Corruption: Alternative Hypotheses

[Sanjeev Sabhlok <sabhlok@almaak.usc.edu>]

Not much time to devote to corruption, today, but thought I'd send off a
brief (!) note. 

Kush's hyothesis: "socialism has nothing to do with ideology"
-----------------
> Sanjeev seem to be saying that corruption in India is because of
> socialistic thinking.   I am saying that socialism is just a facade
> for corruption,  In other words, corruption has nothing to do with any
> ideology. Rather corruption has only one "ideology" which is personal
> greed (sometimes necessity) and opportunity for corruption which an
> unaccountable system provides. 

To test this hypothesis, we will have to frame the argument as follows:

Hypothesis 1:	Indians are genetically corrupt. Hence it is immaterial
		what system of government you put them in. They will
		always be corrupt. Particularly greedy, these Indian
		folk.

Hypothesis 2 (more refined):
	
		Indians are not all genetically corrupt, but there is
		a law of self-selection operating here, in that only 
		the corrupt enter government service. The law of
		self-selection operates irrespective of the government
		system that you operate in. The very word "government"
		will ensure that Indians will fall into two lines:
	
		a) the corrupt will fall into the line headed by the 	
		   flag called "government"
		b) the non-corrupt will fall into the line headed by
		   the flag called "private sector."

In other words, diagramatically, the Kush model reads as follows:

Indians Grp I 		-----> Black box of	----> Result is the same 
(genetically corrupt)	       government		since only
							genetically
							corrupt join govt.

Indians Grp II 		-----> Black box of 	-----> genetically honest
(genetically honest)	       government		and never greedy
							    =====	

The black box of govt can include ANY form of govt. (communism, socialism,
capitalism, fascism, anarchy)

Marx's model was that it is the industrialists who are genetically greedy
and the workers are chaste, pure, humanitarian and good. The Kush model
makes a similar argument, but discriminates on the fact whether you are a
government servant or not.

Sanjeev's (Economic) model:
==========================

In my model, derived from the discipline called economics which studies
how wealth has been created and is created, three assumptions apply to ALL
human beings: 

a) All human beings want more of what they value than less (i.e., they
are greedy). Children might want more of a pony ride, Mother Teresa may
want to save the soul of more people, and you and I may want a more clean
environment (less pollution). All of us will, given the choice of chosing
between equally "clean" $10 and $100, will choose $100. 

b) All human beings are opportunistic. In other words, they all have
"guile." Starting from our epics like Mahabharat and Ramayan, right upto
the current day, when a very "simple," politically untrained, Italian girl
(now Indian), called Sonia Gandhi suddenly "kicked out" our old man Kesri
who was unprepared for the fact that his "own" appointees to the CWC will
change color behind his back, ALL human beings are and will remain
opportunistic. Beware of even the most simple shephard (not necessarily in
a negative sense, though).

c) All human beings are boundedly rational. In other words no one knows
everything about everything else. Hence they take "maximizinig" decisions
based on uncertainty and incomplete knowledge. Consciously they are
always "maximizing" their own welfare, never minimiziing it though the
results may be quite to the contrary.

All these human laws are derived from the laws of nature. In nature, no
animal that does not do the above things, will or can, survive. The result
of any single one of these motivations might not always be obvious as
people apply a combination (also called strategy). Therefore when a king
is very good to his people (as recommended by Chanakya) that does not
violate the first law; it simply is an opportunisitic (strategic) way of
continuing to get the support of his people and to thwart his enemies. If
a king were a fool enough to be not good to his people (as Aurangzeb was),
he will lead to his own downfall or the downfall of his future dynasty.

In my model human beings can be "chanelled" into socially constructive
activities only by devising a system of checks and balances, including
incentives, to ensure that people do what is expected of them.

My hypothesis is:

All Indians are genetically greedy and opportunisitic, like anyone else in
the world. Therefore their observed behavior depends almost completely on
the system which they operate in (i.e., the Black Box above makes a huge
difference on the outcome).

Socialism ---> great role for government in business (including industry)
		+ very low wages to all levels of decision-makers
		
          ----> a general temptation to squeeze out public funds for
		  private gain, by government functionaries.

	  ----> Given the opportunity (which is always there), 
		  the vast majority of the government becomes "corrupt"

As per this hypothesis, there is no self-selection operating which makes
the corrupt join government, and the honest folk to stay outside it. In
fact it does not matter whom you put into the government. Provide them
with a greater role to interfere in private affairs and to build cloth
mills, and pay them a low salary. Invariably, and for sure, in all
societies everywhere (not only in India), this "mix" will lead to corrupt
outcomes. 

We all know that people compare our government functionaries with the time
when the British were there. Our bureaucracy was never as corrupt, then.
But we never had socialism, then, either... This also shows that Indians
are not genetically corrupt. 

Nehru was himself never corrupt, but his greatest bane was the growing
corruption in government all around him. Go to Bhakra Nangal Dam and you
will still find his admonition to the engineers not to be corrupt. He was
completely blank as far as economics was concerned (or even politics: look
at his shock when China attacked us: of course, they would. Why would they
not?). He did not realize that the socialism that had led to great
corruption and even massacres of innocent people in USSR (he was a great
fan of Stalin, can you believe that!), was going to do the same to India.

His daughter and his grandchildren were of course blissfully unaware of
anything at all (Nehru had a truly great understanding of India's past, at
least, and had done much to bring us freedom). When we have top ranking
economists in the world like Bhagwati, Srinivasan and even Sen, trying to
tell these folk that their path is destined to lead India to disaster
(1991, by the way, was a disaster of mammoth proportions), these
mystified, confused, and power-drunk progeny of Nehru did not have the
intellectual capability to understand their sound advice. 

In my hypothesis, therefore, it is the form of government **creates**
corruption out of the usual human traits of "greed, opportunism and
bounded rationality." 

I insist that all Indians are greedy, opportunistic and boundedly rational
[individual differences might exist in the level of these traits]. I also
insist that **no** Indian was born corrupt. All corruption that we see
around us (at the cutting edge level of ticket collectors in trains,
police mamas, delhi development authority, and at higher levels like the
Defence Secretary Mr. Bhatnagar who took money in the Bofors case [by the
way, for those folk who might not be aware, my father was the Additional
Secretary to the GOI, and the number two or three man in defence finance
for many years and he knew of Bhatnagar's involvement right through, in
the Bofors case. He also told me of the activities of many other top
bureucrats and politicians. When I talk of corruption, I not only talk
from my own experience in Assam where a Chief Minister wanted money from
me, indirectly, but from my father's experiences in Andhra Pradesh where
the then Chief Minister asked for contributions from the public sector
company my father was in, and so on...]) was created from the socialistic
system we have adopted. 

There are some folk who need very little (like my father, whose needs are
quite small). These people do not become corrupt in any system. There are
others who are so strongly offended by corruption that they will never
participate in corruption. But I wish to point out that these few folk can
only be a minority. Most people's needs are increasing all over the world. 
When an average worker in the USA has a car and a house, why should our
average DDA clerk aspire for less? Therefore, by giving enormous powers
and low salaries to people who are intrinsically greedy and opportunistic,
we create the monster called corruption all around us. 

I am not saying that coming down heavily on corruption is a waste of time. 
It does help, for a few weeks or a few months even. But unfortunately, we
live longer lives than that, and simply taking draconian measures against
our corrupt people will not solve any problem. It comes back as soon as
these strong measures are slackened, and when it comes back, it comes back
with "vengeance," strengthened and even more greedy. 

Instead, we have to go for the standard economic model of bureaucracy
(Niskanen, Douglas North, and others), and follow the path of Singapore. 

a) Change the system completely by eliminating govt. involvement in almost
all business activities.

b) Pay the law makers, judges, and bureucrats (at all levels) higher and
still higher salaries, as economic growth increases. Today, a typical IAS
officer gets hundreds of times less than his counterpart used to get
before Independence. That is not a sure way to increase honesty in the
IAS. Among the faculty at the National Academy of Admn. in 1994, one of
the most burning topics of discussion among us was the higher and yet
higher levels of corruption among the young IAS officers the moment they
are released into the field. Self-selection is now beginning to operate, I
think. As salaries in the civil services plummet, the people who join it
are more and more clear that they will have to "make up" through other
means. 

I am not saying that corruption will disappear when these things are done,
but that it will come down to such low levels that we could even live with
it, and in any case, it would become much easier to take strong steps
against the corrupt (such as maiming them in public!) without causing a
social outcry. 

Therefore we need to change the system, not simply kill off our corrupt
folk (as Kush's argument might lead us to conclude).

These are difficult topics and the solution is pointing clearly to one
path: get rid of socialism and adopt "capitalism," and standard economic
theory. That way, growth will happen, corruption will go, and poverty
will be completely eliminated (in Korea it took only 10 years of
capitalism to almost completely eliminate poverty). We can then talk of
how exploitative the system is, who is suffering from the greed of our
industrialists, etc. At least will be spared from the greed of DDA
clerks, and the torture of being led by leaders who have barely passed
school.

Sanjeev