Column : The dynamics of corruption

Aug 26 2011, 03:16 IST
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SummaryAs the Anna-Government battle wages on, and provides maximum grist for the political theatre in a long time, it is easy to lose sight of the central issue of how to best battle corruption behind the clash of personalities and the demands and counter-allegations.

As the Anna-Government battle wages on, and provides maximum grist for the political theatre in a long time, it is easy to lose sight of the central issue of how to best battle corruption behind the clash of personalities and the demands and counter-allegations. Few believe that either version of the Lokpal Bill will really rid the country of corruption, but would possibly create yet another barrier to negotiate or a spotlight to hide from. The debate is about how high that barrier should be or how glaring and universal that light, the concern about how to make sure the Lokpal rises above the ill it is supposed to guard against.

I had recently had the chance of researching the subject of corruption with my former colleague Ajay Subramanian*. The questions to ask included whether all corruption is the same—the everyday kind that we face from traffic policemen, road inspectors, tax refund clerks, railway officials or the grand larceny of the kind that the likes of Raja and Kalmadi and former senior judges are now accused of? Which one is worse for the nation, and therefore a bigger danger? And finally, what circumstances bring about the best outcome? Is there a point where the costs of reducing corruption further are more than its benefits? Given that it is unlikely that we can ever build a nation with zero corruption, how much of our resources spent in detection would lead us to the optimum level that maximises the nation’s welfare?

In our view of the world, the entire national income-corruption tradeoff is driven by the alignment between three distributions—of productivity, power and compensation. Let me explain. Not all jobs are equally productive—the farmer directly produces output, while the policeman does not. But that does not mean the farmer should get all that he produces, for then there will be nothing for the policeman, and crime will go through the roof. So, clearly, the farmer must support the policeman in his own interest. So, productivity and compensation structures will be different, taxes are necessary. The nature of the job matters too. The schoolteacher has little power to extract rent (particularly if the examiner is external and cannot control admission) that the policeman enjoys. So, professions and hierarchies create a distribution of power in society as well. So it is possible to think of the entire society in a three-dimensional space—of productivity, power and compensation—where

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