Ending Corruption: Yes, but How?

Author(s): Andrew Sheng

Date: Dec 6, 2012

Theme(s): China

Publications: Opinions & Speeches

Editor's note: Fighting corruption has the highest priority in all economies, but especially pressing in emerging markets, thinks Andrew Sheng, President of Fung Global Institute. While country leaders have the intention, it is often popular determination that drives forward the battle against corruption.

An unexpected rendez-vous with Mumbai brought me to some wonderful bookshops in India, full of the latest global hits at reasonable prices, as well as books that are not easily available abroad. Indian writers have a flair for the English language that is expressive and lyrical, reflecting the deep cultural respect for articulation, best summarised in Nobel Laureate Amartya Sen’s book, The Argumentative Indian.

Where else can you get a book like India Grows at Night: A Liberal Case for a Strong State (Penguin), in which the former CEO of Procter & Gamble India, Gurchuran Das tells a tale of private success and public failure when “India grows at night while the government sleeps”? He asks: “How can a nation become one of the world’s emerging markets despite a weak, ineffective state?”

He elegantly articulates the current issue on the race between India and China: “The big story of the twenty-first century’s first decade is how China and India have embraced the market economy and have risen. The common mistake is to think that the race between China and India is about who will get rich first. The truth is that both countries will become prosperous and reach middle-income levels. The race is about who will fix its government first. India has law, and China has order, but a successful nation needs both. If India fixes its governance, before China fixes its politics, India will win the race, as Raghav Bahl says. If neither succeeds, then both may get stuck in the ‘middle-income’ trap. To avoid that fate India needs a stronger state and China needs a stronger society.”

Indeed. Only last week, China’s new leader Xi Jinping put on the national agenda the pressing need to tackle corruption. Dealing with corruption is today the highest priority in almost all economies, more so in emerging markets. Market forces alone will not solve corruption – the state has to take a leading role, but which policeman can police himself?

N. Vittal offers us some practical suggestions in his remarkable new book, Ending Corruption: How to Clean Up India? (Penguin 2012). As the former Central Vigilance Commissioner in India – a post created in 1998 to investigate corruption against Class I Indian civil servants, including state-owned enterprises and bank officials – Vittal has the know-how of tackling corruption in large and complex bureaucracies.

His methods are insightful. Fighting corruption, like fighting crime, is often thought of as the police’s job. But he argues that you need to use the methods of both a doctor and an engineer to get it done. You have to see it as a disease of the polity, which requires engineering principles to optimise its efficiency and robustness. All engineering systems need maintenance, which can be either preventive, predictive or breakdown, and it is the extreme level of breakdown maintenance that Vittal thinks is required to mop up the country, and by combining that with the medical approach, makes the best formula for tackling corruption.

When I first started thinking about the issue of corruption whilst working in the World Bank, I thought that corruption was a problem of income transfer. If public servants are badly paid, they simply extract a “rent” from those who want public services and this income transfer equalises the income between the underpaid public servants and the more highly paid private sector. Such transfers are unfortunately highly regressive, meaning the poor pay more than the rich.

There are really two types of rent: one bureaucratic, the other political. For most technical and administrative jobs, it is possible to make a reasonable comparison between public service and private salaries. However, for political jobs that wield very large power, the cost of politics can be very large indeed. According to the BBC, the recent US Presidential elections cost US$6 billion, and since the US Supreme Court has recently ruled against restriction on political donations, it really means that the democratic process may favour those who are willing to buy influence.

Vittal examines the treatment of corruption from multiple perspectives: politics, bureaucracy, judiciary, media, the corporate sector, and citizens and NGOs. He argues that the best antidote to corruption is sunshine and transparency. The medical approach is to get better doctors, such as the judiciary, the Election Commission, and Auditor-General and the anti-corruption agency. The engineering approach requires IT, media, education and bureaucratic reform to address the twin deficits of governance – the “trust deficit in government credibility” and the “ethical deficit” – by requiring people in power to uphold the values of protecting the public interest.

In the end, Vittal recognises that as well as dealing with the weakness in human nature, fighting corruption comes down to selecting strong, ethical officials for positions of power, and making the right choices depends on society – each and every member of society. This is a serious matter, but Vittal manages to express it with charming humour.

How to select officials maybe a political question, but it really is about policy. Every Chinese knows the saying: “it doesn’t matter if the cat is black or white so long as it catches mice”. But when it comes to policy practicality Indians have another cat-and-mice story. It goes that a rat is harassed by a cat so it goes to the owl for advice. The owl suggests that since the rat is weaker than his enemy, the rat should become another cat, and then he can fight back. The rat thinks about it and comes back the next day to ask the owl, “But how do I become a cat from a rat?” The owl wisely intoned, “I am here to give you policy directions – implementation is your problem!”

As the Hong Kong and Singapore experience have shown, when society feels strongly against corruption, something can be done about it. Change begins by taking the first step.