Corruption is amongst the most debilitating economic illnesses that afflicts large parts of the world. It damages the quality of life for ordinary people, destroys the moral fabric of society, and slows growth. The reason we see less corruption in high-income countries than in low and middle-income ones is not that those countries are innately more moral, but countries that manage to combat corruption are the ones more likely to progress.
Transparency International provides us with data on corruption across nations and over time. Of the 142 countries it ranks in terms of the perceived levels of corruption, Denmark and New Zealand tie for the first position, and Mauritania is at the other end, with the highest corruption. The two big emerging economies, China and India, had the same score in the most recent table and are ranked 79th. In both China and India, data shows that corruption has not only been high since 2000, but it has been increasing fairly steadily. This raises the question: Why is corruption so persistent?
To control corruption, we need determination and passion, but we also need analysis and a modicum of understanding of economics, law and psychology. My belief is that it is the deficiency of the latter that allows corruption to flourish and persist. The anger and agitation against corruption that we often see in the streets are genuine. But the reason this does not translate into less corruption is because anger is not enough.
Let me give two examples of insights that can come from analysis.
There are many examples from around the world of strong leaders, like Xi Jinping of China, who genuinely wanted to banish corruption when they first came to power, but did not do so. From the logic of political economy, it is not hard to see why this happens.
All political leaders rely on overt loyalty. Further, the so-called strong leaders tend to have an aversion to public criticism. It is not hard to see that for such leaders, nothing is as advantageous as pervasive corruption. When that happens, it becomes easy for the leader to silence dissent and encourage public display of loyalty. This is because when there is pervasive corruption, the leader has the option of arresting almost anyone on corruption charges. This gives the leader the capacity to arrest those who publicly oppose him, not for the criticism, or at least not openly so, but on the grounds of corruption. If this is done systematically, then criticism can be stopped and public display of loyalty can be engineered, since people know that if they oppose the leader they will be arrested for corruption.
The ubiquity of corruption gives a political leader a leash to curb dissent without having to openly say he or she is curbing dissent.
For the second example on the power of analysis, I want to return to a suggestion I had made in 2010 and unwittingly stirred up controversy. Nothing came of my proposal but I do think it ought to be considered by any government serious about controlling corruption, especially bribery.
The idea in a nutshell is the following. Let us call a bribe a “harassment bribe,” when a person has to give it to a bureaucrat or police in order to get something that she has the right to receive. If after you pass the driving test, the official who takes your test asks for a bribe, then that is a harassment bribe.
To curb bribery, India’s Prevention of Corruption Act, 1988 asks for severe punishment for anybody caught in a bribe exchange with the punishment for the bribe giver and the taker being the same. This well-meaning law is, however, founded on weak logic. What the law does is to unify the interest of the bribe giver and the taker, once the bribe has been paid. Both the giver and the taker have an interest in colluding to hide the fact of bribery.
My proposal to break this collusion, at least in the case of harassment bribery, was to amend the 1988 law and declare the act of giving such a bribe legal but the act of taking the bribe illegal and maybe to increase the punishment for the government servant who takes the bribe. With such an amendment, the bureaucrat trying to take a bribe will know that, after the bribery, the bribe giver will have much less hesitation is admitting to having given a bribe. And this fear will make it less likely that the bureaucrat would ask for the bribe in the first place. This is called backward induction in game theory.
I had proposed this based on pure reason and had little evidence to offer, one way or the other then. But evidence has come in in many forms since. First, laboratory experiments done by Klaus Abbink, Utteeyo Dasgupta, Lata Gangadharan and Tarun Jain, published in the Journal of Public Economics, shows that while my argument is not without caveats, asymmetric punishment does tend to curb bribery.
More recently, there are some fascinating findings from China. Three researchers, Maria Berlin, Bei Qin and Gianca Spagnolo, discovered that in 1997 the Criminal Law of the People’s Republic of China was changed in ways that altered the criminal responsibility for bribery between the bribe taker and the bribe giver. Interestingly, they also find that there is sharp decline in bribery after 1997 in China. The results are not without ambiguity but this break in the law creates the possibility of empirical work that we did not have earlier.
My aim here is not to make a case for a particular reform but to stress, first, that the main culpability for corruption lies with not ordinary citizens but government officials who are supposed to enforce the law; and, second, the importance of data and analysis in designing corruption control. If the anger citizens feel against corruption can be matched with expertise and design, we may be able to make a dent in the incidence of corruption, the major economic malaise of our times.
- Economic Graffiti: Why morality matters to economics
To deal with corruption, it is not enough to just get fiscal policies right. It is in our collective long-term interest to nurture individual values...
- Economic Graffiti: In the name of education
There is an impressive increase in school enrollment levels across the country. But not much thought is being given to what students learn...
- Facing the slowdown
India’s economy is not doing well. Only carefully crafted policy reforms can turn it around..