Ill-effects of corruption

A non-descript Gandhian Anna Hazare's crusade for a Jan Lokpal Bill to stamp out corruption in all walks of life aroused universal attention for a fortnight in August , thanks to thefast he undertook to drive down his message. It is not that Anna Hazare found virtue in rooting out the virus of corruption; the nation too had become a mute spectator for far too long to a spate of corruption cases tumbling out from the closet.

The eruption of corruption issue to the centre-stage is not surprising as the citizens feel helpless even to get their small and routine needs fulfilled from the authorities — be it government or municipal corporation or local bodies in villages.

Though institutional mechanisms in the form of Constitutionally-mandated bodies such as the Central Vigilance Commission, the Comptroller and Auditor General, the Election Commission and a raft of laws to take cognisance of corrupt practices, with implausibly inadequate penalties exist in the country, the ground-level remedy to the common man for justice in corruption cases remains an elusive ideal.

Investors, both domestic and global, bemoan the high cost economy India had become over the years, with doing business in the country becoming a none-too-pleasant experience, given the labyrinthine system of dealing with the authorities at all levels.

Against this backdrop, a just published study by the National Bureau of Economic Research (NBER) titled Corruption in the Developing Countries (by Benjamin A.Olken & Rohini Pande ) throws up some interesting insights into the perennially problematic issue.

Claiming that recent years have witnessed a phenomenal breadth in economists' ability to measure corruption, the authors say this has led to a new generation of well-identified microeconomic studies.

They make no bones about stating that while there exists ‘robust evidence' that corruption responds to standard economic incentive theory, effects of anti-corruption policies often ‘attenuate as officials find alternate strategies to pursue rents'.

An outspoken admission to highlight that the inherently diabolical and self-aggrandising proclivities of bureaucrats inured to corrupt practices could seldom be stamped out by legislation alone!

Cost of corruption

Various micro-studies reviewed by the authors unmistakably suggest that the efficiency costs of corruption could be quite severe, as corruption may jack up the marginal tax rate of firms, decrease business activity, raise the marginal costs of public funds and render certain government projects economically unviable.

An interesting estimate of the efficiency costs due to distortion is the allocation of capital from state banks, the authors point out, citing a study that politically connected firms, defined as those with a politician on their boards, received 45-per-cent larger loans from government banks in spite of having a 50-per-cent higher default rates on these loans.

Privately owned banksshow no such political bias! The authors are not wrong when they said shirking by government employees could also be deemed a form of corruption since they are stealing time from the government rather than money.

A host of recent papers estimates absenteeism of health workers and school teachers. In India, with the government pro-active in public investment for social infrastructure and no dearth of schemes to boot, the performance of employees in these domains seldom gets evaluated to ascertain the humongous loss of money to the government or the real benefits to the people targeted.

Subversion of rules

The authors advert to a study about trucks being stopped at weigh stations in Indonesia for overweight, but the problem remains endemic in India too at national highways.

The law demands that trucks exceeding the prescribed weight limit are to be booked, the excess cargo unloaded and the owners made to appear in court asked to pay a fine. However, most of them avoid this by greasing the palms of officials.

The situation is so dismal that, while the owners of the relatively more overweight trucks did pay higher bribes, even those trucks that adhered to the stipulated weight limit were forced to pay a bribe.

Corruption, thus, dramatically cuts the marginal cost of driving overweight, though the damage such overweight trucks pose to highways is quite substantial.

In the end, the authors wryly concede the ability of individuals to outguess (nay, outsmart) those who seek to regulate them, suggesting the crucial need to glean data on both the short and long-run effects of many different anti-corruption policies!

The price of eternal vigilance on this score is undeniable.

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