Capitalism is a Problem but the Root Cause of Corruption Is Lack of Transparency

N. Ram’s new book sees mounting graft as an outgrowth of economic liberalisation. But the fact that controlled economies produced some of the most corrupt societies the world has known should give us pause to think.

Corruption matters to all of us which is why this is an important book. Ram is not sure if India is the most corrupt country in the world but, that imponderable apart, “the Indian political system is corrupt to the core”. Indeed for him “corruption’s salience in India’s political economy … has never been higher”.

The paradox is that reputable studies show that corruption cases only account for an almost invisible 0.06% of 91.1 million registered criminal crimes over a 15 year period spanning 2001-2015. To put it simply, this means we have a huge problem but are doing very little about it.

According to Ram’s argument, the problem is that “corruption is not conceptualised soundly”. It’s seen “in overly simplified moral terms” and not in “relation to socio-economic, political and cultural factors”. As a result both analysis and prescription are “seriously flawed”.

Ram’s analysis of corruption is that “it’s a normal, not an abnormal, condition within the political economy of capitalism”. Indeed, he believes liberalisation simply makes it worse. “Liberalisation has ushered in corruption in a much greater variety of forms and on an unimaginably greater scale than anything seen under the so-called licence-raj.” This is because of the role of the state after de-regulation and liberalisation. He believes the “pro-business strategies of governments bring on or facilitate crony capitalism”. He also seems to accept Pranab Bardhan’s point that “with decentralisation and devolution of authority … corruption may increase”.

Whilst there is a certain measure of truth in Ram’s analysis it’s by no means the full story. No doubt capitalism and liberalisation can provide breeding grounds for corruption but, arguably, the controlled socialist or communist system of the erstwhile Soviet Union made corruption both more inevitable and widespread. Unfortunately, Ram’s book doesn’t talk about this.

May be the size of corruption in capitalist systems is larger but the spread under socialist or communist systems is incomparably greater. Probably everyone in the old Soviet Union was corrupt. It wasn’t just a way of life, it was the only way of living. If you weren’t corrupt you wouldn’t survive.

Now, because I suspect Ram’s ideological predisposition against capitalism underlies his analysis of corruption, his cure is, for that reason, limited. He claims “the answer is better regulation that ensures that decision-making is subject to due process and is accountable and monitorable”. But the Soviet Union had more regulation than any state in modern times. It also had plenty of due process and presumably all of this was accountable and monitorable. Yet corruption was rampant.

The problem arises with the people doing the regulation i.e. the human factor. Not morality so much as the ability to find a way around rules and laws to benefit oneself. Where such ways can be found and not easily detected the opportunity for corruption will remain.

Surely, therefore, the answer is to reduce discretion i.e. eliminate to the fullest extent possible the ability of humans to find ways of benefiting themselves? The more open and transparent a system, the more accountable and monitorable it will be. Of course, you need regulation to prevent monopoly or even dominant advantage but only as a way of ensuring sensible checks and balances. The key is a system that operates on the basis of fair and accepted laws, transparently and with limited room for aggrandising individuals to exercise prejudicial discretion.

Which brings me to the title of this book: ‘Why scams are here to stay’. For Ram this is because of the unchecked liberalisation in India’s political economy of capitalism. But an alternative answer is because we don’t have sufficient transparency and retain far too much opportunity for discretion which distorts and, therefore, creates corruption.

This book also contains two interesting case studies. One on Bofors and the other on what Ram calls “Tamil Nadu’s scientific system of political corruption”. What seems to be his conclusion about the latter is intriguing. It was Jayalalithaa’s charisma and stature that ensured anti-corruption campaigns in Tamil Nadu made little impact. As he puts it: “when a strong and charismatic leader with mass appeal and a loyal organisation to support her … makes a bold stand invoking the notion of popular sovereignty, anti-corruption campaigns rarely succeed.” I’m sure he is right.

However, the chapter on Bofors is disappointing. No one knows more about this scandal or the investigation that revealed it than Ram. Yet all this chapter does is to recount the details of what happened. After nearly three decades that may be a useful reminder but I would have preferred to be told how the investigation was conducted, what problems it encountered and how they were tackled, who helped and who did not, and how different and disparate leads were patched together. Indeed, I want to know more about Lindstrom. Ram describes him as “our principal and key source through the investigation”. But that’s about all he reveals. I cannot help feel he’s held back more than he has told.

Even a little nugget that Ram does offer he’s left tantalisingly vague and incomplete. He says in 1988, R. Venkataraman, the then president, gave him “a tip”. He said to him: “Don’t you know that the standard rate of commission in major defence deals is 6%?” Ram calls this “valuable background information”. But what led a president appointed by Rajiv Gandhi to say this? What was the context and the rest of the conversation in which it was said? And how exactly did it help shed light on the path ahead? Ram doesn’t tell and so we don’t find out.

However, I don’t want to end on a negative note. This is an extremely informative and rewarding book. It’s not easy reading but if you want to know more about corruption it deserves to be read.

Karan Thapar is a Delhi-based journalist and television anchor who writes a weekly column in the Hindustan Times