Capitalism, democracy and corruption—II

Primitive accumulation versus the rule of law

Chanakya

Some of the politicians and civil servants who made money used it to live well, fulfilling their feudal dreams. Some who knew the ropes sent the money abroad. But a substantial proportion of them looked to the opportunities in the market for investment. Some invested in urban property, fuelling a price rise. The ranks of entrepreneurs began to be swelled not only by those who were making profit from land and from inherited capital, but also by this new class of people. Corruption money began to emerge as commercial and industrial capital. An interesting phenomenon was underway.
Hope for change?

What then can we do about corruption? Is it tractable? Will it ever disappear from our society?

I feel the sense of despair too, when I think about it. For there is no doubt that corruption is eating away our vitals, like a cancer in the body. It damages work ethic, and upholds a parasitic society. The great ambition of every one is how to live off the labour of others. It is the poor who are ultimately the worst sufferers.

But perhaps we should not give up hope. I tell myself that the balance of social forces will gradually change in favour of a rule based society, for, once the stage of primitive accumulation is over, society becomes too complex for it to function without the rule of law.

We have some support from history. In Britain, the industrial revolution was preceded by accumulation of merchant capital through all sorts of questionable practices — such as merchant guilds, monopoly licenses to trade, etc. After all, the East India Company, and the manner the British plundered its colonies, was a rich example of corruption that underlay the beginnings of its industrial transformation. But the British were lucky in one sense: the Empire and all that it meant — the colonial civil service, the military — gave ample opportunities for its aristocracy to exercise its imagination and emerge as the sinews of its governmental machinery, giving it that sense of honorable service to the nation. The British civil service thus remained relatively un-corrupt, in my view, for this reason.

The history of almost every capitalist economy reveals primitive accumulation and the associated corruption as an antecedental process underlying the later evolution of market economy, in which the rule of law has become better established. This is not to say that the present day industrial countries are free of corruption. The recent scandals in France, Italy, Germany, Japan, and Britain under Conservative administration, the bribes the global corporations tout with the connivance of their respective governments to get their export orders — all these show how pervasive corruption is even in industrial countries, even though only a few could deny that the rule of law is now better established in these countries.

If we look at contemporary experience, a similar picture emerges: Korea, Malaysia and Indonesia are good examples. The experience of Russia in recent years is another. In China, there is growing evidence of seizure of state property for private use and enrichment, and of corruption in government. It is not true to say, despite the preachings of the World Bank and others, that economic success is possible or has happened only in countries where there is no corruption.

To my rather limited knowledge, there are only two countries, Singapore and Hong Kong, which seem to have built-up successful market economies without going through the travails and corruption of primitive accumulation. But Singapore remains a patrician, meritocratic, authoritarian state, which built its prosperity by acting as an entrepot for the US, European, Japanese and East Asian economies, under the determined leadership of Lee Kuan Yew. Hong Kong also built up its prosperity under historically particular circumstances. The British Administration promised the rule of law in an attempt to keep control of the territory and worked for the prosperity of its citizenry as a means of keeping a foot in the Chinese door. Paradoxically, this proved to be useful for the overseas Chinese and other businessmen traders who were interested in building up links with the mainland China, and for the Chinese government in turn.

This is not to say we do not have lessons to learn from these experiences. But one must not delude oneself into believing that market economies were generally built in corruption-free environments. In fact, at the back of most successful capitalist societies there lay stories of plunder, violation of the rule of law and primitive accumulation based on aggrandisement rather than just entrepreneurship.

Where do we go from here?

So what is the answer? Should we abandon the drive towards a market economy and look to central planning?

I do not believe so. The era of Soviet communism was riddled with horrific corruption and authoritarian rule. And it was not an economic success. I believe that we have to adopt market principles, but pursue a model that seeks to root out corruption at the earliest, and promotes an inclusive growth in which the poor are not left out.

And I believe that the balance of social forces will gradually change in favour of those who want to combat corruption. As India becomes more industrialised, it will become necessary to promote the rule of law and sanctity of contract. The requirements of an industrial economy are too complex to be met through a system in which administrative transparency is lacking, and the rule of law is missing. Therefore, even among those who have built their industrial fortunes through bribery and manipulation of the governmental system, a demand will grow for respect for the rule of law and the elimination of corruption. There is many an industrialist in India now whose original fortune lay in some act of corrupt practice, but who would now be glad to see a proper functioning of courts and the elimination of corruption. For, once you have property, however you have acquired it, it is good to have the rule of law!

Clearly, there will still be powerful forces in favour of all opportunities for making money through corrupt means. That momentum has not yet run out of life. That is why, in the government of India and public sector institutions, you have many resisting the simplification of legislation and removal of discretionary powers. They point to the patrician role of the government and the interests of the poor: but this is far from their minds. A huge number of them just want to make money.

Change will occur when the balance between those who see respect for the rule of law and those who are wedded to the processes of primitive accumulation will change in favour of the former. And I believe that as the size of our entrepreneurial class dependent on a well functioning market economy grows, this balance will change in favour of those who want the rule of law rather than those who want ad hoc favours from the government. The spread of literacy, increased economic security for the poor through enhanced employment opportunities and welfare system (e.g. accessible primary health care), a continuation of the sanctity of the ballot box — all these are also essential for the change to occur.

The realisation that a corrupt-free public life can provide tremendous boost to the growth of our economy and open up new opportunities for employment and better living is already taking root, and this can only grow as literacy and information increase.

The realisation is also growing that the rich are not safe without the rule of law or with a growth process which excludes the poor. Much of the support that movements such as Naxalism derive is rooted in the daily injustices the poor suffer from continuation of feudal practices, their exclusion from growth and blatant violations of the rule of law. Support for the rule of law will therefore grow as this realisation gains ground in the propertied classes. Much will also depend on our democracy moving away from the current state of competition to capture power by coalitions of networks of self-seeking interests to a competition based on public policies.

The persistence of feudalistic forces in many parts of India — Bihar being a foremost example — puts a restraint on such transformation. Land reform such as the one implemented in West Bengal can greatly help in creating a class of peasantry who are economically secure, but not objectively wedded to a system of exploitation of other’s labour. Teachers, small businesses, artisans, professional classes such as doctors, university professors and so on are all people who live by their labour and skill and they constitute a sound bulwark for a democratic order. Every step that protects their place in society can only be good for democracy.

The transition from politics based on networks of self-seeking interests to public policy-based politics is not going to be easy. This is not going to happen easily or quickly. But the sanctity of the ballot box — one of the greatest achievements of independent India — should not be eroded. If we can maintain that, much change for the better will flow from that simple institution alone. I am therefore hopeful of change for the better. But I am not a determinist. All that I am saying is that democracy, capitalism and corruption are all tied up together, and should be viewed in evolutionary terms; and that we should be able to nurture a change for the better by understanding it in those terms. Of course, there are a huge number of good people all over India in all walks of life who are fighting for a clean public life, often at the risk of their livelihoods and lives. The issue is how these groups may gain in strength. And also what practical steps can they advocate?

An incremental process
I believe that we should see the elimination of corruption as an incremental process which, after it acquires a critical mass, can rapidly accelerate.

The incremental steps I would look for lay in many different directions. I would mention the following:

* review legislation in areas where we know, despite the good intentions of the Acts, it cannot be or is not implemented. Having legislation on books, which is widely disregarded, results in disrespect for the law, and once such a habit gains ground, it spreads to other areas.
* simplify legislation, and eliminate the discretionary power of ministers and civil servants in the exercise of executive power. It is a bad principle to legislate a set of rules keeping the worst or most peculiar case in mind, and build too much discretionary clauses to meet such situations.
* publicise and promote e-governance which reduces the dependence on governmental offices reduce the size of bureaucracy, but pay the civil service well.
* maintain a merit-based system of recruitment into public service
* protect the Supreme Court of India and its independence open a register for all members of legislature and civil service above a certain rank to record their property and any income received outside their regular source of income; shame or punish those who do not comply.
* promote channelisation of payments above a certain monetary value through the banking system.
* award honours and medals for public servants at various levels known for clean public service
* decentralise the administration of all services that are concerned with people such as education, health, and rural works. At the same time reduce the dependence on government as the sole provider of services or utilities through opening them up for supply through various alternative mechanisms — including through NGOs, trade unions, trusts, etc.
* confiscate the property of those proven to be corrupt, and impose minimum jail sentences publicise the experience of other countries at a similar stage of development in fighting corruption.

I believe that the backbone of a nation often lies in nurturing an educational system that promotes good civic values: self-esteem, pride in one’s nation, a sense of public duty. Is there nothing we can do to promote such an educational system?