Rafale Deal and Corruption

The Modi government is embroiled in an alleged corruption case of  Rafale Jet deal with the French government. Opposition parties are now gunning for the resignation of prime minster Narendra Modi. They have accused him of personally influencing and altering the deal, which was originally put in place by the former UPA government, to benefit his crony Anil Ambani. The former French president Francois Hollande has now confirmed that it was the Indian government who didn’t give him any choice to choose their Indian partner, and only suggested Anil Ambani’s Reliance company name.

We can’t and don’t want to investigate this alleged scam here. May be Modi did influence the deal, but that is not our concern here where we want to discuss the nature and cause of corruption.

Nature of Corruption

WordWeb online dictionary defines corruption as Lack of integrity or honesty (especially susceptibility to bribery); use of a position of trust for dishonest gain. One major type of corruption is bribery. Murray Rothbard divides bribery into two types,

we must distinguish between an invasive bribe and a defensive bribe. The defensive bribe is what we have been discussing; that is, the purchase of a permission to operate after an activity is outlawed. On the other hand, a bribe to attain a exclusive or quasi-exclusive permission, barring others from the field, is an example of an invasive bribe, a payment for a grant of monopolistic privilege. The former is a significant movement toward the free market; the latter is a movement away from it.  (Murray Rothbard, Man, Economy, and State: A Treatise on Economic Principles, p. 1142)

The other major type is political scams, like the alleged Rafale deal, where people misuse a position of trust for dishonest gain. Indian people trusted Narendra Modi and made him the prime minister, but, if this scam is true then, he misused this trust and used his position to benefit his crony Anil Ambani.

Cause of Corruption

Now bribery can be between business to business too, but in most cases of corruption the one institution that is omnipresent is the state and its bureaucracies. A businessman has to give a bribe to the bureaucrat or politician in order to get permission to start his otherwise legitimate business. This is the defensive bribe. This type of bribery is through which, as Ludwig von Mises said, a market economy breathes in an economy where government intervention is omnipresent. Or a bribe can be given to politicians and bureaucrats to stop other people from getting the license and entering the market which can result into higher competition. This is the invasive bribe, and this type of bribe is dangerous. This invasive type of bribery is in which most big corporate houses, like the Ambanis, Adanis, Birlas, Tatas, Mahindras, Bajajs etc., are involved in. They are the ones who have become big corporate houses by giving such bribes to political masters to stop competition from eating away into their businesses. They stifle the market competition. Such big businesses are also involved in political scams too. They are the cronies of the state and so they get all favors when deals like Rafale are getting finalized.

So, no matter which type of corruption we examine, the root cause of corruption is the omnipresent state and its interventionism in the economy and society. As Ludwig von Mises said,

Corruption is a regular effect of interventionism. (Human Action, p. 736); and
In many fields of the administration of interventionist measures, favoritism simply cannot be avoided. (Human Action, p. 735)

And, such corruption has nothing to do with this or that political parties. It is inherent in the very nature of the state (aka, the government).

Remedy of Corruption

If the existence of the state (aka, the government) and its interventionism, which creates myriad of bureaucracies, is the root cause of corruption then its remedy lies in the elimination of this state and its interventionism. Totally eliminating the state can take time, but immediately people can start to demand the rollback of the government in the form of dismantling of its myriad bureaucracies and its interventionism policies. We can start by dismantling as many government departments as possible and repealing as many so-called regulatory legislation (acts) as possible. Such action demands a change in the public opinion, and that in turn demands that public, at the least, becomes aware of the true nature of the state (aka government). As long as the public is unaware of this predatory nature of the state or is not ready to remove that state after knowing it, removing corruption is impossible.