The other side of corruption

December 7, 2014

Perhaps the rethink on corruption needs to focus more on how to deploy the proceeds of corruption

The other side of corruption

Now that Pakistan has firmly re-established itself as the 126th most corrupt country in the world -- up a notch from last year’s ranking of 175 countries -- perhaps it’s time to reassess what corruption means to us.

As per the Transparency International definition -- one commonly accepted across the board -- corruption is the "abuse of entrusted power for private gain" and "it hurts everyone who depends on the integrity of people in a position of authority". But does it really?

First of all, the definition itself is too flat to admit nuance. The South Asian institution of ‘chai, paani’, for example, is now too well-entrenched to be even regarded as corruption per se; it’s generally rationalised away as speed money, akin to tipping wait staff at a restaurant for better service even though providing the same is their job. Given that public functionaries are duty bound to provide service anyway, does a provision of better service -- at the passport office, at the Nadra office, or even at a Sessions Court -- really qualify as abuse of entrusted power, even if it stems from private gain?

While the argument for egalitarianism has a certain seductive logic, it doesn’t really square up with real politick. To build upon the controversial argument extended by Indian sociologist, Ashis Nandy last year, societies are invariably unequal: some pay speed money to get their FIR registered, others rely on phone calls to the policeman. While much is made of the ‘fact’ that corruption enables transfers from the powerless to the powerful, power -- or its exercise -- isn’t a zero-sum game.

In an unequal world, corruption provides options to even those who lack power -- think school-college networks, familial networks, military or bureaucratic links -- and empowers them to rise above their circumstance. Put another way, corruption empowers as it allows people to buy the power they can exercise for their own benefit.

And this is why any global crackdown on corruption -- on chai-paani practices, on the nepotistic award of public contracts -- is meaningless until corruption is redefined to include the capture of public policy by vested interest groups.

The most significant engagement of a state with its publics is through public policy; the rest are details. Public policy is what determines jobs, livelihoods, health and education; it is simultaneously the font from which the legitimacy of the government flows and the site where democratic accountability is practised.

The capture of state institutions and policies by big business or the deep-pocketed not only erodes the legitimacy of the rulers and cuts through the accountability relationships that bind the rulers with the ruled, this policy capture undermines the prospects of democracy as well.

Accordingly, till the influence of the National Rifle Association on US government is documented and the interests of the Pakistani military industrial combine in undermining peace with India is understood, the wails over ‘corruption’ can only be the sideshow.

 If corruption were a critical determinant of growth, the top five corruption free countries -- Denmark, New Zealand, Finland, Sweden, Norway -- would have been the fastest growing and the now-soaring BRICS nations would have tanked.

And this is perhaps why corruption isn’t really the big issue as far as business practices or the macro-economy are concerned. Take the example of the Overseas Investors Chamber of Commerce and Industry (OICCI), a body comprising some of the biggest foreign investors in Pakistan. In their 2013 survey of business and investment in Pakistan, the members surveyed identified a host of issues plaguing the business environment. Yet, rather prosaically, the consensus was that the most significant issues were energy, the law and order situation, inflation and political instability. Even the second tier didn’t feature corruption: government policies and the slow-moving judicial stream were mentioned instead.

Clearly, corruption isn’t the economic flashpoint it is made out to be by international watchdogs and local politicos. And this contention is borne out by the fact that corruption -- or "unethical practices", as OICCI refers to it -- finds mention only under the section called ‘cost of doing business’.

Globally too, businesses absorb corruption within their costs; whether they pass on these costs to consumers through inflated prices or through shoddy quality is a different matter. But corruption, in and of itself, is no serious impediment to running a profitable business.

This fact is corroborated by Transparency International’s own assessment of the Asia-Pacific region. Despite being "the world’s fastest growing region" (according to TI itself), of the 28 countries that comprise the area, "the majority lag behind in their efforts in fighting corruption in the public sector, with 18 scoring less than 40 out of 100 (on a scale where 0 is highly corrupt and 100 very clean)."

If corruption were truly a critical determinant of growth, the top five scorers on the TI list -- Denmark, New Zealand, Finland, Sweden, Norway -- would have been the fastest growing and the now-soaring BRICS nations would have tanked by now. (In the TI index, Brazil ranks at 69; Russia 136; India 85; China 100; South Africa 67.)

The other point to be remembered is that in the construction of indices, such as the TI one is that they’re predicated on perception largely. Without empirical evidence regarding corruption -- for example, exhaustive documentation of how much money was funneled into corrupt practices, how this affected the longer term interests of the country -- perceptions can only be taken as unreliable broad indicators. For example, in the OICCI survey, a stunning 74 percent of respondents said they hadn’t been approached for "unethical practices". Whether this response stems from a greater tolerance for what constitutes ‘unethical’ or is derived from facts on the ground, the core issue remains that corruption itself isn’t generally considered to be a problem.

All that remains to be analysed is how corruption is processed through societies and economies. The argument is somewhat similar to case made out for the black economy in Pakistan. In the late 1990s, the staunchest defenders of capitalism advanced the idea that while the government did lose out in terms of revenues, the black economy allowed for money to be made and -- more critically -- be ploughed back into the economy, thereby creating real gains in terms of incomes and jobs.

And that is precisely what’s wrong with Pakistani corruption. In countries characterised by high levels of instability -- fiscal, economic, and political -- money flows out of the country eventually. And the sustained net outflow of resources eventually cannibalises growth. The problem isn’t that the federal minister is accepting bribes for awarding a sugar import quota; it’s the fact that not only is he stashing his share of the loot in the Cayman Islands, by importing sugar, he’s destroying the infant sugar production industry. The consumers win in the short term; the imported sugar is marginally less expensive than the locally produced variety. But in the long term, the local industry, local jobs and local lifestyles are hit.

Perhaps the rethink on corruption needs to focus more on how to deploy the proceeds of corruption.

The other side of corruption