Struggle for transparency

In a dubious landmark and a first for India, the Parliament could hardly meet for its winter session, paralysed by an alliance of opposition parties in rowdy protests against a corruption scandal in the state allocation of the telecommunication spectrum.

By Pranab Bardhan

Published: Thu 30 Dec 2010, 9:47 PM

Last updated: Thu 2 Apr 2015, 10:18 AM

The scathing public auditor report as well as energetic judicial intervention comes close on the heels of other recent scandals involving land and housing schemes and the malfeasance widely reported in the arrangement of the Commonwealth Games. Some of the opposition parties, of course, throw stones from their own glass houses – one of them most recently associated with ministers involved in land scams and illegal mines in the state of Karnataka.

Are there structural reasons for such pervasive corruption? And does India’s corruption differ from that, say, in China?

A common question is why corruption, once associated with the discretionary powers of the earlier “license-permit raj,” seems to be on the rise in India, instead of falling with the abolition of that control regime. One can immediately think of at least three reasons to explain this puzzle.

First, despite a great deal of deregulatory reforms and trade liberalisation, some major controls, particularly at the level of state governments, remain. For example, anyone who wants to start a factory needs land, often acquired from the state, water and electricity connections made possible by relevant departments, and then need environmental clearance, putting the applicant at the mercy of factory inspectors and labour-law implementing agencies, and so on. This is not to suggest that some of these regulations do not have rationale based on legitimate social objectives – say, overseeing minimum work conditions in factories or restrictions on pollution – but considerable official discretion is involved and, with that, some scope for corruption.

Secondly, with high economic growth the market value of scarce public resources – land, oil and gas fields; mineral resources; the telecommunication spectrum and more – has gone up enormously, and so has the chance of making money from their favored allocation. For example, in the case of the allocation of 2G spectrum, instead of the standard method of auctions, the minister concerned allocated them to favored agents in 2008 at low 2001 prices, resulting in a loss to the treasury of up to $39 billion, according to an estimate, possibly bit of an overestimate, by the public auditor.

Third, over time elections at all levels have become more expensive in terms of advertisement costs, petrol for transport, and alcohol and cash for the large numbers of vote-mobilising youth, particularly as an Indian constituency involves numbers of voters much larger than elsewhere, more than a million in case of parliamentary seats. Without public financing of elections, raising money from all kinds of private sources, often through illegitimate means, is indispensable. Of course, those private sources in turn demand and get quid pro quo from politicians in terms of policy favours.

In comparing India with China, this last reason of election expenses is barred. Yet the other two reasons remain valid in China as well and may explain part of the large corruption there. In fact, with fewer checks and balances either in government institutions or from independent judiciary or media or civil society, the corrupt in China can get away with unscrupulous behaviour much more easily. In rural areas where households do not have ownership rights on land, Chinese local officials, in collusion with local business, have been much more peremptory in acquiring land without adequate compensation. Nothing like India’s recently enacted – though as yet weakly implemented – Right to Information Act deters the corrupt Chinese official.

Of course, those caught in the act face the threat of more severe punishment in China: Corrupt officials are sometimes summarily executed while in contrast, Indian corrupt officials, if punished at all, get off relatively lightly. But in general, Chinese punishment for corruption is often arbitrary and, more often than not, used against political adversaries or small fry.

Of course, public protesters against corruption are also punished sometimes on charges of disrupting public order – a recent case in point is that of the large-scale tainted milk scandal of 2008, which led to the execution of a high official and also imprisonment of protesting parents of some victims.

It’s interesting to note that Chinese journalists who were fully aware of the developing story of the tainted milk scandal postponed writing about it until the 2008 Olympic Games – China’s moment of international glory – concluded, in order to be “harmonious,” as one editor explained to a foreign reporter in justification. Meanwhile 300 children fell sick, and dozens died.

In contrast, media fury in India broke out over reports of official ineptitude and corruption in the arrangements for the Commonwealth Games in New Delhi this year just before they began.

There are, however, grounds to suggest India has more institutional inducements for corruption than in China. First, in China the lines of authority are more well-defined and streamlined, whereas India operates with an administrative system of multiple veto powers on a given decision – a legacy of colonial times and distrust institutionalised in the administrative process.

In the recent media splashes and leaks around the corruption scandals in India, showing the sticky fingers of corporate and real estate tycoons, lobbyists and journalists in good measure, the cozy nexus is usually described as crony capitalism.

But such cronyism is actually more acute in China, where successful state-owned companies are often controlled by powerful political families. It’s been reported that of the multimillionaire residents of China the overwhelming majority are relatives of high-ranking Communist Party officials. While there are hereditary political bosses and family business empires in India, there’s also a more vigorous private corporate sector and quite a bit of churning in the list of top companies. India’s crony capitalism does not approach the levels found in China.

The sound and fury around the recent corruption scandals in India will serve some purpose if they strengthen the resolve for eternal vigilance on the part of civil society rather than reinforce the enveloping cynicism.

Pranab Bardhan is professor of economics at the University of California, Berkeley© 2010 Yale Center for the Study of Globalisation

More news from OPINION