Sunday, January 23, 2011

Killing the Corruption

Recent flood of corruption events (here, here, and here) in India have rocked the country hard, and the issue has become a big talk of the town. The media is full of anti-corruption campaigns/news. Bollywood has also focused on this issue many a times with movies like 'Nayak' etc. Even before these events came into day light, corruption was an issue of major concern for most of the Indians. Majority of them - mostly youngsters - think that corruption is one of the major roadblocks in the path of India's progress, and they of course are right. Corruption is a big opportunity cost imposed by the government on the economy. Despite all these brouhaha, so far the thinking about the issue of corruption remains muddled; no one is asking the right question, and no one knows the true solution of this problem. In this short missive I will analyze the causes of corruption and will discuss the solution of this problem.

What is corruption?
Before we logically analyze the problem of corruption, we need to first have a clear definition of it so that to avoid any confusion. We are here concerned with the so-called political corruption as exemplified by the above cited scams. Precisely speaking, the country is in search of solution of corruption being carried out by the public officials i.e., by the politicians and the bureaucrats. Here we are not interested in the corruption of culture or the values of Indian society for which again the State is partially or fully responsible.

There are mainly two different forms of political corruption:
  1. Bribe by the government officials; and
  2. Scams perpetrated by the politicians/bureaucrats which swindle tax payers' hard earned money e.g., the recent CWG or Adarsh society scams.

After defining the theoretical concept of corruption, now we are in a position to understand its root cause.

Why corruption?


Why bribes?
As I have discussed elsewhere, bribe is the money which people have to pay for successfully passing through the labyrinth of government bureaucracies. For example, Person X decides to start a restaurant in Mumbai. In a libertarian anarcho-capitalist society he will have no problems in starting his hotel other than facing the usual challenges of starting any business i.e., availability of start-up capital, availability of land (either his own or a seller ready to sell), and availability of labor. If he has the initial capital available and a private land owner sells him his land then person X can straight away start his restaurant. He doesn't have to deal with anyone else but the private property owners with whom he wants to make a business deal.

But, alas, we don't live in a libertarian anarcho-capitalist society! We live in a State governed centrally planned economy where the State controls (partially or fully) the means of production. Here the procedure for starting a restaurant is diametrically opposite. The big hurdle person X will have to pass is to successfully steer clear his business proposal from the maze of various bureaucratic departments. Anyone who has even a slightest experience of going into these creepy government offices knows and will understand what I am just about to say. The process of going through the public office red tapes will start with an application for opening the hotel. Even if the papers are all clear and no one has any objection for this business application, given the human nature, bureaucrats in that public office will ask person X for bribe. They will threatened him that without bribe his application is going no where. Such scenarios are depicted vividly in TV serials like 'office office'. Facing the choice between giving a bribe and starting his business and not giving a bribe and ruining his business, person X will choose to pay the bribe to start his business. If he select not to pay bribe then his business is ruined and his survival becomes a question mark, and when there is a choice to be made between life and death most normal people choose life.

The most important thing we need to notice here is this: Person X is not happily giving the bribe to the bureaucrat. On the contrary, the bureaucrat forced him to pay the bribe. He is giving bribe because he was asked to by the bureaucrat. No one willingly pays bribe. The only reason people pay bribe because without it their work will get tangled in the public offices. Bribe is the additional cost which people have to incur because of government bureaucratic departments getting in between them and their work. If no one asks for bribe then no one will pay it. If there is no demand for bribe then there won't be any supply of bribe.

So, who is responsible for the corruption in the form of bribe? Of course the bureaucracy, and not the bureaucrat. Why not the bureaucrat? Because if there are no bureaucracies to begin with then there are no bureaucrats!

Let us take a look at government scams now.

Why scams?

Basic human nature is that of selfish genes and politicians/bureaucrats are no different; they are as human as I and you are. As Milton Friedman famously said, there are four major ways of spending money. People are very careful when they have to spend their own hard earned money either on themselves or on their friends/relatives etc.; they are also careful when they are spending somebody else's money on themselves; but they take no care whatsoever in using the money to which they have no direct accountability i.e., somebody else's money on somebody else. Politicians/bureaucrats fall in the last category. They are in charge of tax payers' money. This money they have not earned or they don't owe it directly to the tax payer. Tax payers' money simply is a loot by the government. And when it is not the case of tax payers' money, public officials are in charge of money which is being created by the central bank (RBI) out of thin air through printing. The selfish human nature has evolved in such a way that, if given chance, most of the people will wish to amass huge amount of resources without doing any kind of hard work. Most people like 'free' goods and so they will use political means for living their lives. Being in charge of somebody else's i.e., tax payers' money, these public officials are inclined to gobble up huge amount of these freely available resources. This inclination ends in those financial scams.

So here again, the root cause of the financial scams is those bureaucracies which allowed the public officials to be in charge of tax payers' money. If there are no bureaucracies then there is no chance of bureaucrats gobbling up tax payers' money.

One thing we have to constantly remind ourselves here is that, there is nothing wrong with this selfish human nature because it has helped individual genes to survive in the evolutionary process. Everyone is selfish. Important thing is, this selfish nature is a boon when it is harnessed by the free market process, but it is very harmful when is left unbridled in government bureaucratic departments. The issue is not of changing human nature from selfish to one that of altruism/benevolence. Thinking that human nature can be changed artificially is a pure utopia, just like the socialist communist thinkers' belief in the birth of 'a new socialist man' devoid of his selfish nature. Society has to accept the selfish nature as given and then it must develop the bottom up voluntary institutions which can harness selfish nature's beneficial powers. Human cultures have evolved that institution in the form of capitalism which relies on private property rights and free market process. People will have to preserve capitalism if they want to kill the problems like political corruption.

Solution
State and its bureaucracy is the root cause of political corruption and so dismantling the State and its various bureaucratic departments is the only way of abolishing the corruption of public officials. If there won't be any State and State officials to interfere in individual's lives then there won't be any problem of political corruption. No one will have to pay the additional cost in form of bribes and no politician/bureaucrat has a chance of messing up with tax payers' money.

If anyone thinks that without dismantling the State and its bureaucracies they can remove the problem of corruption then they are just whistling Dixie. Honest State government is an oxymoron.

2 comments:

  1. dont you think your "sollution" would lead to a bit of caos? there wont be anyone to monitor over the overgrowing population. correct me if i am wrong..

    ReplyDelete
  2. @Rubana: Dear Rubana, government is chaos and market is peaceful order. I can't discuss everything here. I can only suggest that you read these following books (all freely available online).

    1. Chaos Theory by Robert P. Murphy (http://mises.org/resources/3088)

    2. For a New Liberty by Murray Rothbard (http://mises.org/rothbard/newlibertywhole.asp)

    3. The Market for Liberty by Linda and Morris Tannehill (http://mises.org/resources/6058)

    4. Planned Chaos by Ludwig von Mises (http://mises.org/resources/2714)

    Alternative of thug State does exist viz., the Anarcho-Capitalist Private Law society. The only problem is people don't know much about it. Understanding this alternative will only better human civilization.

    And thanks for asking the important question. Asking question will only start the discussion of various ideas and through such discussion only we can find solution of our problems. Ideas only drive the world!

    Madhusudan.

    ReplyDelete

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