus, legislation is one route proposed for fighting corruption.

Yet India has one of the most overburdened judicial system, with 3 crore cases outstanding. The number of judges, at 10.5 per million population, is abysmal compared to any other countrys .One-third of the posts in the judiciary lies vacant. Why then does the AAP or the UPA think that to tackle corruption, all India needs is new laws India has not lacked laws to fight corruption. It just does not have any culture of implementation.

The reason why no political party takes corruption seriously is that corruption is not only systemic but it is also functional. It may be illegal or even immoral but it is crucial to the democratic system India has. Elections are fought and won on black money. This is domestic black money on which all political parties are silent whatever they may bleat about black money abroad. Indias democracy would be crippled without black money.

Since elections are financed mainly by black money, corruption of every kind is necessary to the system. We all know that some ministries are regarded as ATM ministries. The ministers who are corrupt do it not so much for themselves (though they get their cut) but for their party. This is why A Raja is welcome in the DMK. Government expenditures contain within themselves built-in Rajiv Gandhi leakages which will water the electoral system. Indeed, Kiran Reddy, while he was Chief Minister of Andhra Pradesh, said so openly. No need to complain about corruption; after all, that money re-enters the system, he said.

Corruption is not a microeconomic behaviour or a two-players game but a macroeconomic structural distortion which connects several parts of the political economy. These are the judiciary, the electoral system, the political party system and the almost ubiquitous reliance on cash transactions. It would require therefore, first of all, the reform of the judiciary so that backlog can be eliminated and the number of judges per million could be doubled or trebled. My own, somewhat drastic, remedy for the backlog of cases would be that for all cases which are more than five years old, the decision should be arrived at by a random number drawing. If the number drawn is odd ,you decide for the plaintiff; if even, for the defendant. It is not perfect but one not argue that it is unfair when compared to the delay. One can allow an appeal for the few who may think they could do better by reviving the case. The courts need refurbishing and re-equipping. Many more judges need to be recruited and hence, even more trained for the future. This in itself needs an expansion of legal education across the country.

The next step has to be a reform of the financing of elections and the treatment of political parties as corporations. Political parties must not only be subject to RTI but should adhere to company law in terms of transparency of accounts, payment of taxes and recording of donations above a certain minimal limit. All donations above a certain low limit must be via bank transactions and not cash. The big national partiesCongress and BJPare quite like giant corporations. Their employees should have proper rights. Their finances should be open to inspection. It should be legal, perhaps even tax-deductible, to give money to political parties.

What remains then is the removal of the large amount of black money in the domestic economy. Here, my proposal would be the demonetisation of all existing currency and its replacement by a newly printed currency which would bear no similarity to the old one. Up to a certain period after the introduction of the new currency, a certain limit, say, one crore per person, the old money can be changed into new money. All bank deposits automatically get converted. But cash beyond the limit of one crore per person must be put into zero coupon bonds issued by the government. These bonds should be marketable after a decent interval of say three months. Their price would then reflect the discount which would be a fitting tax on black money. Thus, the taxation of black money will be as the market decides. Who knows, this may even work.

The author is a prominent economist and Labour peer