Sunday, January 1, 2012

The key drivers of corruption…..and why the JLP is not the solution

I did a piece last night on how Transparency International’s ratings and rankings clearly showed that India was a very corrupt country. However, the data also showed that in relative terms, India faired OK when compared with countries either in the BRICS block, or in South Asia or even in the larger Asia-Pacific block. It makes us ask the question: How can India do better than it is doing right now? What are the international trends that can be observed and do these trends favor India or go against it in its fight against corruption?

The data released by Transparency International places India at a lowly 92nd position in a listing of some 180 odd countries. It has a score of just 3.1 – a low score indicating a high level of corruption. What is worse is that the score has dropped since 2007 when it had reached 3.5. Had India retained this score in the 2011 listing, it would have been ranked around 77th, just a notch lower than China which is at the 75th place. Since Transparency’s ratings are based on data from ten different international sources, some of which are dependent on pereceptions and public reports, it is not difficult to understand why the ratings have dropped in the last few years (given the kind of scams we have seen).

The implication for India is clear – it may be relatively acceptably placed in the comparable grouping of nations, but it surely has a great opportunity to leap frog and get recognized as one of the less corrupt countries. Here’s why.

The three variables that clearly skew the corruption ratings are: 1) Population of the country – smaller countries doing better 2) political system – democracies doing better than dictatorships and monarchies and 3) liberal economic policies help reduce corruption. Let’s consider the data before understanding the implications for India.


On the population score, it’s interesting that only two countries amongst the top ten most populous countries feature in the list of countries with low levels of corruption (a score of 7 or higher). These are the US (score: 7.1; rank 24th) and Japan (score: 8.0, rank 14th). Amongst the next ten most populous countries, there is only one country that does well on the corruption score. This country is Germany (score: 8.0, rank 14th). From the next ten most populous countries, there are only two countries that have corruption scores of 7 or more. These are France (score: 7.0; rank 25th) and the UK (score: 7.8; rank 16th). Taken together, from the 30 most populous countries, there are only 5 which are low on corruption. In other words, 83% of the most populous countries fare poorly on corruption.

Look at the linkage between population and corruption differently. The average corruption score in the top ten countries by population is 3.9; in the next ten is 2.6 and the next ten is 4.4. Not a clear pattern, but it does give a hint that lower populations lead to better corruption scores.

But population alone is not a good measure to explain the performance on corruption. There are populous countries like the US (3rd by pop; score 7.1) which do well on corruption…..and there are many small countries by population but do very poorly on corruption. In fact, the worst two on the corruption scores are North Korea (population only 24 million) and Somalia (population under 10 million). But these countries are explained better by the other two variables I listed at the beginning than by their populations. If population had been the only parameter which decided corruption levels, India would have been doomed. But thankfully for us, there is the democracy factor that comes into play.


Look at the data differently now. Among the top 30 top performing countries by corruption, there are only two countries which are monarchies and one that is presently a democracy but has been ruled by a dictator in the past. The two monarchies are Qatar (score: 7.2; rank 22nd) and UAE (score: 6.8; rank 28th). The country under dictatorship in the past but having democracy now is Chile (score: 7.2, rank 22nd along with Qatar). All the other 27 countries are democracies. In fact, they are all liberal democracies of Western Europe and North America.

Let’s see how some of the known dictatorships/near-dictatorships fare. North Korea is worst off at 182nd position with a score of 1.0 along with Somalia, also at the same position. Afghanistan and Myanmar are next worst at the 180th position with scores of 1.5. Next up: Sudan, Turkmenistan (single-party system) and Uzbekistan (follows old USSR methods). The next worst are Haiti and Iraq and this should prove the point. Take China which fares only marginally better than India at 75th position; Pakistan at 134th position; Libya at 168th, and Nepal at 154th and Syria at 129th and the point about democracy is proven conclusively.

For India, its biggest hope is its democracy. How does democracy help in curbing corruption? I think this has been proven amply by the Anna movement. The pressure that people put (or lets say…..are allowed to put) on the government ensures that governments act on corruption. In the absence of the Anna movement, no government in the last 60 plus years (including Congress, BJP, Janata Party, etc) has acted on corruption. But the pressure of Anna’s movement has made corruption the hot button topic today. This is why I support Anna’s movement in principle (will tell you the qualifications later).

The other aspect of democracy that helps fight corruption is the existence of free media. The plethora of TV channels and newspapers (wait for radio to be allowed to do news!) makes sure that our politicians are under constant watch. In contrast, in China, even a Google, Facebook and twitter are not allowed to operate. There is no free media in that country. More than 2000 people are persecuted every year in China – but there is no record ever kept of it. This is the reason why Kapil Sibal was wrong in trying to even hint that the internet should be supervised (no matter how light the supervision). It shouldn’t be. Even with all the porn stuff available on the net, its impact of the public is self limiting. People who use the net know which sites to trust and which not to.

The government of India has been forced to work on multiple ways to tackle corruption in India. A number of new acts are being enacted – the Lokpal only being one of them. The Citizen’s charter bill, the Judicial Accountability bill, the state Lok Ayuktas (maybe through a different form of legislation now), the Whistleblower’s act, the strengthening of the Prevention of Corruption Act and the CVC Act are all bound to have an impact on corruption. A transparent land acquisition policy, a new mining policy and a more transparent public procurement policy will all ensure that corruption reduces.

Liberal economic policies:

There is one other important factor that is common amongst most countries that have less corruption. That is the pursuit of liberal economic policies. The more the competition in the marketplace for goods and services, the less the corruption. Liberal economic policies limit the size of the government and the role it plays. The government gets out of non-essential sectors. Corruption in Air India or all the mining corporations for instance could come down if the government got out of those businesses. The government instead focuses on public policies…..and their implementation – leaving the business of business to the private sector.

There are many other factors that also work towards reducing corruption. Electoral reforms that ensure only good candidates take on positions of political power are critical. Many people have commented that while India is a democracy, its poor electoral systems allow many “undemocratic” people to get elected. If we could clean this up, corruption would come down.

The last point now. Why did I qualify my support to Anna’s movement? My big worry is that Anna’s movement – the over emphasis on the JLP – could take India towards a new form of undemocratic Police Raj. What I called the Lokpal Raj in my post of December 13th (License Raj, Police Raj….now get ready for the draconian Lokpal Raj….). In our pursuit of a corruption free society, we must not allow the creation of a monster watchdog – the Lokpal – which has no reason not to become corrupt itself. The JLP is a wrong piece of legislation and all political parties must resist it – irrespective of what Team Anna feels. Anna must also recognize that the Lokpal is just one piece in a slew of laws required to battle corruption.

The real truth is that India’s democracy and its liberal economic policies will make India a less corrupt place. India’s high population could be a drag. It may be worth discussing what eminent journalist Kingshuk Nag has been propounding for long – having three times more elected representatives so that the population per MP and MLA is reduced. In any case, Anna’s movement and the freedom of media are two major reasons why India will succeed. Anna’s JLP however is a step in the wrong direction – creating as it does a monster of an institution. Overall, I am confident the next 20 years will see corruption coming down in India….

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