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The often heard remark these days is that corruption has now become widespread. It was not the way it used to be - in the good old days one paid a bribe to expedite matters or get someone to go out of their way to do something. And not many took bribes anyway.

Not the case these days. You need to pay to get things done - period. And everybody seems to be corrupt these days. Its that bad.

Or is it? We are used to looking at corruption purely from a moral standpoint. It is illegal and immoral and therefore not good. And more of it is naturally worse. But isn’t that a naive way of looking at it? Shouldn’t we rather ask ourselves the question ’’Why is corruption bad?’’.

So why is it (bad)? The foremost reason is that a decision is made, not on the merit of a case, but rather on the ability of a person to pay. It is therefore implicitly assumed that the resources of the country are not used efficiently. For example a tender is awarded to someone who may end up delivering a shoddy product or service for the same amount of money spent. Now this theory works well when a single person is in a position (or motivated enough) to influence the decision making process and very few (if not a single) persons are willing to pay for that influence. You therefore have one person among a group of contenders who is willing to pay for a decision to be swung his way and you have one person among a group of decision makers who is motivated enough (has been paid off) to influence the decision in a particular direction.

The situation however changes dramatically when everyone is willing to pay, and everyone is interested in taking.

Corruption as a competitive advantage:

Corruption provides a competitive advantage when a single person indulges in it. This advantage is lost when everyone is willing to pay. What was a competitive advantage now becomes a qualifying criteria. In other words you need to pay a bribe to be participate, but the bribe does not assure you a victory. Of course the extra that one pays, increases the cost of a product or service. But this increase is no more than an abstract notion, if the bribe is termed a legitimate cost. And an effcient market place will discount this cost through a proportionate increase on other costs or a devaluation of the medium in which these transactions take place.

Corruption as a motivator:

The fundamental premise behind corruption is that greed can be a strong motivator. Thus money can be used to influence a decision in a particular direction, since the person taking the bribe is motivated by greed. In other words the ability to influence decision making, depends directly on the degree of motivation and therefore the amount of money an individual can make.

What happens then, in a situation where everyone wants a piece of the cake. The simple outcome is that the piece becomes small, and its ability to motivate is that much mitigated.

Corruption and economic efficiency:

The effect of corruption is not simply in the direct influence that it has on various economic transactions. It also lies on how the proceeds of a corrupt transaction are deployed. When a large amount of unaccounted money ends up in the hands of a single person or entity, it is likely to be spent in an inefficient manner if it is spent at all - Luxury products, designer lingerie, foreign jaunts and decadent lifestyles. The more likely outcome is that the money sits idle in a swiss account or gets stashed away as black money.

The same money when distributed among a larger number of people (in smaller volumes), is more likely to get back into the system in the form of spending on education, consumer goods or as capital for small business activities. Ultimately activities that are more likely to feed economic growth.

Corruption and the corrupt:

Corruption does not only affect its victims, it obviously also has an impact on its perpetrators. But before we analyse the effect that endemic corruption has on the corrupt, we need to appreciate that a transaction between a bribe giver and taker is a genuine one, where one pays for a particular outcome that the other promises. And the credibility of a bribe taker and therefore his ability to demand the bribe depends on his ability to deliver on the commitment.

Endemic corruption has two effects on the corrupt. With more and more people taking bribes the ability to deliver on the commitments made decreases. Since corrupt transactions are by definition illegal, they need to take place on trust - you cannot have a contract between the parties. With more ’’bad eggs’’ in the community the overall perception of the ability of corrupt people to deliver gets lowered.

Endemic corruption also exposes the corrupt to another danger - other people accepting money in their name. And considering again the nature of their acitivity, they cannot look for protection from the law either. This situation is particularly true for political parties in whose name thousands of people (including party workers) collect protection money / election funds and pocket the same. The effect of this is so much felt by polictical parties that most of them are taking considerable effort in eliminating corruption at the lower levels since they are unable to manage it efficiently.

Corruption and corruption:

Manage it efficiently ??? Yes corrupt activities are like any other - they need to be managed. And the larger the scale of the activity, the more difficult it becomes to manage unless it is organized. But the problem is that it is very difficult to hide an organized activity. So the first effect of endemic corruption is that it exposes itself.

Unfortunately unlike other ’’businesses’’ this exposure does not do it any good. The fundamental reason behind this fact is that the corrupt do not draw their strength from money (even though their activities are mostly geared towards gaining it). They draw their strength from their ability inspire the masses (politicians), their ability to provide for you (bureaucrats) and their ability to protect you - from criminals and themselves (police). And immaterial of which - these abilities are lost due to corruption.

For politicians it is an issue of morality. Immaterial of what their criminal backgrounds politicians need to maintain a clean face. Unlike other professionals morality plays a very dominant role in how a politician is judged. This is probably the greatest professional hazard that any policitican faces. And the more endemic corruption is, the less the credibility of the politicians (and their ability to win votes). The argument that people can win elections through booth capturing is very simplistic - since the guns (and the goons) need to be bought. And anything for sale can be bought by others too, thus jacking up the price of both guns and goons. And the more the money that is spent on either of these, the greater the urgency to get it back. Since EVERYONE needs to spend to win an election, but not all can profit from it (you can have only one railway minister), the tendency to bring down governments becomes higher. Shortlived government translates to more elections and more money to spend. Thus honesty and popularity based on character make a lot of sense - economic and political - in an atmostphere vitiated by corruption.

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