Sunday, September 11, 2011

A primer for the corruption fighter

The dust has settled and a degree of calm prevails. Anna Hazare has returned to his village after conquering Delhi. He ought to consolidate his gains now before letting loose another storm. He would do well to sit down with his advisors in this lull and draw up a result oriented, longer term agenda to fight corruption. To this end, I offer Team Anna a primer on what we know about corruption--what works and what doesn’t--a sort of corruption fighter’s manual.

A strong Lokpal is a good idea but it should be lean and effective. Less is always more and the Lokpal will succeed if it does few things. Let it focus on the big fish and leave the smaller ones to Lok Ayuktas, Vigilance Commissions, and other agencies. The Lokpal should have the power to initiate a case without the government’s permission and its decisions should be binding. Chief Vigilance Commission (CVC) has failed for these two reasons, and it too should be reformed by removing these two handicaps. The CVC should be answerable to the Lokpal but not be under it. Similarly, Central Bureau of Investigation (CBI) should be answerable to the Lokpal, but not under it. All three—Lokpal, CVC, CBI—should be autonomous bodies. However, in CBI’s case, the “single directive” (which requires prior government permission before prosecuting senior officers) should not scrapped as suggested by the Supreme Court for it was paralyze decision making.

A lot depends on luck when it comes to who is the Lokpal. The Election Commission was a mediocre institution until the determined T.N. Seshan came along, and he was followed by another outstanding CEC, J.M. Lyngdoh. Karnataka’s Lok Ayukta has recently brought the state’s chief minister to his knees. One can help ‘luck’ by insisting on probity, toughness, will power, and courage when selecting a Lokpal.

While the Lokpal is needed medicine, it is administered long after the sickness appears. Hence, prevention is better than cure. To prevent corruption, we must reform our institutions of governance—the administration, police, judiciary, and elections. Since Indians confront the bureaucracy daily, it is the first priority. Corruption will be cut if decision making is transparent, discretion is reduced, rent seeking opportunities shrink, officers are punished for deliberate delay--the favoured tactic of a corrupt babu-- and punishment is guaranteed to the guilty.

But none of these administrative reforms will work unless the incentive system within the bureaucracy is changed from the present one based on seniority--where everyone gets promoted based on years of service--to rewarding good performance and punishing poor outcomes. The present assessment system is ineffective—you cannot have eight out of ten officers being rated as ‘very good’ or ‘outstanding’, especially when India’s bureaucracy is rated the worst among 13 countries in a survey by an independent firm in Hong Kong.

There are two types of corruption—harassment and collusive. In collusive corruption the bribe taker and giver collude—such as in the 2G scam—to steal money that belongs to the state, and both should be harshly punished. In harassment corruption, an official gives a citizen what his rightful due—a ration card or a birth certificate--only after he earns a bribe. The bribe giver is a victim here and should be encouraged to complain. This is why Kaushik Basu has suggested that a bribe-giver be given immunity to encourage him blow the whistle. The virtue of the Jan Lokpal draft is the strong protection advocated for victims of corruption. The government’s bill is superior in stipulating strong punishment for false complaints.

The Internet is our best friend in preventing harassment corruption because it brings transparency in transactions. We got our first taste when buying railway tickets and corrupt booking clerks have practically gone out of business. Placing land records on-line in Karnataka and Andhra has reduced the corrupt power of revenue officials. Those states which are using e-governance in giving birth and death certificates, ration cards, pension payments, driver license renewals have cut down on speed money. It should be mandatory for every government department to place its rules, procedures, and forms on its website. Cash transfers based on the Aadhaar smart cards will do much more to reduce the massive corruption that exists in delivering jobs, subsidised food and fuel, and other services to the poor.

Citizens Charters have been a flop so far but post-Anna some state governments, like Delhi, have decided to implement these and from September 15 officials will be fined Rs 10 to Rs 200 per day when they fail to deliver services to citizens on time. Five states have announced that they plan to follow suit.

Land is the biggest source of corruption because government decision making is deliberately opaque. Change of land use, municipal permissions, completion certificates, plus dozens of permissions result in massive collusive corruption. The amounts are even larger in awarding contracts for natural monopolies--mining, oil and gas, telecom spectrum—and the answer is open, transparent bidding (like an auction) under a firm regulator. Because most industrial and large real estate projects require environment clearance, the ‘licence raj’ had shifted to this ministry.

Ever since Indira Gandhi disallowed corporate donations, elections are now only fought with black money. Cleaning up electoral funding has to be a priority along with other electoral reforms such intra-party democracy and banning criminals from politics. Judicial and police reforms are crucial. The police cannot be a lackey of state chief ministers and has to be given autonomy as reform commissions have suggested. Given the growing cases of the misconduct of judges, the judicial appointments must come under a judicial commission comprising of non-judicial persons.

Finally, the most important lesson--keep the government small. A lean government tends to be more competent and less corrupt. Sensible governments no longer run industries, airlines, and hotels. Fewer controls and fewer licenses mean less corruption, as we have seen since 1991. Reforms are the best medicine against corruption.

Monday, September 05, 2011

India Says No to $80 Toilet Paper, Wall Street Journal

An anticorruption campaign has given voice to a growing middle class tired of public indignities

A year ago, no one in India could have imagined that cabinet ministers, powerful politicians, senior officials and CEOs would be in jail now, awaiting trial for corruption. The credit for this dramatic shift belongs in no small part to the anticorruption movement of a 74-year-old activist, Anna Hazare, supported by determined justices of the Supreme Court, an exceptional auditor general, rival television channels in search of "breaking news" and, crucially, a newly assertive Indian middle class. The long-term impact of this movement is unclear. It could lead to something profoundly good, or it could destabilize the whole system.

A series of corruption scandals has swept India over the past year. These include graft-ridden purchases for the 2010 Commonwealth Games in Delhi, for which rolls of toilet paper were purchased for $80 each; the government's sale to favored companies of licenses for the mobile-phone spectrum, at prices so low that they are estimated to have lost taxpayers somewhere between $10 billion and $40 billion; and the grabbing of expensive apartments in Mumbai by politicians, officials and generals on prime property that was meant for war widows.

Fighting this pervasive corruption has been Mr. Hazare, a villager in a white rural cap who evokes the figure of Mahatma Gandhi and has successfully emulated Gandhi's protest tactics of hunger strikes and peaceful marches. Mr. Hazare launched his first hunger strike, a five-day fast, in April. As a result, the government agreed to draft a bill creating an anticorruption agency that would investigate complaints against officials, but the bill was weak, and Mr. Hazare rejected it.

His second hunger strike, which he staged last month in Delhi, drew tens of thousands of supporters and spurred the government to agree to discuss his own version of the bill—a considerable victory, since politicians of all parties have stonewalled the creation of an anticorruption agency for 40 years.

Many officials were taken by surprise by Mr. Hazare's support from the middle class, which is almost a third of India's population today, up from 8% in 1980. Since reforms in 1991, India has become the world's second-fastest-growing economy, and the middle class is expected to become 50% by 2022.

There are still vast areas of horrible deprivation, but a significant number of Indians have experienced a palpable betterment in their lives. As a result, the discourse of the nation, or what Alexis de Tocqueville called "habits of the mind," are changing. People have begun to believe that their future is open, not predetermined, and can be altered by their own actions.

The same thing happened in the West after 1800. In her book "Bourgeois Dignity: Why Economics Can't Explain the Modern World," Deirdre McCloskey argues that the West rose not only because of economic factors but because the discourse about markets and innovation changed. People became encouraging of entrepreneurs. New perceptions and expectations emerged.

In the same way, the rise of India and China has brought dignity to their middle classes. Ordinary conversations over chai in India are now about markets and focus on the contrast between private success and public failure. While the private sector provides cutting-edge services and products to the world, the roads outside are potholed, electricity is patchy and water supply erratic. The difference between the two worlds is accountability: In private life, if you don't work, you don't eat; in public life, jobs are effectively for life. Indians believe that they are rising despite the state and are often heard to say that "India grows at night, when the government sleeps."

India's electoral politics do not cater to this aspiring middle class. Every party treats the voter like a victim, focusing on welfare programs or historical wrongs. Politicians have not realized that with high growth, mobility and a demographic revolution, aspiring Indians will soon overtake those who see themselves as victims. The person who got India's 851,695,668th cellphone in June was a village migrant, and no one in the country's political life captures his hopes. An op-ed about Mr. Hazare's protest movement in the Times of India had just the right title: "It's the middle class, stupid."

For too long Indians have been denied dignity by public officials who ride in cars topped with flashing lights and make citizens wait endlessly in gloomy offices, placing miles of red tape in their way to get even basic documents. The newly assertive middle class will no longer put up with this. As the social anthropologist Shiv Vishwanathan says, "The consumer revolution that we have experienced in the past two decades has told the citizen that he can expect a higher quality of governance."

It would be a shame if Mr. Hazare's movement contributed to undermining India's finely crafted constitutional system, which has made its democracy the envy of the developing world. Street protests and hunger strikes can gain attention, but legislation requires working within the system, in the messy details of parliamentary negotiation.

Mr. Hazare's bill is needed medicine, but it is being administered long after the sickness appeared. Clearing swamps is a better way to tackle malaria than administering quinine.

To prevent day-to-day corruption, Mr. Hazare and others like him need to work on reforming the rules of India's bureaucracy—creating transparent decision making, reducing discretion, shrinking opportunities to manipulate public rules for private gain and penalizing delays (the favored tactic of a corrupt bureaucrat). Indian bureaucracy needs to be transformed from a system based on the benefits of seniority to one that rewards good performance and punishes poor outcomes.

India's churning reflects a deep middle-class anger with pervasive graft in the government, police and judiciary. Bourgeois dignity may well hold the key to this Indian puzzle, but it needs to find expression within the bounds of the country's constitutional system. Street theater seldom makes for lasting reform—and sometimes brings down the good with bad.

—Mr. Das is the author of "The Difficulty of Being Good" and "India Unbound."