Let's legalize bribing, tax bribes and thus use free markets to fight corruption.
(Nobel laureate in the making or Imbecile already made ?--No.. don't tell me..I would like my Nobel prize to be a surprise )
On a serious note:
Yeah, thats right.. not finding the right words.

i do agree that free markets over time,if grown properly, will help to decrease a lot of the widespread corruption that is inherent right now. however, the problem will then become that instead of system-wide corruption, the money will flow to certain areas more than others and you'll have great corruption in smaller but more influential pockets, but not all the way from top to bottom. Like the US govt currently is run.

i know i'm going to be jumped on for saying this, but why do people pay? it isn't easy, but it certainly isn't always impossible to get something done without paying that bribe. so why do people want to take the easy way out and pay a bribe every time?

i was on the phone one morning speaking to a friend last week, when suddenly he said that he'd call me back in a minute. i hadn't even realised that he had been driving all the while. when he called back, he told me that a cop had stopped him for speaking on the phone while driving. so my friend had offered the cop a couple of notes, and the matter was settled.

now here's a law that says that one can't drive and talk on the phone at the same time. if one breaks that law, one should have the - i don't know, integrity? :) - to pay the fine, not the bribe, and get ticketed for it. but the temptation is to stick a couple of notes out of the car window and drive off.

i think bribes are more like dowry than we care to admit. those who demand it are totally to be faulted. but also those who pay it, without even trying to fight the practice.

fighting the temptation to get out of a sticky situation by paying a bribe - that's the only lasting answer, i think.

Like the US govt currently is run.

With the amount of money the US Govt. deals with, I will take it anytime over other institutions that deals with similar number of resources or people.

You are right in saying that the nature will change, but Corruption will NEVER be eliminated. As long as there are greedy folks looking out for their own ass, it won't go away.

What can be done is push corruption out so that it isn't system wide and whatever corruption that does occur, is marginal to the point where it doesn't have such a major impact on the daily lives of people at every level.

Just like other vices, it will never be eradicated. You will always have a percentage of Nazis, drug dealers, terrorists, etc., but as long as they are on the fringes in small minorities, their effects can be nullyfied and absorbed by the decent majority.

The bribes in schools was ridiculous in India. Parents who had kids that deserved to get into schools and colleges based on MERIT got screwed because they didn't have enough cash to cough up to the principal or administrator.

The idea that in general people of the US are more "ethical" and Indians are "un-ethical" is something I DONT BUY at all.
The problem with the Indian system is the OVER CENTRALIZATION of government. The British were ruling with the CENTRALIZED model because their aim was to extract as much tax revenue as possible.

Unfortunately for most part the British system is kept in place even after they have left. Over centralization of power is a result.

A quick example. The County Tax assesor and collector is a Elected position in the US, where as in India a civil services person will be posted to some far away place to be the "Collector". The corruption is obvious when the "Collector" is an outsider appointed to "Collect" taxes the same way British were doing.

When my dad got stopped by a cop in India recently, he actually had to help the cop fill out the form so that he could pay the fine for speeding -- the cop was so used to people bribing him. This does say something about the ethics of both the police and the general populace, I think.

This does say something about the ethics of both the police and the general populace, I think.

gujudude-

my thoughts exactly, no one can realistically expect the corruption to never be there. I'm just saying unfortunately that if the corruption is kept to a minimum then we won't have it so pervasive at all levels of govt. As India grows, corporate bribery will overtake personal bribery and thus you should techinically have more grassroots/lower level administrators lose their influence over others to demand bribes. What probably will happen is that those at the top of the political food chain will reap extensive rewards via bribery (cleverly disguised as 'campaign funding'). So at least the local politicians will one day have more accountability to the people. But who knows how long this will take.

Correction :
May be it shows that both the people and those who are in government have actually ** NOT **bought into the system.

Bribery has two components, as I see it:

1) Infrastructure: India just doesn't have enough power, water, food and other essentials to go around, and you NEED to bribe someone in order to live. As an example, them that stand in line at the corporation office or the ration store in Chennai and can pay an extra amount get basic life supplies. Those that cannot or don't are forced to go without light, water, rice, etc. This is an infrastructure problem.

2) Outright Corruption: Akin to the dowry, a price which when paid assures cooperation from authorities, priests, police and other officials.

Wonder which side the school bribe falls under. There are so many students clamoring to get into good schools of which there are only so many to go around. Is it that simple of a resource vs. consumer issue? I wonder.

Bribery and corruption aside, (as Abhi mentioned in the post) there is also a huge deficiency of "public service ethic". The services are often rendered(if at all rendered) in the most inefficient and counter-productive ways possible.

Anyways the survey also throws up numbers for statewide corruption:

Among the states, Kerala is the least corrupt, while Bihar emerges as the most corrupt. J&K comes next to Bihar, Madhya Pradesh third.

High on the list are Karnataka, Rajasthan, Assam, Jharkhand, Haryana and Tamil Nadu.

Delhi comes in the middle, 11th among the 20 states surveyed. Among the less corrupt are Himachal Pradesh, Gujarat, Andhra Pradesh and Maharashtra.

I am surprised that some southern states (Karnataka and TN) are higher than I would expect. Another surprise is Maharashtra which seems lower down the pecking order. Mumbai and Pune (both being in Maharashtra) seemingly thrive on corruption. However they may be an exception to the rest of that state.

With this talk of free-markets and deregulation helping to reduce corruption, I think it's worth stating that the most (nominally) communist states in the country were on the good half of the list : Kerala (#1) and West Bengal (#8).

Three cheers for Uma and Yamini's Dad.

I do think there is a lack of a public service ethic. People are more willing to shrug and "say it's not my problem" when it comes to local government. Unfortunately America is moving in that direction as well but we do have a tradition, and still many pockets, of hell raisers and busybodies and courtroom backbenchers--just regular citizens, often retirees and ornery housewives and eager beaver students --poking their nose into the workings of their local government and helping keep it somewhat reasonable. I never hear of such a tradition in India, please let me know if you know of counter examples. But I do think it would be helpful.

i'm really surprised Delhi comes in the middle...i thought my Mama Ji alone accounted for the majority of police bribing and various other schemes!

The idea that in general people of the US are more "ethical" and Indians are "un-ethical" is something I DONT BUY at all.

I couldn't find any data on US vs. India per se BUT, there is actually a relatively active field of study around "social capital" - one form is which is basically interpersonal ethics (e.g. do i behave in a trustworthy manner towards other folks? Do I think they're being trustworthy to me?, etc.)

The general thrust --> there are some very important, society wide differences in crime, corruption, etc. even after you control for differences in wealth, law enforcement, etc which can be attributed to "ethics"....

This article from the author of Bowling Alone does provide some quantitative comparisons of interpersonal trust across US states - it's pretty striking how much it varies just within the country & how closely it correlates with other sorts of crime...

I couldn't readily find the data but I'm inclined to believe that a good chunk of India's notorious corruption problem is the product of low social capital. On the plus side, I betcha India's social capital is growing pretty quickly (shared culture like Bollywood, tech, nationwide markets, globalization, etc. all generally make Indians feel MORE like they're one big happy family rather than dueling clans)

-People are usually not worried as long as it does not happen to them
-Resources are less in general and leading to opportunities of corruption.
-Pay scales of the employees involved are not very enticing
-Cost (both money and time) of getting things done the legal way is more than getting things done otherwise
-Proving corruption and termination of employment is very difficult, esp at lower levels.
This is nice post ..worth a read (Very likely many have already read it)
Now...This is the natural course of human behavior.Some are causes for corruption and some are just vicious circles.

Thankfully People are just reacting to incentives. This is a very researched subject. Hence we can use Economics/Behavioral Science etc to tackle these problems at more practical levels.
Employing Prof Nash, There might be atleast one hundred others who would have thought of using these scientific tools to tackle corruption.
So, the important question is: Is anyone from the government one among the hundred?

Vinod,
The social capital article seems interesting.
One of my theories is that the Christian nature of America makes it more community based. It also binds US in a common thread increasing "social capital" as a whole for the nation.

A survey conducted by Transparency International India (TII) says Indians paid bribes amounting to Rs 21,068 crore [US$ 4843 million appr] in the past year.

RC: $ 3.3 trillion is the PPP figure -- the actual $ GDP is about $ 630 b.

reader,
Thanks for the correction. The percentage of bribes ($4 billion) to the GDP ($ 630 billion) still is less than 1%.

Vinod, why do you call it "this most murderous of food chains ?" Because you think that bribery is intrinsically a serious crime, or because of its consequences? Why are there nations like South Korea that were both far more corrupt than India and far faster growing?

My grandfather recently passed away - he was loaded. It wasn't until I was older did I realize that he was a government official, approving construction contracts all over India in the 50s, 60s,and 70s.

He retired in an expensive neighborhood with other government official who were also on the take. Judges, police chiefs, etc - they played cards and drank together until their last days.

In his private life, he beat up his kids and his wife, and had multiple affairs. But he was also very kind and charming - a classic abuser. This kind of behavior has a strange way of coming out in other areas of life.

Vinod, why do you call it "this most murderous of food chains ?"

For me, it's a pretty straight line from poverty --> death. And few things screw up asset allocation processes more than graft.

But, I'll also agree that there's a little bit of hyperbole in there ;-)

Why are there nations like South Korea that were both far more corrupt than India and far faster growing?

S. Korea, Japan + other E. Asian nations that experience corruption are far BELOW the levels seen in India. Figuratively, in SK and Japan, you could say that corruption occurs at the CEO level.

In India, Pakistan, Africa, etc. it's down at the routine, junior manager / individual level - for ex. an ex-MSFT dude I knew who started up a biz in India once wrote back to us about how, unless he put a few hundred rupees in his mailbox, the postman would simply stop delivering his mail.

Regardless of "CEO-level" corruption in SK & Japan (or the US, for that matter), mail still gets delivered and parking tickets efficiently arbitrated & settled without graft. And that's before you get into more serious issues like awarding contracts...

I think the solution to bribe phenomenon is just more competetion.

For example. when I was growing up a phone line technician (govt. run phone co.) had to be paid a bribe in order to get the service. Now after 3-4 choices the market for bribes of govt. phone techs is wiped out.

Other issue is, what impact is the bribe phenomenon making on the growth. I am sure there are reasons OTHER THAN BRIBERY that are ALSO contributing in holding the growth back. Or in other words the GDP growth (which is the ONLY WAY of removing POVERTY... as per Adam Smith to ...the present economists) process has inefficiencies in nations that cant seem to come out of poverty and I think the factors other than bribery may be playing a bigger part.

I disagree:

Transparency International, the worldwide corruption monitoring organization, lists South Korea as one of the countries — along with Russia, China and Italy — where bribes are most likely to be paid in a business transaction. [cite]

Besides which, if it's the magnitude of the corruption that leads to poverty and death, wouldn't it be worse if you have to bribe CEOs than if you have to bribe traffic cops? And, from an economic perspective, what's the difference between paying a bribe and a fee for expedited service? If the latter don't harm the economy, why would the former? Isn't the real problem the lack of services rather than corruption itself?

... in India and many other dysfunctional countries, a public appointment is, more often than not, the path to getting rich.

That's exactly what the U.S. political system is at the highest levels, Congress and the lobbyist revolving door (e.g. the FBI raided Congressman Cunningham today). It's a ticket to wealth through influence-peddling. For many, it's not about public service at all.

I'm inclined to believe that a good chunk of India's notorious corruption problem is the product of low social capital.

But what causes that low sense of community is overpopulation leading to competition for limited resources.

One of my theories is that the Christian nature of America makes it more community based.

Why Christian vs. Hindu or Muslim? Overpopulation still makes more sense as a root cause, IMO.

I don't think there's a root cause for corruption.

Because it is positively reinforcing, it works more like a cancer (it may have an origin, but it doesn't have a 'cause').

Some of this was discussed a couple of years ago, when 'The Tipping Point' came out. There is a tipping point for corruption, past which more people are likely to behave in corrupt ways than not.

Ummm ... Vinod? Reread "Bowling Alone" or any of Putnam's other works. India should have much higher social capital than the US on many of Putnam's measures.

"Why Christian vs. Hindu or Muslim? Overpopulation still makes more sense as a root cause, IMO."

Congress and the lobbyist revolving door (e.g. the FBI raided Congressman Cunningham today). It's a ticket to wealth through influence-peddling.

I really like the following line from the nice article on towing cars in India:
"Neither the crook (the cop in this instance) nor the victim can afford the luxury of a moral stance."

To the extent that corruption is an adaptation to poverty, bureaucratic entanglement and the need for survival, I'd rather not demonize the parties involved. It is a whole lot easier, however, to demonize CEOs, Congressmen, MPs, and other well off purveyors of corruption. There is absolute nothing mitigating about their circumstances.

The Christian nature comment was from my observation of American society. As an observor, I noticed that the community feeling is far more prevelant here in the US amongst Americans. During any national emergency there is a flood of donations.

Yeah I dont know if America has that much of a community sensibility. Most of the time, neighbors don't even talk to each other, other than to say hello when they get their mail. Whereas in India, all your neighbors know what you're doing, and as the cliche goes, the whole village raises a child. America is a lot more isolationist, quite the opposite of community feeling.

I heartily agree with Varma - an interventionalist government, its intentions cloaked by social cause de jure creates its own license for corruption.

So you agree then that the US's attack on Iraq was corrupt?

For all its objections, freedom & growth maximization have the advantage of being relatively objective vs. the far more abstract goals of "equity",

Let me get this straight, "freedom" is objective, but "equity" is not? Where does that leave Truth, Justice, Beauty and the rest of the Aristotelian forms?

What would you prefer a corrupt system that works or a non-corrupt system that does not work. When cellular networks were first introduced in Kerala the telecom unions repeatedly degraded the system by choking the interconnection with the landline system. All representations were to no avail until some sort of "arrangement" was reached with between the private telco and the union. In Calcutta when the first private airline flight was to land the airport unions (CPM controlled of course) went on a flash strike. Having failed to prevent the emergence of private airlines the Commies did the next best thing - don't let them land or take off! I have dealt with Sales and Medical Representative Union of West Bengal (and am proud to say the only HR manager to ever have prevailed over them) will not let you transfer sales people or get them to work to a target. If any sort of managerial control is exercised "peaceful action" and finally more persuasive action (trashing your office and beating up your staff) happens. Of course these things can be worked out by a "small contribution" to the union. Goverment by itself is not inherently corrupt. Here in the US I find the government a pleasure to deal with either directly or indirectly. Is there anything as reliable as the Interstate Highway system? I will go to a National Park any day over a tacky and crude 'private park'. Several things we take for granted in the US would have never come about but for the government. That said I am no advocate of an overbearing big bureaucracy - but neither am I in favor of a tiny state machinery. There is certainly a middle way and the way it works in the US is the ideal.

Whether it is private or public owned what matters is accountability thru checks and balances. The government in the US is not simply the federal government but begins with my city council - where even if I cannot vote I have a voice. Having an elected executive in the US gives citizens the ultimate power over the government letting them have a government that exists to serve them.

The concept unfortunately in India is very different. The socialist mindset of Indian politicians of every stripe - not just the commies - makes them think that the government exists to serve the people by making its decisions for them. Which is why smaller panchayats in India often have more powers over their livers than large city corporations. Added to that the "intellectuals" of India while screaming about "monopoly capital" and "the evil forces of international capital" are silent when it comes to corrupt cops and babus for reasons best known to them. I am waiting to see Tehelka film an expose of small time bribe takers at the motor vehicles department. I am waiting with bated breath!

That's exactly what the U.S. political system is at the highest levels, Congress and the lobbyist revolving door ...For many, it's not about public service at all.

Sigh. The exception doesn't make the rule. My point wasn't that corruption is non-existent in the US --> it most certainly is. The point is that it's far more pervasive at the lowest levels in India than it is in many western nations and THAT makes all the difference. The cop who gives you a parking ticket in NYC is far less likely to be on the take than the one who gives you one in Delhi.

When it's that pervasive all sorts of weird things just sorta break down... hence my example about the Indian postman.

But what causes that low sense of community is overpopulation leading to competition for limited resources.

This is a multivariate problem and pop / resources feed the equation, BUT, no matter how you slice it, you can't explain it without incorporating culture.... for ex., if you want to test the Overpopulation hypothesis, from the CIA world fact book -

India

Pop = 1,080,264,388
Land = 3,287,590 sq km
Thus, density = ~328 people / sqkm

Let's compare that to some famously high social capital countries...

Japan

Pop = 127,417,244
Land = 377835 sq km
Thus density = 337 / sqkm

Netherlands

Pop = 16,407,491
Land = 33883 sqkm
Thus density = 484 / sqkm

Both the Netherlands & Japan have higher density, almost no real natural resources, but still much higher soc capital.

Let's take a famously low soc capital / density example -

Nigeria (resource / oil rich, but still dirt poor)

Pop = 128,771,988
Land = 910,768 sq km
density = 141 people / sqkm

[People x land x resources] explains some aspects but there's an "x factor" in the equation which (at least in these cases, appears dominate the functiona altogether)...

Vinod? Reread "Bowling Alone" or any of Putnam's other works. India should have much higher social capital than the US on many of Putnam's measures.

I'm quite familiar w/ Putnam's work - I cited him earlier. Soc capital is NOT an exact science - by some measures India should be stronger than the US (for ex., villagers knowing each other), by others, however, it's dismal (anonymous folks from one village trusting anonymous folks from the next enough to conduct diff types of biz & have disputes arbitrated effectively by govt institutions). Overall, you'd be challenged to find anyone who'd seriously claim that India has a higher soc capital than the US across a wide range of variables...

I do concur with Putnam, however that it's declining in the US. I also argued earlier that it's increasing in India... but the gap is wide and will take a long time to bridge...

As I am huge fan of macro Economics, I would love to see someone do a study of the ECONOMIC impact of bribery. The "moral" aspect is a subjective one, IMO.

For example: The corruption of Iraq war... Bechtel being given infrastructure projects as if Iraq dont have any contractors who can build buildings and sewer systems. As if Iraq didnt have any of that before the Americans went it. But Bechtel gets contract to re-build so all "Iraq re-construction" money comes back to US.

The Bribe moneys that are being collected by various people ($4 Billion) must be put to use by them, in terms of buying items and building houses and such... which ends up adding to the GDP and creating jobs ???

... pop / resources feed the equation, BUT, no matter how you slice it, you can't explain it without incorporating culture...

1. The stats are misleading. India has far less uniform density than the Netherlands or Japan. You'll probably find higher social capital in India's rural areas than in urban ones.

2. Overpopulation and competition for resources strongly shape culture.

you'd be challenged to find anyone who'd seriously claim that India has a higher soc capital than the US across a wide range of variables...

You need to compare areas with like densities: say, the large cities of India with the large cities of the U.S. In high density environments, you tend to trust more people in your family or immediately around you (because there are more such people, and you need each other's help to succeed where there's high competition for resources and a dysfunctional economy), but fewer people beyond that level (because of competition).

... by others, however, it's dismal (anonymous folks from one village trusting anonymous folks from the next...

Granted. Villages were the basis of identity, and intra-village (clan) competition was common, as in Scotland. At a larger scale, if India is like Europe, then you have the French and the Brits' level of distrust between its ethnicities. In comparison, the U.S. was originally settled by people who were relatively racially homogeneous and more or less came over around the same time.

For those who believe that corruption in India is almost an industry, here’s proof. A survey conducted by Transparency International India (TII) says Indians paid bribes amounting to Rs 21,068 crore [US$ 4843 million appr] in the past year. And no one would have guessed it, but the biggest chunk of this money goes to schools till the Class XII level.

To continue, why is this by itself a problem? As Varma points out this is a result of over-regulation by government. Could it be that, left to itself without govt. intervention the cost of schooling would rise to the 'right' market price which is the current price and the bribes. So, by having artificially low costs imposed by government you have people going around the 'system' and setting the costs back to where they might belong. You must be aware that schooling costs in India are incredibly low for the quality of eduction provided. Looks like the market is pricing this appropriately. Two cases seems very close to me (sans scholarships)
a) Govt sets low prices for education. People go around the system, pay bribes and well-off kids get into the best schools.
b) The market sets high prices for good schools say "harvard, penn" and well-off kids go to ivy league while poor students go to community school.
Does this really lowers the productive capability of the nation. Arguably the most happening place in the 19th century in the US was the New York area. Does anyone remember Tammany Hall, George Plunkitt and all the 'bosses', not shining beacons of public service. New York seemed however doing fine, going from third world to a first world status during that time.

In fact, corruption is a problem at the 'top' level. CEO's cooking their books, paying themselves company money or loans, not expensing stock options, human rights violations, monopoly and collusion, govt granting tax breaks to companies - these tend to have a higher cost because they distort the market pricing mechanisms and thereby cause a breakdown in the feedback structure. This is something that would play into all the 'public service ethic' etc. which needs to be closely monitored.

Bribery is actually Adam Smith capitalism at its best. Every individual is his own agent, and uses money to promote his own needs. Through the invisible hand, everyone is supposed to be better off. Well look at corruption! If anything, bribery makes the markets more liquid (a la Ebay), and that is supposed to be a good thing, but we all know it hinders progress in society.

The problem with Adam Smith has always been that that philosophy does not incorporate societal utility, just personal utility. Keynes et al recognized this long ago, and about 50 years ago the concept of externality came about to try to incorporate societal interests into the equations of economics.

As I am huge fan of macro Economics, I would love to see someone do a study of the ECONOMIC impact of bribery. The "moral" aspect is a subjective one, IMO.

This gentlement named Vinod (no not that one) is a Harvard PHD in economics, and he's now an economics professor. He has dedicated his work to this very issue.

http://www.fordham.edu/economics/vinod/

I wonder if he could chime in on the issue? Let me email him.

"In the US and many western countries, we take it for granted that folks joining the public sphere are never going to get rich."

So a few should sacrifice so that others can get rich! It is naive to expect this from others. If public officers do their jobs (less corruption, more security and better infrastructure) why can't we make sure that they get rich in the process? Is it so hard to find a way to reward them for their efforts?

Just $4 billion? Wow, we are cheaper in corruption too. Let's come up with an outsourcing model for this ;-)