21 November 2017 14:16:09 IST

A management and technology professional with 17 years of experience at Big-4 business consulting firms, and seven years of experience in high-technology manufacturing, Rajkamal Rao is a results-driven strategy expert. A US citizen with OCI (Overseas Citizen of India) privileges that allow him to live and work in India, he divides his time between the two countries. Rao heads Rao Advisors, a firm that counsels students aspiring to study in the United States on ways to maximise their return on investment. He lives with his wife and son in Texas. Rao has been a columnist for from the year the website was launched, in 2015, and writes regularly for BusinessLine as well. Twitter: @rajkamalrao

Corruption invokes such distaste, but should it really?

It is a commercial transaction between two consenting adults, both of whom benefit

There’s something about the word ‘corruption’ that unites us all. Everyone hates it and wants it to go away, magically. We feel this way because of our perception that corruption is inherently unfair. It tips the balance towards those who pay and takes away from the rest of us who play by the rules. Ironically, this feeling is true even among people who routinely pay and accept bribes!

Political influence and nepotism too are abhorred by us because the strains of corruption are everywhere. Someone who is not deemed meritorious is awarded a position simply because of his or her relationship to someone in power. Nepotism meets our ‘corruption rule’ definition, word for word. The currency of transaction is not cash but relationships and power.

Consider being in line at the box office to buy a ticket at a cineplex, when someone cuts in line in front of us. We generally would frown on at this because we are scared that we may be denied the scarce commodity (the ticket) as a result of the intrusion. Or we would not want to wait a few extra minutes for our turn at the box-office. Most importantly, we just apply our sense of fairness to the situation. Someone coming late must honour the civic rule of joining the rear end of the line.

‘Official’ corruption

But even though fair play is what we desire — to stand the same chance of being allotted a scarce resource as everyone else — we do have internalised exceptions to the corruption rule. For example, institutionalised and ‘official’ corruption is something we routinely accept and even take part in.

For a darshan to visit Lord Venkateswara, the TTD organisation has skilfully created a system where, if you pay a ‘bribe’ to the organisation, you can stand in a different, shorter line. If you pay a sufficiently higher fee, you could even be invited into the Lord’s sanctum to offer your prayers.

This system is corrupt because, by our definition, it too tips the balance towards those who pay. But we are scared to call it corruption because the organisation has blessed it as official. And it justifies the move as a way to raise needed revenues, or prevent unofficial bribes to TTD workers.

Reservation is another such exception. Seventy years after Independence, our political leaders bend over backwards to reserve government jobs and college seats for minorities. This system is decidedly corrupt because, by our definition, it favours one person over another. The payment here is not in cash but in the suffering of prior generations who were oppressed for centuries. But we all grudgingly accept it for the same reasons as the TTD system: The policy is official, attracting the protections of law. And there is always some social justification for it, although it gets weaker with each generation.

The illegality

What riles us, therefore, is not that corruption favours one person over another. It is the fact that corruption is not officially sanctioned or permitted. We don’t mind paying the TTD for out-of-line favours but we do mind paying a TTD worker who may use his discretion to grant us those very benefits. Because, in the case of the former, our largesse benefits an organisation which does public good but, in the case of the latter, our cash enriches an individual who is considered a weasel. And this latter action is abhorred by the general population.

From the perspective of economics, however, this distinction is meaningless. A ‘special fee’ to allow you to cut in line is a bribe, no matter who benefits. It is simply the cost of completing a transaction to your satisfaction.

Benefit for economy

In some cases, petty corruption could actually benefit the economy. It is the government which makes all kinds of rules and regulations, some of them well-intentioned, but most designed to tie you up in knots.

Consider a doctor who recently moved from Mumbai to Bengaluru. He is told by an officer at his local RTO that he has to obtain a ‘No Objection Certificate’ from his Mumbai RTO before he is eligible to drive in Bengaluru with a Karnataka Drivers Licence.

This regulation is silly. RTOs are notorious for not doing business online or over the phone, so it is not easy for the doctor to obtain his Mumbai NOC. He faces three options: Travel to Mumbai and obtain his NOC; take a full driving test in Bengaluru, although he is an expert driver; or drive in Bengaluru without a valid licence. Each has a transaction cost involved — either in money or in time.

So he settles on a fourth option — pay a bribe to the local RTO to overlook the NOC requirement and grant him the licence. Both the official and the doctor know that the latter presents little risk to Bengaluru citizens. The chance of an audit uncovering this lapse is also remote. The bribe serves as a transaction cost to get the wheels of government moving. And free the doctor to return to serving society.

A friend of mine, who is a supplier to the Indian Railways, said that the Accounts Payable department regularly demands a 3 per cent cut on all bills at the time of payment. This money is distributed among various officials — and is always paid in cash. When demonetisation happened last November, banks experienced cash shortages for nearly five months. The AP department, very understandingly, told my friend that it would issue him a credit for the 3 per cent — a corruption credit — until cash positions at bank improve. Five months later, the department was paid its ‘credit’ in full.

The impossibility

Eliminating petty corruption is extremely hard, almost impossible. It is a commercial transaction between two consenting adults, both of whom benefit. For a third party like the government to get involved and cast a vigilance net which works on a 24x7x365 basis to ‘root corruption out’ is a fantasy. In the worst case, the mandarins who oversee the government’s vigilance actions are themselves human and may do favours for a price.

The Aam Aadmi Party was the first to launch a national campaign against corruption. The NDA government has usurped it as its own — because it is politically popular — and adopted it as justification to usher in major actions such as demonetisation and the launch of the new GST regime.

Supporters say it is high time we rooted out this evil. But many of these same supporters would not mind paying a bribe to that municipal inspector for a lower assessment of annual property taxes on their own homes.

This is the conundrum we find ourselves in today. We will keep talking about corruption for another 20 years — and the needle would still have barely moved.