The Worry about Anna (Hazare)

29 Aug

The following piece is in response to Arundhati Roy’s opinion published in The Hindu.

That Anna’s proposal for Lokpal is deeply flawed is inarguable. Whether Anna is also a bigoted RSS sympathizer, if not their agent, propelled by foreign money, as Roy would have us believe, is more in doubt. Since the debate about the latter point is rendered moot by the overwhelming support that Anna seems to enjoy, I focus on some important, though very well-tread and long understood, questions around corruption raised by Roy in her polemical screed.

Corruption is ubiquitous in India. Ration shops (considerable adulteration, the skim sold off), government employment schemes (ghost employees), admission to government schools (bribes must be paid to the principal), allocation of telecom and mining licenses (bribes paid for getting licenses for cheaper than what a fair auction would fetch), ultrasound clinics providing prenatal gender identification (bribes paid to police to keep these running) etc. are but a few examples of this widespread practice.

That corruption has serious negative consequences is also not in doubt. The poor get lower quality produce, if anything at all, as a result of corruption in ration shops. Inadequate public goods (e.g. canals) result from public’s money, and some intended beneficiaries denied benefit, as a result of ghost employees in government employment schemes. Sex-selective abortions result from continued operation of prenatal ultrasound clinics. And considerable loss in government revenue (which can be used to provide public goods) results from corruption in granting of licenses.

On occasion, corruption may increase welfare of those most in need. For example, if some laws are arrayed against the poor, and if the poor can pay a nominal bribe to circumvent the law, corruption may benefit the poor. The overall impact of corruption on the poor is still likely to be heavily negative, if only because the loss to the public exchequer via the widely suspected significantly greater corruption among the rich is expected to be far greater. There also exists some empirical evidence to support the claim that corruption causes poverty (Gupta et al., 2002). However, an argument can be made to not enforce anti-corruption laws in some spheres, if successful attempts to amend the law that warrants circumvention can’t be mounted.

In all, the case for reducing corruption is strong. However schemes of solving corruption by creating a bureaucracy to go after the corrupt may be upended by bureaucrats going rogue. Stories of the almost limitless power of a ‘Vigilance Commissioner’ to harass and extort are almost legend.

‘Who shall mind the minders?’ is one of the central questions in institutional design. The traditional solution to the problem has been to institute a system of checks and balances to supplement accountability via ‘free and fair’ elections (which themselves need a functioning institutional framework). The system only works within limits, though innovative institutional designs to solve the problem can be thought off. The only other fruitful direction for reducing corruption has been to increase transparency (via RTI, post-facto disclosures of all bids in an auction, etc.), and via increased automation (cutting out the middle men, keeping bids blind from the committee so as to prevent certain kinds of collusion, etc.) – something the government is slowly and unevenly (depending on vested interests) working towards.

Corruption in enforcement is harder to tackle. Agents sent to enforce pollution laws have been known to extort from factory owners by threatening them with falsely implicating them with deliberately adulterated samples. There automating testing, and scrambling identity of source during analysis, may prove useful.

Bibliography-
Gupta, Sanjeev, Hamid Davoodi and Rosa Alonso-Terme. 2002. Does corruption affect income inequality and poverty? Economics of Governance. 3: 23–45