A friend has strong views against corruption and he was stuck with a problem. He wanted to buy a plot of land. There was nothing illegal in it, but until he paid grease money, the files wouldn’t move. In that ethics versus efficiency trade-off, he eventually opted for his land and paid. As citizens, all of us confront that trade-off, the relatively poor more than others. Corruption isn’t distributionally neutral and hurts the poor more than others. Since richer-off sections can afford to opt for privatised supply of many goods and services, their interface with the government is rarer.
Like every other piece of machinery, the government machinery too needs oil and grease. Notice, these are often services that are a citizen’s right — ration cards, SC/ST certificates, driving licences, passports, land deeds, water supply, electricity connections, bank accounts, school admissions, health, FIRs. One person’s entitlement doesn’t necessarily deprive another. It’s no different for business and that doesn’t necessarily mean the corporate sector. Micro and small enterprises are victims. Ask the street vendor, the own account enterprise and the self-employed. Ask about police, excise, municipal inspectors, forest officials and labour inspectors. This corruption isn’t always about bending the law to suit one’s needs. Even if laws are not being bent, entry, functioning and exit, three stages of an enterprise, confront grease.
Unlike citizens, enterprises’ interface with government machinery is continuous, not sporadic. A citizen may opt for ethics and choose not to bribe. That’s not an option for an enterprise, not unless it closes down.
The answer lies in making administrative law transparent and non-discretionary, and in exerting countervailing pressure. There have indeed been improvements. But I am only saying that one cannot run an enterprise without bribing, unfortunately. The present corruption laws don’t cover the private sector or the bribe-givers. But changed legislation is only as good as its enforcement. Beyond entitlements, one moves to situations where my getting something amounts to you not getting it. For instance, government contracts. Is it possible to move to a transparent system, say through e-procurement, where discretion is completely avoided? The answer probably depends on the type of contract. Road contracts are different from those in defence, or allocation of natural resources, where auctions may not be the only option. As long as there are scarce licences for allocation, there will be lobbying, so that I get the contract and you do not, so that policy is tweaked to favour me and constrain competition.
This phenomenon wasn’t new for industrial licensing and was documented in the late 1960s. What’s changed, apart from scale, is the shift from industrial licensing to allocation of natural resources. In principle, it is by no means obvious that reforms always lead to decline in decision making and corruption.
Sure, there can be greater transparency, and surely, legitimate lobbying (that doesn’t ask for special dispensation) should be legalised, instead of being frowned upon. If the electoral system is fixed, the nexus between corporate funding and political parties will also partly break down.
While pointing fingers at the corporate sector is easy and crony capitalism is bandied around as a dirty word, there is crony socialism too. Corporate governance isn’t a silo. It doesn’t improve if overall governance doesn’t. Nor does it improve if the criminal justice system is such that there is no effective and credible deterrent against corruption. In that politician-business nexus, corruption is high-gain and low-risk. It’s not that other countries don’t have corruption. Whether it is the US earlier, or whether it is Hong Kong recently, there are learning experiences. But the first step is to improve government decision-making.