THE COST OF CORRUPTION

The cost of corruption

By:- Ramesh. N. Desai

India is considered to be a very highly corrupt country by foreigners. Indians themselves also think likewise. While foreigners are appalled by this phenomenon, we Indians take it in a more matter of fact manner. Our easy acceptance of corruption is also one of the main causes of its existence.

Corruption can be classified as wholesale and retail. Wholesale corruption occurs when large amounts are involved and VIPs or even middle level functionaries are involved. Such cases get highly publicized and a lot of furore takes place. The cases are long drawn out and only when public memory weakens do they fade out. The truth in the matter is never known to the common man. When the next corruption scandal breaks out, it is time for the preceding one to start disappearing from peoples’ minds. In fact, powers that be appear to use this technique repeatedly without most people noticing it,

The retail corruption, on the other hand, is something that the common man faces day in and day out, at every step in his life while dealing with the authorities, however petty they may be. Be it a traffic constable, be it a railway booking clerk, a thanedar or a clerk of revenue, sales tax, income tax and so on. The ‘inspector raj’ may have reduced after economic reforms but that affects business people who take into account the money to be lost if they take a principled stand and not pay the speed money.

The money involved in retail corruption may be small but its consequences are very costly. Firstly, the whole society accepts it as a way of life. The corruption does not stop at only the governmental lackeys. Each and every person who thinks that he is in a position of giving goods and/or services, thinks that he has to get in return, something over and above the normal cost. This is on the same lines as speed money which is paid in addition to the salary. In course of time the whole society gets corrupted. Black marketing, hoarding and many other social evils can also be traced to this mindset. I have noticed in some parts t of the country, a usual question asked of the prospective bridegroom. Does he deal with the public in the course of his work? If so, what is the amount of ‘ooperki aamdani’ (speed money) that he makes. The answer to these questions helps to determine the amount of dowry that could be paid.

Secondly, as putting obstacles in the path of the common man yields rich dividends, a tendency to put in place more and more obstacles in the form of newer and newer rules and regulations gets a fillip. More rules, more laws, more the avenues of corruption. The Neta-babu nexus then takes over. This quite naturally reduces productivity. Cost of production rises. Inflation is the result.


The short term scarcities and the resultant anxieties of the masses are exploited to impose a regulatory system in place which works to perpetuate the scarcity rather than attack the causes of the scarcity. A rationing mentality takes over and it creates its own vested interests which see to it that a solution of the real problem is never found. Food
rationing had been imposed in the wake of the food scarcity during the second world war.

Immediately after independence, Mahatma Gandhi had advocated removal of rationing but it took a long time for us to do so. Food is now in plenty as we focused our attention on the green revolution instead of wasting our energies and scarce resources on rationing. Let me hasten to add that this year’s drought is an exception but here too, thanks to the economic reforms, we have a sizable foreign exchange reserve to enable us to import the shortfall to tide over the emergency. Thankfully, we have not gone back to rationing, even if we have not resorted to large scale imports of food grains. Imposition of rationing would have been a longer lasting inflationary step than inaction which has resulted in a shorter term inflation till the next good monsoon.

When socialism was the buzzword, cars and scooters were not available except at a premium and / or after a waiting period of a few years. Cement, iron and many other articles were controlled. Even newsprint was not spared. .After economic reforms, they are available in plenty as the focus shifted to more production rather than on rationing. Uncalled for regulatory activity is an avoidable unproductive expenditure. The old adage “Least government is the best government” still holds true. Under socialism, the government was the biggest contributor to inflation. However nobody dared say it. The media could lose their quota of newsprint, if they tried.!

Thirdly, the cost to the society in terms of loss of productivity is sizable. In developed countries, the retail corruption does not exist, leading to a certainty of outcomes. Here, in our country, one never knows when and where the work has stopped. The amount of follow-up and the cost involved in it, not to speak of the speed money, is stupendous. Once upon a time, New Delhi and the various state capitals were teeming with a species called liaison officers who mediated between government departments and the applicants. After economic reforms their population has gone down. Every government office even now, has its retinue of touts – middle men. Unless you go through them you may find a myriad of obstacles. These are however, a part of the retail corruption gang unlike the liaison officers of pre-economic reforms days who were part of the wholesale corruption gang. In our country, perhaps the government is not of the people, by the people, for the people but of the dalals, by the dalals and for the dalals. We might as well rename India as “Dalalistan”! Costs of production, naturally go up as one has to negotiate through a variety of obstacles and a variety of middle men.. This leads to inflation and we get into the wage-price spiral which only goes up and up.

Fourthly, government jobs become attractive on account of the power , perks as well as speed money ( incentive for saying ‘no’ to everything ) not to speak of lack of accountability. There are no goals , no dead lines, excuses galore for non-performance. What more do you want in a job? There is therefore a clamour for more and more government jobs. Being a democracy, public demand has to be satisfied for vote
gathering .Thus the society is burdened with an increased unproductive expenditure. Every society has three types of human resources 1) those engaged in production, 2) those engaged in services enabling production and 3) those engaged in regulatory srervices.
A good economic society gives maximum returns ( economic and others ) to people in production, lesser to those in services enabling production and least to those in regulatory services. Our brahminical mind set does the reverse. Brahmin, the regulator – highest, Kshatriya, the destroyer, next higher, Vaishya, the sevice provider, next higher and Shudra, the producer, the lowest of the low. No wonder, we do not understand dignity of labour. Each of these categories is important in its own function but we have to spend least money on regulation. Self- regulation is the best but its spread depends on the maturity of the society. We have already made a beginning in this direction after economic reforms. We have to carry it forward. Unproductive regulatory expenditure has to be minimized. By eradicating retail corruption we can make regulatory jobs less attractive and thereby reduce the pressure on more creation of regulatory jobs. It will doubly help in improving productivity. Less government servants, less corruption, less obstruction, more productivity. I do not claim to be an economist, nor do I have statistics to prove but my common sense tells me that the country can increase its G.D.P. by a per cent or two if we can emasculate if not completely eradicate this monster of retail corruption.

There are complaints about dumping of cheap Chinese goods in our country. Their cost of production is lower than ours. Their GDP growth is consistently higher than ours. They are perhaps able to do this because of lack of retail corruption in their country. If we have to compete with them, we must take the bull of retail corruption by the horns apart from improving productivity and reducing marketing and distribution costs..

Let us now look at wholesale corruption. It has to be tackled too but the priority has to be on retail corruption. The common perception is that the wholesale corruption is a bigger evil and must be eradicated first. In our households, mice play a bigger havoc by chewing up our papers, clothes, wooden articles etc than cats who might occasionally polish off milk and other dairy products left outside cupboards. The annual damage done by rats is much more than that done by the cat. Despite this, when we watch the Tom and Jerry cartoons, we all have a sympathy for the mouse and applaud him when he makes a fool of the cat.

We always favour the perceived underdog. The same is the case with the petty thievery indulged in by the retail corruption. Just as we see the cat as a bigger menace, we see the wholesale corruption as a bigger menace. However from the society’s point of view, it is not really so. The money made by wholesale corruption is either invested or stashed away in safe deposit vaults as consuming such large amounts is not possible. If invested, it is put to a productive use and if stashed away, it reduces inflationary pressure by taking that much cash out of circulation. The money generated in wholesale corruption is more of a transfer from one account to another without unduly affecting the economy. The money generated in retail corruption is however spent in current consumption. It is done in a wasteful manner as the beneficiary is in a hurry to dispose of his ill-gotten wealth.

The common perception is that unless wholesale corruption ( a bigger evil) is eradicated, retail corruption (a smaller evil) can not be done away with.. As we have seen above, it is the eradication of the mice rather than the cat which should be our priority, being more harmful to the household.. The common excuse of the lower level corrupt people is that they have to pass on a substantial part of their booty to higher ups. We readily gulp this as we have already decided (without adequate proof) that the rot is from top to bottom.

This is not to argue that wholesale corruption should be allowed to continue unabated. All I am saying is that the bigger evil is the retail corruption and its eradication is our first priority, if we mean what we say about wanting to benefit the ‘aam aadmi’. That is where the shoe is actually pinching him. Winning a test match, sending a mission to the moon, having a compatriot as a Nobel prize winner. All these events make us proud. Similarly, a Lalu or a Koda or Bofors scandals give us a high. They are necessary to keep up our spirits. They are however not so important to the common man as getting his ‘daal – roti’ cheaper than before or getting the street on which he lives to well paved and clean or a good well-run hospital or school in his area. Similarly swift and impartial punishment to a perpetrator of wholesale corruption gives him some satisfaction. Of course this does not happen, but if it did, even then, it does not fill his belly. Removal of petty or retail corruption in his own sphere of activity will give him a much greater satisfaction. He would much rather see that no differentiation is made between him and his rich and influential neighbour in the matter of either availability of public services or of punishment in case of any transgressions.

All the well intentioned policies of the government do not get actually implemented, largely because of this factor. There is the famous remark of the late Rajiv Gandhi about only 15 paise reaching the common man out of every rupee spent by the government. Unfortunately, he met with an untimely death.

Under alien rule, petty corruption was a method of controlling the population. Under democracy, it is the biggest hindrance to governance. Under alien rule, controlling the subjects was the main aim. Retail corruption was then, a tool for governance. Today, development is the main aim. Retail corruption is today, a major hindrance to governance. The control mindset however continues.

The powers that be who want to govern by back seat driving, would like this perception of the common man ( that the real evil is wholesale corruption ) to continue. It helps them to carry on with the retail corruption. They however want it to continue as it helps them to to do their string pulling act. They can keep blackmailing the rulers to get them to toe their line. Government is all about power and control. If you can control people who wield power, why bother about doing the dirty work yourself? These are the people who keep alive the myth of wholesale corruption being much more in quantity and quality than what it actually is. Beyond making a big song and dance ( with media helping them ), nothing happens. On the other hand, by keeping alive retail corruption, they are able to exercise control on lower level bureaucracy. They are thus able to control both the top and the bottom.

There is a hierarchy of control. The civilian controls the uniformed people by either brainwashing or by making them morally or financially corrupt. The uniformed people, in turn, control others by coercive means. Both of them together control the corrupt politician. The politician is their safety valve. They can pass on all the blame to the political class. This was ok during the alien rule. It is not so now. However in some parts of India it is almost impossible to climb the political ladder unless there is a vigilance file against the person concerned. The impression sown in peoples’ minds is that the Neta controls the Babu whereas the reverse is actually true in most parts of India.

People are made to believe that because the Neta is corrupt, poor Babu has no alternative but to be so. The reality is the other way round. In states where the Babu has been set right and is not effectively in control of the Neta, things have been better. The Neta is changeable. He can be thrown out after 5 years. It is in peoples’ hands. The Babu on the other hand is a permanent fixture. People have no control over him. .This is one more reason for the higher priority for eradication of retail corruption in preference to wholesale corruption. There can be no real democracy till every limb of the government is transparently accountable to the common man.

Let us look at W. Bengal. It has been ruled by the left front for three decades now. There have not been any major scams of wholesale corruption there. Recently, one of their own leaders complained about retail corruption. We all know how static the growth has been over there. Apart from the ideological backwardness of their leaders and choice of a wrong path, retail corruption has also been one of the reasons for the state’s present condition. Clearly, lack of wholesale corruption alone does not guarantee that the common man will become happy. What is really more important is to eradicate retail corruption. Wholesale corruption’s eradication can follow.
Are the developed countries developed because there is no retail corruption there or because they are developed, there is no retail corruption there? Well, wholesale corruption takes place there too. Media are full of such stories but the wrath of the common man there is such that visible and effective punishments result in swift retribution. Their wrath is in contrast with easy acceptance of the same in India. In fact, wholesale corruption is used as a pretext for continuing with retail corruption. We, alas, are a lot more tolerant of things that should be intolerable and a lot more intolerant of things requiring understanding and tolerance.
In the end, I would say that mere absence of wholesale corruption does not guarantee going forward in growth. Also, existence of only wholesale corruption ( unaccompanied by retail corruption ) does not deter growth unduly as we have seen in developed countries. But presence of retail corruption deters growth and its absence promotes growth. Let us therefore concentrate on eradication of retail corruption as our first priority. Eradication of wholesale corruption can follow the eradication of retail corruption. Let us not put the cart before the horse! In any case, we have been trying to do this for a long, long time without success. Let us, for a change, free the common man from having to pay ‘chai-pani or ‘dasturi’ or whatever name under which speed money is known. Once freed from this shackle, he will be a lot more intolerant of wholesale corruption and nothing is more effective than the righteous anger of the common man!