Given that there is a corrupt Scandal breaking out almost every 24 hours in India currently, I took a step and asked myself – what really is the Economics of Corruption?
I put on my Rodinhood Cap and came up with these thoughts:
– At the outset, its important to recognize that ANYONE who takes a bribe or passes on a favor to someone or creates undue benefit for someone else (that is not legal) RISKS many things. The top risks being losing your job, being fined, being thrown in Jail and of course earning a permanently bad reputation.
So, if I asked you today to take off all your clothes and come to office, you would NOT. Simply because the Stupid FAME or VANITY of the challenge is not WORTH the damages that come with the outcome.
If that is the case, then I ask – what makes Corruption worthwhile?
INCOME PARITY
So, if you are a Cop in Mumbai and have 2 kids and a wife to feed, and the Salary that you officially earn as a Cop is a pittance, you start accepting petty bribes to supplement your income. Its done in a silly clandestine way that is quite embarrassing. However, the bribes create AN INCOME PARITY for you that matches your needs and expenses.
So, Bribes often make up for Disparity in income levels. If one totals the Bribes of a Police Department and divides it by the Cops employed, it tells you what they SHOULD HAVE been earning.
If they were officially paid this amount, would they still accept bribes?
VALUE DISCOVERY
Lets say that there is a massive Government owned Textile Mill Complex in defunct Textile District of Mumbai that a Builder discovers, and then bribes his way to owning.
Post paying the official price and the hefty bribe, he then works at creating a VALUABLE property around it and selling it to retail buyers . So a real business appears on top of a not so productive land that was acquired via a bribe. Now, the bribe is a serious crime and can send the builder to Jail. He lives with that gnawing pain at the back of his mind.
Does the builder pursue this dangerous path as a way of UNLOCKING VALUE of the real estate that otherwise would remain undiscovered or unexploited? If he would not convert the Mill to a Commercial Complex, the Government would keep running those defective Mills and make Cloth no one would buy and pay Salaries to unproductive workers from Our Tax Moneys.
Doesn’t the act of Corruption finally lead to preventing waste and unlocking massive value?
CREATING A LEVEL PLAYING FIELD
During the Indira Gandhi regime, personal Income Tax rates had climbed to as high as 90%! This immediately led to lots of people evading taxes by paying bribes to the Income Tax dept.
Their reflex action was to PRESERVE their wealth, rather than squander it away.
It has been subsequently proven ove the years that as the Income Tax code gets rationalized (reduced and made prevalent across more people), less incidences of evasion are found, since good sensible citizens would rather pay what seems to be a RATIONAL amount and sleep comfortably in the night.
Similarly, lets assume that I am a Soft Toy manufacture, importing artificial fur from China to cover my soft toys and then export them to the USA.
If the import duty on that Velvet is so abnormally high that my toys become ‘un-exportable’, then I may resort to bribing Custom officers to NOT pay my duty so that my business remains Viable.
In these cases, via corruption I am seeking TAX PARITY or Harmonisation with the world.
Again, its been proven that reduced Taxes (Import and Excise) dramatically increase GDP and of course are less cheated upon.
What do you think?
Bharat
if one totals the Bribes of a Police Department and divides it by the Cops employed, it tells you what they SHOULD HAVE been earning……
Thats the bottom-line of the core corruption in our country!! Yes, police deserve to be paid better or atleast be provided with if not the same but competitive freebies that the armed forces receive!! The police department in turn needs a major overhaul!!
The disciple of a person is not brought from within, but by the environment created around you. India is way behind in even creating something of that sort!!
A moment of Irony is, should we be sad that there are so many scams around us or be happy that there are some of them atleast getting busted!
Abey John
Corruption exists at two levels. (Why two? I love to split everything into 2 or 3!) What we have in India is corruption of deprivation, seeking – as you so rightly put it Alok – parity. Or the so called poverty mentality and the desire to escape it. The other type of corruption is the one born out of plenty. The type that screwed the Lehman Brothers over. Legal fudging of the law can be done away with by equitable wealth disbursal systems. The Lehman type is the real danger. The type where Anil Ambani will float Swan telecom and have partners as Tiger, Parrot, and Zebra. I kid you not. That type of corruption is hard to combat. But the bottom line is it has all to do with the heart and what you deem as wealth. Our current value system measures wealth by what you have in the bank which essentially convolutes any type of straight thinking.
We really need a visitation from Master Yoda!
Alok Rodinhood Kejriwal
awesome thinking!!
Abey John said:
Mahesh Khambadkone
The good cited as a result of corruption, is like the motivation to exercise as a result of smoking.
The acts are done selfishly, never done with that good in mind, and may be co-related to the good only as a means to justify the act.
Alok Rodinhood Kejriwal
very well said.
I agree.
Mahesh Khambadkone said:
Satyen
Alok, great thought provoking topic. And as well stated by Abey, there is a need to distinguish between corruption caused due to the failure of the state in providing basic necessities, and corruption due to greed.
The disgracing thing is all our major scams are all due to greed. After a politician has a 100 crores (arbitrary number picked), I don’t get why they keep risking themselves future from a personal perspective, and lose the opportunity to actually carry out their duties and leave a legacy from the civic perspective.
Or simpler still (and I know I am being too pragmatic with this), let them ask for bribes from everyone offering a tender, and pick the one that will do the job right! At least that way we will get good roads, ports, etc. I don’t get why they can’t get the work done even after taking the damn money!
Munish Goyal
#1 : We can assume that is the actual cost of policing or running a govt. office. So even after paying the bribes you do not get poorer to starvation, its just you paid x % higher fees.
2nd point: Corruption is all pervasive as per #1 so just solace yourself in considering it as y % more tax you are paying. But what about the poor who cannot afford bribes ? for whom the cheap facilities are created by the govt. , they should somehow be allowed relief in the corruption value chain . Ha ha
3rd: Whatever said done, it is afterall money circulating from one to another. The money should not leave the country. If it stays in country then it will work towards economic growth in some way.
This black money will erect a factory, develop land or lend on interest towards economic growth.
4: Now the money should be in right hands. Govt. is the best hand, because you and I wont build the city roads or create a metro rail. But if corruption led to poor roads then everyone suffers. The corrupt babu also drives his car on the same road. 🙂
#5: The poor looses in the game. Govt made subsidized ration, health etc. schemes for the poor. If those are not implemented due to corruption, then POOR is the one who looses, however far country’s economic development goes.