The current corruption allegations being discussed in India are unprecedented. They have exposed a web of complicity between so many powerful actors on a scale that almost no one could imagine. These allegations bring to light three incontrovertible trends. First, that the scale of rents government can now extract from sectors it controls?infrastructure, land, and licensing granting powers?has increased with the growth in the economy. Second, capital is still totally dependent upon the state. Much of what we see as the lobbying of capital is not so much for special favours, as it is to make sure that entry barriers to particular sectors do not remain closed. But this is a game only big corporates can play. Indian capital is also extraordinarily timid; always at the beck and call of politics. Third, corruption is not simply about the relation between state and capital. It has corroded many institutions. It has legitimised the thought that everything can be made instrumental?from media space to professional ethics. This is a much deeper challenge that will be harder to redress. It is a deeper challenge because we have legitimised the assumption that only incentives matter. We have legitimised this assumption to the point that we think that doing the right thing involves incentive-based solutions. Incentives are important. But if a society internalises the thought that the only valid reason to do something has to relate to incentives, then our corrosion is complete. The loss of integrity means just this: that our choices are not shaped by values intrinsic to us or our vocations; they are determined by external incentives.

Whether this system can be easily cleaned up is an open question. If history is any guide, it is not going to be easy. For one thing, there is no political or social force left that has indubitable credibility to be able to build a plausible social movement around corruption. The last two occasions that corruption produced a national crisis, the Emergency and post-Bofors, had two things in common. There was a political or social force outside of government?whether the JP movement, or the newly emerging parties in north India?that had not yet been tainted. And on both those occasions, significant members of the Congress party, Jagjivan Ram and VP Singh, eventually led an internal revolt. Congress will close its ranks, and the opposition is too compromised to be credible for long. Second, comparative reflection suggests that combatting corruption is not easy. China routinely executes people for this crime, but is nowhere near eradicating corruption. Third, we have to ask uncomfortable questions about the relation between corruption and democracy. We cannot continue to pretend that the thousands of crores that are required for elections and the mobilising and organising of political power do not have something to do with corruption.

But history moves by the cunning of unreason. And here, despite, the awful magnitude of corruption that we are witnessing, there is some reason for hope. First, corruption, like the bourgeois, is a revolutionary force in its own right. It is the means through which closed oligarchies of power are often opened up; and it is a matter of constant amazement how one generation?s bad money becomes another generation?s good. Corruption has also been the means to social mobility in India, where manipulating state power has led to thousands of petty fortunes being made, which, in turn, have created new churning. Corruption was seen as socially legitimate because it was a means of empowerment. Second, corruption is intrinsically bad. But its effects can be magnified if it leads to oligarchic capture by a few groups that endures. There is a silver lining in India. Despite regulatory interventions having murky origins, eventually the market structure that emerges is competitive and innovative. India?s move to equity markets may have, on the path, been filled with all kinds of shady dealings; but eventually we got a well-functioning market. And in telecom also, the consequences in terms of consumers have not been as catastrophic as the magnitude of corruption might lead one to assume.

Third, India is a large country with competitive politics. What this means is that there will be rival crony capitalists, and the ensuing competition will provide some kind of checks and balances. Fourth, what matters often is not corruption per se, but the structure of corruption. Tamil Nadu presents an interesting paradox. Here is a state whose politics is supposedly rife with corruption. But it is also a state that runs better public health, better education better PDS systems than others. In short, large-scale corruption has gone hand in hand with exempting some services for the poor from corruption. In some other state, we are beginning to see phenomenon like this emerge. The most important objective should be to create a consensus on preventing corruption in schemes that directly affect the poor. Finally, overt scandals should not disguise the fact that there are other clever forms of rent seeking going on. India?s great fascination with public private partnerships has little to do with demonstrated efficiency. It has more to with the fact that PPPs allow the generation of rents, without risking the same scrutiny that regular contracts do. The cost renegotiations in a project like Delhi airport are probably even more unconscionable than what has been unearthed in the Commonwealth Games scams.

But because it is under a PPP, it somehow becomes ideologically more legitimate.

The real frontier of corruption is now going to be at the level of local government. There is already evidence that as the number of functions being devolved to panchayats increases, spending in panchayat elections is going up. At the local level it is going to be a race between community scrutiny on the one hand, and the temptations of rent seeking on the other. Which will win is still an open question. So don?t hold your breath that the scourge of corruption will vanish anytime soon. Even with regulatory reform or de-licensing, the state will have the power to harass you. Just ask the poor of this country, for whom even existence in a city has been made a crime. Just hope that corruption is a little less brazen, a little more intelligent and a little less destructive of the lives of the poor. And while all efforts need to be made to target the corrupt, past history suggests that anti-corruption measures paralyse the good from making decisions more than they deter the corrupt. There is a real danger that in the current free for all?where the state is exercising even more arbitrary power?this is exactly what will happen. The paralysis of government after Bofors probably took a bigger toll than the scandal itself. But then the one thing corruption warps most irrevocably is a sense of proportion.

?The writer is president and chief executive, Centre for Policy Research, New Delhi