The colour of corruption’s collar
Jan 28 2014
Zakaria interviewed many people to understand what is going in the context of this year’s Lok Sabha elections in India. One of them is a former corporate executive and now author Gurcharan Das. In the podcast, Das waxes eloquent about the all-pervasive corruption in India. He says that one needs to bribe in India for a birth certificate and again bribe for a death certificate. Thus, there is a cycle of “cradle to grave” corruption. This, of course, is music to the ears of western India-bashers.
No one denies the existence of corruption in India. The President in his recent Republic Day address has himself said, “Corruption is a cancer that erodes democracy, and weakens the foundations of our state. If Indians are enraged, it is because they are witnessing corruption and waste of national resources. If governments do not remove these flaws, voters will remove governments.”
I must hasten to add, however, that my personal experience has been quite different. I have never had to bribe for the birth certificates of my children nor have I had to bribe for the death certificate of my late father. But I quite believe that Das may have had a dissimilar experience. I am trying to make a different point though. Many intelligent people fail to distinguish between corruption with a big ‘C’ and corruption with a small ‘c’. Both types of corruption are wrong and illegal. But it is important to understand the difference between the two just as it is critical to appreciate the distinction between a petty crime and a murder.
It is important to make this distinction because various kinds of corruption require different therapies. Would you equate a petty bribe taken by a traffic constable from a lorry driver with a kickback received by a businessman from a foreign equipment supplier? The traffic constable has taken Rs 50 from the lorry driver, while the businessman, who has raised equity from public and borrowed from nationalised banks, has squirreled away $100 million in a Swiss bank account. Would you treat the two “crimes” in the same way?
Take the case of a paltry customs official who has charged Rs 5,000 to clear a shipment quickly, and a minister who has taken Rs 1,000 crore as bribe in a large defence contract from a foreign supplier. Are they at par? Take the case of a rickshaw puller who is unable to pay his bank loan instalment, and an airlines owner who has created Rs 10,000 crore of non-performing asset (NPA) for banks. Are the two “corruptions” on the same footing? Do they need the same medicine? Why is it that some companies are too big to fail and some individuals are too big to jail?
To be effective in combating bribery and corruption, it is important not to lose sight of scale. When the US legislated the Foreign Corrupt Practices Act 1977 (FCPA), it distinguished between bribery that influenced decisions and “grease money” that speeded up transactions. The anti-bribery provisions of the FCPA make it unlawful for a US citizen and certain foreign issuers of securities, to make payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. But it does not include “grease” payments because it is not made for people who are decision-makers.
The class character of bribery is apparent from the outcomes of the prosecutions. Large financial institutions have paid huge fines in the US. In most cases, the institutions have not admitted guilt and no one has gone to jail. In a recent high profile prosecution case, a trader agreed to pay a fine in excess of $1.8 billion without admitting any guilt. This led the judge to ask why he is paying such a huge fine, if he has done no wrong!
Transparency International publishes an index based on corruption perception. Strangely, the countries that help launder money and keep the money safe, secure and secret are perceived as clean. The givers of big bribes are often large corporations from developed countries. It is mystifying that their behaviour does not besmirch the reputation of their nations.
China’s president Xi Jinping’s anti-corruption tirade has caused a collateral damage in the country. According to Xinhua, 56 hotels with five-star ratings have had to downgrade just to survive. Remy Martin Cointreau has seen a 30 per cent fall in cognac sales in the nation. The demand for luxury goods and cars has fallen. About 182,000 Chinese officials were punished and disciplined for corruption in 2013, which has cast a pall of gloom on China’s “luxury” industry.
As we fight corruption in India, we should not ever believe that it is a “local only” phenomenon or that India is the only country facing the corruption demon. As the Nobel Prize winning US economist Joseph Stiglitz said a few weeks ago, “The US is a good competitor to India in corruption.” And it is not just about India and the US. There is rampant large scale global corruption today. A concerted effort is needed across borders to strike at the roots of the global supply chain of corruption and mete out the severest punishments to the giver, the taker and the keeper.
Blue collar corruptions generally constitute petty bribery. But the big corruption is mostly white collar involving the rich and the powerful. We have to imprison those who are swindling our nation’s banks and plundering our natural resources. If we only scream about the petty corruption of traffic constables, we are, as the English would say, barking up the wrong tree.
(The writer is managing director of Deloitte Consulting, India. These are his personal views)