Corruption as a driver of the economy

Vithal Rajan | Updated on January 13, 2018

Bakhtiar Zein/shutterstock.com

It propels a development pattern that widens the rich-poor gap — a problem more serious than the black money it generates

The frisson caused by the demonetisation of higher currency notes gave ample scope for the theatrics of politicians. Economists, however, pointed out that most of the money would already have been translated into benami land assets, or sent abroad for safe-keeping. It is only black — that is, untaxed — money that could be unearthed, and that too only from the occasional hapless ‘mules’. The big fish, as EAS Sarma, former economic affairs secretary, has pointed out, are practised in laundering money. The former governor of the Reserve Bank of India, YV Reddy, pointed out recently that political leaders have hesitated to close loopholes that permit ‘round-tripping’ of money through foreign safe havens.

An old habit

The Prime Minister’s speeches have added to the popular understanding of corruption, as exemplified by Bollywood films, in which villains stash away black money in sacks. People are waiting for these villains to be dragged out into the open.

The practice of giving maamul and nazrana is a hoary tradition. In fact, in Kalidasa’s Shakuntala there is a memorable scene in which a policeman is bribed! The giving of gifts to the powerful was a transfer payment, like giving baksheesh to a beggar. The nazrana offered to the nobility, Robert Clive’s loot, the jewels that Lady Willingdon graciously accepted from maharajas, were all, like Nadir Shah’s pillaging of Delhi, a form of looting of looters, a transfer of hyper-surplus value.

At the dawn of Independence, India’s leaders and their followers were a band of upright persons committed to serving the country and its people. Their actions were transparent and their lifestyles simple. The early deaths of Mahatma Gandhi and Sardar Patel gave the Congress satraps a free hand to treat the country as their own jagirs. By 1966, corrupt practices had become thickly entwined in the form of government itself, joining corporate leaders, politicians, and bureaucrats in cycles of mutual benefit and aggrandisement. These cycles of power, money, and corruption of social values have grown, and continue to grow, stronger by the day.

India has survived better as a democracy than most former colonies. But India shares with almost all of them, in Africa and South Asia, a special scourge of corruption. This new post-Independence form of corruption as a driver of the economy produces more concentration of power and wealth with the elite, prevents deeper democratisation of the polity, and excludes the poor from ever being able to do more than marginally improve their status.

A structural malaise

It is not the will of political actors alone but the new structure of the polity that makes the goals of development unattainable. The colonial government had distrusted the colonised peoples; the independent governments went further, regarding the masses as mere basket-cases incapable of helping themselves or the nation, whose poverty was not a result of exclusion from assets such as land, water, education and bank credit, but karma. The masses had to be paid off with largesse in the form of bank loan waivers, and free give-aways during elections.

This structural corruption soon morphed into corruption as a force of production when the State started to define knowledge of what was practical and good, and what was not feasible under the present circumstances.

When Jawaharlal Nehru called big dams “the temples of modern India” he and his advisors were misled by their fascination for American and Russian gigantism. But persistence despite all scientific evidence can only be attributed to a strong ideological belief that micro watersheds and people’s own efforts at water conservation did not matter, while dams resulted in popularity, prestige, corporate profits, and large kickbacks.

India’s early bid to acquire nuclear technology was no doubt dictated by defence concerns, but persisting with spending vast sums on an unsafe and uneconomical technology, while overlooking renewables amounts almost to a fundamentalist belief.

Even if all the netas and babus turned miraculously honest, nothing will change fundamentally in the trajectory of development, and white money will continue to be loaded into rich pockets. Corruption as a force of production creating black money is only a minor feature of its evil working. Above all it warps the very process of development to keep the rich rich and the poor poor.

The writer is a political economist and social worker

Published on March 03, 2017

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