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01 February, 2013

Corruption in the age of globalization


Corruption is a part of mankind’s hoary tradition. Ancient Indian works bear testimony to its existence in the distant past. Going by the Gospels, one of Christ’s disciples was an official who was corrupt. In theory, in a feudal dispensation fear of instant retribution may deter an official from accepting illegal gratification but when rulers want to amass riches for personal gratification or for financing wars they cannot act against corrupt officials who help them realize their goal. In the early phases of British rule in India, the administration was highly corrupt. Officials of the East India Company returned to England from their Indian assignment with immense wealth. Hickey, who set up India’s first newspaper, exposed corruption by Company officials but he was acting in the interests of a faction within the organization and was not a genuine anti-graft crusader. The House of Commons summoned Robert Clive and Warren Hastings, two enthusiastic empire builders, to answer charges of corruption. Under the Company’s rule there arose a class of Indians who served the cause of the colonial masters and obtained opportunities to fatten themselves at the cost of their own countrymen. Those whom the Company had employed to prepare land registers falsified the records and dispossessed people of their holdings. After the British government assumed direct responsibility for the governance of India military adventurers were replaced by officials selected through a competitive process, and they tried to provide a clean administration. 

The Indian Civil Service, which comprised educated Britons and Indians selected on the basis of a tough examination, enjoyed a high reputation for efficiency and integrity. It was, however, not entirely free from corruption. Soon after Independence, two senior Indian officers of the service, S.A. Venkataraman and S.Y. Krishnamoorthi, faced corruption charges. Under the rules, an ICS officer could only be tried by another member of the service. The British officer who tried Venkataraman was scandalized by the evidence that a contractor who had dealings with his department had picked up the bills for the Scotch whiskey which a New Delhi wine shop delivered at his house each month. Both Venkataraman and Krishnamoorthi were sentenced to jail terms. That was in the 1950s. Since then there have been few instances of officials of such seniority being prosecuted although the system continued to provide scope for corruption. Evidently, somewhere along the way it lost the ability to act against corrupt officials presumably because they were acting in concert with political elements. 

Prime Minister Jawaharlal Nehru established a convention of ordering a judicial inquiry when a prima facie case of corruption or other impropriety was established against a Central minister or State Chief Minister.  On the appointment of an inquiry commission the minister was obliged to resign but an adverse finding did not lead to criminal prosecution or prevent return to the government at a later stage. In other words, corruption only exacted a small political price. It did
not invite a legal penalty.

Over the years corruption charges have spiralled. In the 1970s, Prime Minister Indira Gandhi famously described corruption as a global phenomenon. It is true that corruption has existed in all societies and at all times but there is nothing to indicate that in India it was as widespread at any time as it is today. The economic liberalization programme the government initiated in the 1990s has been widely represented as one involving dismantling of the licence-permit raj, which had spawned corruption in the early years of Independence. However, the era of globalization it inaugurated has seen enormous growth in the extent and volume of corruption.

At the root of the continuous expansion of corruption is the political parties’ growing need for resources to fight elections. In a five-year period, they have to face three elections – at the national, state and local levels – and even cadre parties are becoming increasingly reliant on money for the conduct of campaigns. Acceptance of contributions from corporate entities was widely seen as undesirable as it would place the parties under obligation to them, and at a very early stage Parliament passed a law prohibiting political contributions by companies. The ill-conceived legal remedy led to widespread use of black money in elections.  Many business houses found it necessary to generate black money to fund political campaigns. The law has since been changed but black money continues to oil the election machinery of the political parties.

When the Congress dominated politics at the Central and State levels it was the major beneficiary of corporate donations. Jawaharlal Nehru is known to have stayed away from fund raising, leaving the job to party leaders who maintained close contacts with the captains of industry. As other parties grew and began posing a challenge to the Congress, businessmen started patronizing them too. Over the years the fund collectors came to have much clout within the parties and some of them started siphoning off part of the donations to build private kitties. A veteran of the freedom movement observed in the 1970s, “In our time 80 per cent of the money we collected reached the AICC, the rest going into expenses. Now only 20 per cent reaches the AICC, the rest going into other channels.”  As collections dwindled, parties in power began raising money through kickbacks. There was now a direct link between favours shown to individual business houses and the money that flowed into party coffers. Still later a similar link emerged in the award of foreign contracts too. The Bofors scandal is a case of this kind that got exposed. In many States, postings and transfers of officials also became a source of political funds. When officials are drawn into fund raising in one way or another it becomes difficult for the political masters to check corruption in the bureaucracy. That explains why the system which could throw the book at members of the ICS is unable to take on members of the less glamorous successor services.

Corruption in the bureaucracy operates differently at different levels. When officials at the higher levels take bribes it is generally to show favours. Businessmen consider the payments they make as part of their investment. Ordinary people who deal with the lower levels of the administration for routine matters often find it necessary to grease palms not to receive any favour but to get what they are entitled to as a matter of right such as a birth or death certificate or a caste or income certificate.  The licence-permit raj undoubtedly offered much scope for corruption. Rahul Bajaj, a leading industrialist, has admitted that he expanded his business surreptitiously by producing more than what he was licensed to manufacture. This is how the famed Harvard Business School, of which he is a distinguished alumnus, records the story in his own words at its website: “To lower my costs while improving the price and quality of my products, I needed economies of scale," he explains. "Ignoring a government regulation, I increased my volume by more than the permitted 25 per cent of my licensed capacity. If I had to go to jail for the excess production of a commodity that most Indians needed, I didn't mind."Bajaj’s confession about breaking the rule has special significance as he is the scion of a business family which had close connections with the nationalist movement and Mahatma Gandhi. He did not go jail for his defiance of the law, which his alma mater describes as “his own form of disobedience” in a bid to pass it off as something akin to Gandhi’s civil resistance movement. It is not unreasonable to assume that the authorities, politicians and officials, were not unaware of the goings-on in the Bajaj plant and that their acquiescence was bought in a manner which neither he nor Harvard wishes to acknowledge. In a book titled “The Polyester Prince”, published in 1998, Hamish McDonald, an Australian journalist, chronicled how Dhirubhai Ambani, a self-made businessman, built a big empire in a short period. A few copies of the book reached India soon after its publication but quickly disappeared and no further consignments reached the country. The Ambanis reportedly threatened to launch legal action if the book was sold in India. At one time the book was available online but now it is not easily traceable even in cyberspace. It is not clear if the credit for blocking it belongs to the powerful state or to the resourceful business house.  Dhirubhai Ambani’s two sons figure high up in the Forbes list of Indian billionaires, and the magazine has indicated that the older of them, Mukesh, could emerge sooner or later as the richest man in the world. The names of the Ambani brothers and their mother, Kokilaben, figure in the list of Indians who had accounts in a branch of the Hongkong and Shanghai Banking Corporation in Switzerland, which France had made available to India some time ago. The Indian government’s failure to act against the bank or the account holders suggests it is reluctant to pursue black money trails which may lead to corrupt politicians and officials.
Corruption of the permit raj days, enormous as it was, pales into insignificance in comparison with the scams of the era of globalization, the amounts involved running into hundreds of billions of rupees. There has been an exponential growth of graft since investors, domestic and foreign, started rushing to grab valuable resources such as land and minerals. Rapacious businessmen have shown readiness to bribe their way around obstacles such as environmental laws and opposition from local residents.  Many politicians have acquired business interests in diverse fields, including the media. Affidavits filed by candidates seeking re-election to public offices have revealed enormous growth in their assets during their earlier term. It was against this background that Anna Hazare launched a campaign to force the government to enact legislation for setting up a Lokpal with powers to prosecute corrupt politicians and officials. 

The idea of a Lokpal at the Centre and a Lokayukta in each State to deal with complaints against the administration was first mooted by a high-powered committee half a century ago. Several States have already created Lokayuktas, headed by retired Supreme Court judges or High Court Chief Justices. Their performance has generally fallen short of expectations of the public. In a few instances they have pursued cases against powerful persons relentlessly but the law does not invest them with sufficient powers to punish those found guilty. A Central law has not materialized so far. On several occasions bills were introduced in Parliament and allowed to lapse with the dissolution of the Lok Sabha. Finding the pending bill drafted by the government unsatisfactory, Anna Hazare and his associates, who included some lawyers and former officials, prepared a draft of their own with strong provisions and insisted that Parliament pass it into law. The government modified some provisions of its draft to meet their criticism but the bill fell through. While the government ritually reiterates it is committed to enact a strong anti-corruption law, its lackadaisical approach leaves doubts in the public mind about its earnestness in the matter.    

An act of corruption, while benefitting some, almost invariably deprives others of justice and fair play. As such, it amounts to a violation of human rights. However, the human rights movement in the country has not involved itself seriously in the fight against corruption.  Even the moral and ethical aspects of corruption have not received adequate attention. Indeed, with elements known to be corrupt parading in public as roaring successes in their fields, there is often sneaking admiration for them and willingness to emulate them.

India is currently going through a phase of fast economic growth. Even a cursory look at the history of the developed societies will show that they witnessed large-scale corruption in the early stages of explosive growth. Britain experienced such a phase in the 18th and 19th centuries. The United States went through a similar period in late 19th and early 20th centuries. Japan and South Korea, two Asian countries which saw swift development after World War II, were dogged by scams. The biggest economic success story of recent years has been China’s, and it is grappling with the problem of corruption at high levels. Where India differs from these countries is in the inability of its system to deal effectively with corruption at high levels of the administration.  Two former Prime Ministers of Japan and a former President of South Korea were jailed on corruption charges. China executed a provincial governor after being found guilty in the early days of economic liberalization. More recently it jailed two members of the powerful Politburo of the Communist Party and a third high-ranking party official is expected to go on trial soon. The real problem that India faces is not the absence of a strong law but the incapacity of the system to move against those at the top. A change in this state of affairs cannot be expected until the political machinery is cleansed and the electoral system is freed from the influence of money. (Social Science in Perspective, Vol 4, Nos. 2 and 4, July-December 2012)

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