Now that the dust has settled on the matter, let?s face facts?-the sight of three MPs brandishing wads of one thousand rupee notes, however shocking to the eye and unethical to the mind, just confirmed what most Indians already know?that a large number of our politicians are corrupt and that MPs are, quite regularly, traded like horses.
It is also a fact that as a country, and as a people, we are surprisingly tolerant about corruption in high places. Rarely are politicians hauled up for amassing illegitimate wealth either by the law or at the ballot box. Instead most citizens are deeply inconvenienced by corruption which takes place at a lower level and which affects the day-to-day life ofordinary people?most people dread interaction with government agencies like municipal corporations, local police, factory inspectors, various jal and bijli boards and such like. So, when one hears people complain about corruption in the government, it is this sort of thing they are referring to?-not the high corruption of the political class which, however unethical and amoral, ultimately doesn?t affect the normal lives of ordinary citizens. Ironically enough, the money involved in low level corruption is a lot less than the many crores in high politics?-still, it?s in human nature to be more bothered about what affects one more directly.
Let?s analyse high corruption, given the circumstances. If, for a moment, one could set ethics and morality aside?and this is admittedly difficult?one can perhaps see the positive side of corruption. Consider this: Narasimha Rao?s reformist government only survived its full term because it traded in MPs. Had the government fallen before its time, perhaps the process of economic reform from which the country has benefited greatly, may have stalled. Vested interests might have seized the opportunity to claw their way back to power. Similarly, one could argue that the deal-making which went on before the most recent trust vote was in some way justified by its positive outcome. The Indo-US nuclear deal is good for the country?both in terms of energy and in terms of a longer term strategic alliance with the United States. The realignment of political forces, rumoured to have been smoothened out by the lure of cash, may even help push through critical economic reforms in banking, insurance and pensions. It?s hard to argue that these reforms are bad for the country. In fact, it is far better than the status quo which was being enforced by the Left.
The point, somewhat controversial though it is, is that corruption, of the kind that happens in high politics, is not necessarily value-reducing to the country and economy as a whole. In fact, it can even be value enhancing. The key question is which is more likely?value-enhancing corruption or value-reducing corruption?
Ironically enough, the quantum of corruption has actually increased many times over since liberalisation?-yet it has had little impact on soaring rates of economic growth. This is not an accident. For one, liberalisation has ensured that many of the highly discretionary and value destroying powers of the government?licensing, high trade barriers, restriction of foreign investment, restriction of competition?-have been removed. In an earlier time, corruption ultimately resulted in the use of these instruments as payoff to those giving bribes. Second, the fractured nature of the polity and the multiplicity of political parties have helped diffuse the impact of corruption?-in a single-party or two-party system, or a one-party government, it is easier to buy influence, whereas with multiple parties and coalition governments there is a perverse sort of competition, which may cancel out any potential monopolisation of influence in a government or policy matter. There is, thus, a countervailing balance of power, which prevents arbitrariness in policy of the kind seen in the first three or four decades after independence. Third, India has a highly decentralised, federal form of government, which, on the negative side, makes fruitful implementation of government policy difficult. Yet, on the positive side, multiple power centres make it difficult to monopolise any particular government policy. So, given the current polity, economy and policy framework, there is a much reduced probability of corruption adversely affecting economic growth.
India is hardly unique in this combination of high corruption and high growth. China has plenty of corruption?-some surveys suggest even more than in India?-but it has little impact on growth. Again, in China, economic policy is liberal and government quite decentralised which reduces the adverse effects of corruption. Many of the East Asian tiger economies like Korea, Malaysia and Thailand are well known for corruption in high places, but very impressive economic performance. Korea, in fact, is one of the few countries where an extremely statist policy, in combination with corruption, resulted in high economic growth. This was because of the unique political economy of Korea which meant that the state was too powerful to be taken over by any business interests?-the state could in fact enforce strict performance requirements on business. Malaysia and Thailand, on the other hand, are more like India?weaker states, more vulnerable to vested interests. Korean style interventionism, like we had in India till 1991, resulted in poor economic performance. Thailand and Malaysia on the other hand always followed relatively liberal economic policies?like India does now?minimising the adverse impact of corruption.
This argument should not be seen as glorifying corruption, which is morally abhorrent and ethically inexcusable. However, it is important to understand the impact that the economic policy regime, nature of government and structure of government can have on determining the economic outcome of corruption. In India, like in China, there seems to be a happy equilibrium. Morality and ethics take time to change?growth cannot be held hostage to time.
?dhiraj.nayyar@expressindia.com