One word that
makes one take notice is corruption. People are, at least in theory, seemingly
opposed to corrupt practices and project a need for honesty. While there would
be little dispute or rather undisputed stated preference towards eliminating
corruption or critical of corrupt, revealed preference often demonstrates
otherwise. People may go hammer and tong on the corrupt, yet given an opportunity,
they are unlikely to resist themselves from exercising what is termed corruption.
People might tend to proclaim themselves honest and non-corrupt, yet a detailed
analysis of their personal or professional lives might indicate otherwise. It
is obvious that no one wants to describe
themselves as corrupt but would engage
in practices that can be deemed corrupt.
A story comes to
the mind that was revealed by co-passenger in a train. He was describing
principles imbibed by his father and father in law which shaped his views
against corruption. He was against bribery and would not pay so no matter what
the costs are. Yet there was an occasion when he had to get certain work done
in government office. Presumptively it was not possible to do without resort to
bribe. Apparently, perchance he happened to meet someone at that office. That gentlemen
wanted certain work done from this office. So there was a quid pro quo of doing
each other reciprocal favour. Thus it seemed that work was done without resort
to bribery. However, for good or bad there was quid pro quo. It is not merely
the cash bribe that matters in corruption but non-cash matters too. While in
the instant case, it might have been a legitimate transaction happening thanks
to accidental meeting of service provider and service requestor. However, if we
were to define corrupt practices, this too would have counted one had the
privileges been misused, consideration existing or not.
Before decoding
further, it is germane to understand and define corruption. In the normal
course of things, corrupt activities encompass bribery, graft, nepotism,
cronyism, extortion, parochialism, influence peddling, and patronage among many
others. An economic agent through his or her position has the power to
influence things, the power to allocate resources and the agent does the same
on extraneous factors rather than merit. Implied is a criteria that is to
followed for allocation of resources is sacrificed at the altar of other
considerations like money, network, position etc.
Corruption can
be defined, to borrow from Transparency International, as the abuse of entrusted
power for private gain. To each agent, there is a power vested to allocate the
resources. The resources allocated have to follow certain norms. The norms are
relaxed on non-merit considerations with an apparent private gain in mind. The private
gain can be monetary or non-monetary. It can be a quid pro quo or expectation
of a future ‘reciprocal altruism’. It could also manifest as sheer need for
demonstration of power. It can be framed by the personal equations of the two agents
in question. It can hinge on the past equations of the agents, a different sort
of reciprocity. It can exercise as a favour to their own family/network etc.
It would thus be
interesting to analyse corruption in economic terms. Economics by its very
definition concerns itself about allocation of scarce resources and the behaviour
of the agents in the allocation of such resources. So the understanding of
corruption in economic analysis would thus begin from this definition. What
would make the behaviour of an agent manifest as corrupt practices? It further
needs to examine the context in which corruption happens. There would be
analysis of the relative power structures that exists between the contracting
parties or agents. To analyse the same, the first step would be narrowing down
the corruption into two classifiable forms.
First instance
refers to wherein one is prevented to the rightful access to resources by an
agent using the power of hold out. An example would be the customs refusing to
clear the goods though every formality was completely and everything was in
order. the ostensible reason could be the demand from the customs agent for a
bribe before allowing the release. Similarly, the sub-registrar raising
objections to registration of property being purchased though everything would
be in order. Other instances could be the shop or a hotel being denied the
renewal of license through objections sundry and all. Such instances come
across as a first classification. To many small entrepreneurs, this is the
daily hassle for claiming the rightful, they have to pay bribe or rather
extortion money. The resource owner has the rightful access to the resource but
prevented so from executing their rights.
The second
classification emerges when the resources are transferred to an agent who doesn’t
have the rightful ownership. Illegal mining licenses, illegal telecom licenses
are good examples for the same. The resources are currently in control of
agent, whose power and position enable them to transfer to others for the
legitimate usage. But the power is misused for personal gain. A firm or
government agency calls for applications for a job. Instead of merit, the
recruitment board decides to adopt extraneous criteria to select a candidate
who might not have the requisite merit. The criteria could be parochialism,
nepotism or sheer bribery. The end objective is the same. Someone undeserving
gets access to resources through wilful connivance of the economic agent. Most
forms of corruption deal with the same. In fact, this form of corruption morphs
at the government level into what is termed as regulatory capture.
The solution for
the same thus lies in identifying the source and classification of corruption.
In the former instance, perhaps making only bribe seeking as a crime and not
bribe giving would bring out the corrupt practices to the fore. At the moment
both the bribe taker and bribe giver are penalised. So the incentive shift to
bribe giver to open out. There is also a disincentive for the bribe taker
because there is no monitoring for cheating.
The latter category has to be handled differently. The bribe giver could
be made penalized and not the bribe taker. The bribe taker might have an
incentive to refuse bribes and bring out the bribe offers on play. Of course,
there could be consequences, intended or unintended. The need for eliminating the
scourge for corruption lies in identification before the solution is found.
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