The Hindu Business Line : Capital punishment for corruption?

Several newspapers reported in July that China executed Zheng Xizoyu, the former head of its State Food and Drug Administration. He had been found guilty, just two months earlier, of corruption. He was found to have received $850,000 (Rs 3.4 crore) in bribes from eight drug companies and the severity of the punishment was justified by the government on the grounds of the size of the bribes and the damage to the country’s image.

Executed for corruption… within two months of being found guilty! I did not hear any protests anywhere. There are usually none in China unless the government wants it, in which case they bus the people to the protest locations, usually in front of the Japanese or US embassies. There were no protests in the US either, where there is a small-scale industry of groups monitoring human rights abuses in China. I think capital punishment for any offence cannot be justified on any grounds. The Chinese choice of this punishment was to send a strong message that they are taking corruption seriously. It remains to be seen whether this will have any effect on the general level of corruption.

When people believe that corruption is all pervading and one case hits the headlines, it can generate several cynical responses from the common man on the street. ‘Everyone does it and he got caught’ is one. True, that does seem unfair but is no reason for not pursuing the suspect against whom the evidence is available.

Evidence is always tough in corruption cases. By raising the stakes of punishment, the hope is that while some may escape punishment, the price to be paid for the crime will act as deterrence for others. That is the luck of the draw.

Another objection would be equally cynical. ‘He probably did not have enough friends in high places.’ Now, Prince Bandar bin Sultan, a Saudi, is currently accused of having received bribes from BAE Systems, a British company, for facilitating a £43 billion (Rs 3,52,250 crore) export of fighter planes to Saudi Arabia. When the order was signed in 1985, the British government hailed it as a means to protect jobs in its defence industry.

The British also loved the fact that they beat the rival contenders for the deal, namely France’s Mirage jets. But when the BBC and The Guardian newspaper claimed to have uncovered evidence of the bribe, the British government used the now standard excuse around the world — that it would affect a national security relationship with the Saudis, and suspended any inquiry. Of course, it also helped that the guilty party was the son of the Saudi Defence Minister and crown prince. Apparently, the stench is not perceivable at high places.

In high places

That is not new, especially for the UK, which has a hoary tradition in this regard. Remember Clive? He personally pocketed £234,000 (Rs 1.9 crore) in the 1750s from Bengal’s treasury (equal to £22 million or Rs 180.5 crore in today’s money) for his role in installing Mir Jafar on the throne and beginning the colonisation process. He was officially exonerated. The East India Company itself had a cozy relationship greased with ‘gifts’ to the throne in return for charters and other facilities.

Even if it reaches high places, the stench is sometimes felt only after the person loses power. When a government does not pursue corruption against people in high places, it gets even less respect from the man on the street. In the possibly apocryphal story, a policeman outside government offices in India asks for a nominal amount in return for being excused of a traffic violation, by pointing to the building and saying, ‘I’m not asking the kind of money they take!’

It is not as though the givers are the private and the takers are the public officials. Private-to-private corruption is as extensive, although possibly causing less harm to public morality and misallocation of public resources.

In an ongoing case in the US, the financial aid directors at many universities, including prestigious ones such as Johns Hopkins and University of Texas at Austin were recently found to have received kickbacks from financial institutions who give student loans. The lenders wanted their particular institution to be placed on a preferred lender list and students directed to them for securing loans. Financial aid is a crucial need in the universities due to the high cost of tuition and applicants often seek the advice and help of the university in securing a loan. Thus, the financial aid directors were leveraging their power in return for personal benefit, creating a corruption situation, even if the students were not hurt by higher rates or stringent terms.

Two sides to a coin

There are two sides to any bribery issue — a giver and a receiver. The Chinese authorities have not yet filed any charges against the companies who gave the bribe and it is not known if they will. In May, two ex-officials of Siemens, the German engineering company, were convicted of bribing officials at an Italian utility company. They admitted paying two officials at the utility, Enel, €6 million (Rs 33 crore). The court judgment required the company to forfeit the profit in the deal, and the individuals were given suspended sentences. The judge was lenient towards them since they argued that the Italians had demanded the payment.

The US has done a much better job of controlling public corruption than most places in the world. Not because they are particularly moralistic, and they have also gone through bouts of corruption during their earlier days of growth and development. But they have formalised and legitimised activities that attract corruption. From an economic perspective, the cop on the street, the ration officer, the clerk in admissions, and so on, by their petty actions, make the burden fall more heavily on the poor than the rich who can afford to make the payments. They are the ones who distort income distribution, and lead to ineffective resource allocation, by making services and facilities unaffordable to those who need it the most.

Let’s give up the death penalty for corruption, but be assiduous in pursuing the small timers also, and perhaps institute tarring of the face and parading the culprits in the streets as punishment.

(The author is a professor of international business and strategic management at Suffolk University, Boston, US. He can be reached at cgopinat@suffolk.edu)

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