India's Corruption Problem (and why it isn't easy to fix)

Introduction
In 2011, a sheepish spokesman for the Indian government broke the story that the head of the country's anti-corruption watchdog was forced to resign by the Supreme Court on the grounds that he himself faced corruption charges.

Although the irony of this anecdote amused many media commentators, it served as a painful reminder of the extent to which corruption has ingrained itself in Indian culture. Indeed, while India enjoys the distinction of playing host to one of the fastest growing economies in the world, media coverage of the country’s rapid rise in the international community often glosses over deeply entrenched social issues that continue to plague the lives of millions of Indians even today. Amongst the most severe of these concerns is that of corruption in the Indian government; a report published by the Global Financial Integrity, a prominent global political transparency think-tank, estimates that the amount of black money in the Indian economy ranges anywhere between $100 billion to $500 billion, trailing only China, Russia, Malaysia and Mexico. In recent years, there have been numerous corruption scandals implicating governmental officials, including multi-billion dollar telecoms scandals, land-grabs, and illegal monopoly charters, which have concentrated the fruits of India’s development in the hands of few.

Like many other developing economies, however, India has been unable to shake the grip of black money on its economy. While there are several reasons for this malaise, perhaps the most damning (and unique to India) is the extent to which pro-corruption measures have been weaved into the Indian political and legal fabric. Strict regulations written to keep governmental business secret from foreign intelligence agencies have had the unintended effect of ensuring “the opacity of political finance” in India, enabling officials to launder governmental money. Furthermore, India’s labyrinthine legal code makes it extremely difficult to file corruption charges against officials; in several districts, police officers need permission from the state to investigate corruption offenses by central government employees.

Corruption is nothing new to the Indian people and has permeated nearly membrane of life in India, ranging from small police bribes to macro-scale, election-influencing graft. Yet while protests against corruption are a common sight in Indian town squares and promises to eradicate it an ever-present feature in the political debates leading up to elections, until recently India had witnessed few serious attempts to effect any substantial reform. Rather, there was a long-standing sense of resignation that reluctantly accepted the seemingly unshakable place of corruption in India’s affairs. The extent of this complacency was humorously captured in an advertisement aired on behalf of a construction company in India in 2007, which promised potential customers that it would acquire land permits with the lowest bribes possible.

The Indian political ecosystem, however, experienced a seismic shock in 2011, when a seasoned Indian civil servant, Anna Hazare, published a draft of the so-called Jan Lokpal (ombudsman) Bill that he submitted to the Indian Parliament, calling for a radical overhaul of the Indian judicial system to fast-track prosecution of politicians on corruption charges and the creation of an independent governmental watchdog. The unprecedented audacity of Hazare’s demands, along with the revered status he enjoyed after decades of service for the Indian Government, captured the nation’s attention. When the Indian Parliament declined to hold hearings on the Lokpal Bill, Hazare’s clarion call “drove thousands of people onto city streets…in almost every corner of India” (Yardley). Many celebrated the Jan Lokpal Bill as a panacea for India’s developmental issues and hailed Hazare as a modern Gandhi figure, likening his movement to the Indian independence movement.

While the public’s raucous desire for reform is understandable, Anna Hazare’s solution to corruption – externally-imposed political oversight – represents a fundamentally flawed approach to tackling the issue of corruption in India by undermining the democratic system of checks and balances within the government, and also discounting the extent to which corruption acts as a lubricant for business activity. In order for reform to be effective and sustainable in the context of India’s political and economic ecosystems, it must be focused on long-term reform of the fundamental relationship between the government and enterprise, rather than artificially limiting the power of the central government, as Hazare proposes.

Tackling Corruption via Internally-Driven Reform Within the Government

The fundamental problem with existing proposals to combat corruption, such as Hazare’s bill, is the manner in which they attempt to impose external oversight on India’s governmental activities, rather than reform its very manner of functioning from within. Indeed, several other developing nations which have also grappled with the issue of corruption have succeeded in implementing reform that strikes at the issue on a much deeper level – instead of focusing on increasing their bandwidth to identify and prosecute corruption, they work towards eliminating the very environmental factors that incentivize corruption in the first place. Such an approach is likely to give way to a much more sustainable and stable solution that will prevent India from quickly regressing to an equilibrium in which corruption is commonplace as it is today.

In the past decade, for example, Singapore’s anti-corruption effort to to raise bureaucrats’ salaries to a level where they will not be tempted to take bribes has been met with significant success. Rather than hang an axe over the heads of its civil servants, as Hazare proposes to in India, Singapore elected to slowly work towards breaking down the culture within governmental institutions of having illicit relationships with private enterprise.
Some may reject this argument, arguing that this sort of reform relies heavily on the societal mores and value systems of a particular country, and, hence, Singapore’s ability to employ it successfully does not necessarily predict a similar outcome in India given the immense cultural differences between the two countries. However, such an approach would likely be met with even more success in India – India’s civil servants are ranked amongst the most dissatisfied and underpaid in the world relative to cost-of-living standards. A study conducted by the Indian Staff Federation in 2015 found that 43% of the governmental sector employees in India were not receiving any health or retirement benefits as part of their compensation packages. Given this reality, it is not surprising that so many governmental employees in India are driven to graft in order to remain financially solvent and secure as living costs in India undergo a period of rapid explosion. Hazare’s proposal, on the other hand, does nothing to acknowledge or address this reality.

Furthermore, Hazare’s system attempts to artificially suppress corruption without providing an alternate avenue for business to take place; this proposition fails to recognize the extent to which corruption has become deeply rooted in the Indian soil. To play off this metaphor, any durable attempt at anti-corruption reform in India must recognize that corruption is a very difficult tree to uproot, and care must be taken to not damage the surrounding soil in the process. Thus, a more gradual, internally-driven approach to eliminating incentives for corruption, such as that championed by Singapore, is likely to be more effective and sustainable in the long run than the artificial imposition of external oversight. Furthermore, this approach to restructuring the Indian economic system has the added benefit of striking a balance between stemming corruption and preserving the democratic system of checks and balances that the Jan Lokpal bill runs into the ground, as discussed later on.

India’s Tenuous Relationship with Corruption – The Necessary Evil
An additional benefit of the internally-driven governmental reform proposed above over the anti-corruption policies that are currently being debated is the manner in which it enables the Indian economic ecosystem to stably evolve towards an equilibrium in which corruption is no longer necessary as a lubricant for business activity. Many critics of Hazare’s policies paint a dire picture of the damage that brash and premature anti-corruption reform could inflict on the Indian economy by drawing a comparison to Mikhail Gorbachev’s doomed glasnost and perestroika programs in the twilight years of the Soviet Union. Like the Jan Lokpal Bill, a core tenet of Gorbachev’s proposed reform was the radical overhaul of the business regulation system in place at the time with the intention of dramatically reducing governmental involvement in enterprise and, by extension, the scope for corruption to exist in the Soviet economics system.

Just as Hazare is today, Gorbachev was lauded for his attempts to rebuild the Soviet Union in the run-up to the new millennium, but, as history was to witness, his attempts at reform had the unintended result of ultimately accelerating the decline of the Soviet Union. Gorbachev’s crucial mistake was assuming that the money injected back into the economy as a result of anti-corruption measures would be sufficient to kick start the Soviet economic engine – rather, the inability to easily pay bribes and form illicit partnerships with governmental officials led to a lack of protection for private investment and fewer opportunities for innovation and modernization. In broader terms, he grossly underestimated the extent to which corruption was acting as a catalyst for business activity. With the precarious balance in the relationship between business and state disrupted, the economic fallout for the nation was catastrophic.

In many ways, modern day India bears a strong resemblance to the cold-war era Soviet Union – both espouse primarily socialist economic policies, and both economies are driven by a small set of large companies with strong governmental ties. This parallel runs even deeper than one might initially assume – the very roots of India’s endemic corruption can be traced back to the Soviet-style models of governance adopted during the country’s early years of independence. Alienated by the military support provided by the United States to arch-rival Pakistan during the Cold War, India turned to the former Soviet Union for assistance in developing its armed forces. Over the decades, the Indo-Soviet partnership transcended the military realm, and India’s evolution into a socialist state during the 1960s and 70s was heavily influenced by the USSR’s economic and political system. In particular, the Indian government under Prime Minister Indira Gandhi implemented centralized economic planning mechanisms similar to those championed by Joseph Stalin and Nikita Khrushchev. In order to nurture nascent Indian businesses and enable them to compete with established Western companies, the Indian government enforced protectionist policies that required businesses operating in India to obtain licenses from governmental officials, an approach inspired by the regulatory system in the Soviet Union (termed propiska).

Of course, this system was fraught with an egregious misalignment of incentives – the very politicians with the power to grant licenses stood to make millions of dollars from kickbacks and bribes. This system became entrenched as India’s economy grew and business incentives become more and more compelling, establishing the so-called ‘parallel economy’ dealing in black money. Hence, corruption has found itself comprising the lifeblood of the Indian economy today, just as it did decades ago in the case of the Soviet Union.

Thus, the structural similarities between India and the Soviet Union, as well as those between Hazare’s proposed corruption watchdog and the governmental restructuring under Gorbachev, forecast a disastrous outcome in India. Rather than artificially inducing a shock in an ecosystem that is not ready for change, India must be careful to only embrace reform that gradually reshapes the nature of the government’s involvement in enterprise at a pace that does not threaten India’s fledgling economy. The internally-driven approach to governmental reform proposed above, thus, has the benefit of reflecting the lessons learned from Gorbachev’s failure in the 1980s by allowing the relationship between government and business to organically evolve into a state in which corruption is no longer necessary to facilitate economic activity.

The Jan Lokpal Bill and Preservation of Democratic Governance – Walking a Tightrope
The likely economic fallout from reckless political reform in India is not the only concern with respect to tackling corruption; the need to maintain the integrity of the country’s democratic system of governance is also a crucial consideration, and this is another area in which the internally-driven approach to governmental reform proposed above outshines Anna Hazare’s proposed anti-corruption bill.

While the possibility of repatriating the hundreds of billions of dollars of laundered Indian taxpayer money in Swiss bank accounts may excite many, one must dig deeper to understand the full range of implications that the Jan Lokpal bill has for India’s governmental structure. In Hazare’s words, the fundamental tenet of the Jan Lokpal bill is the creation of an independent watchdog agency with “power of superintendence and direction over any central investigation agency” with the ability to “sanction prosecution against public servants…for corruption”. At first glance, the Jan Lokpal appears to be a silver bullet for India’s corruption problem – many could reasonably argue that the construction of an independent governmental watchdog with free reign to prosecute elected officials for corruption would serve as a significant deterrent against graft.

However, the dangerous extent to which the Jan Lokpal Bill consolidates governmental power is extremely worrying. In Hazare’s envisioned world, the Jan Lokpal agency, whose members are nominated by the ruling party, wields unilateral control over the entire lifecycle of an investigation into an abuse of power, starting with surveillance and ending in prosecution and sentencing. In arguing against the possibility of provisions in the bill that would allow other governmental agencies to regulate and monitor the activities of the Jan Lokpal agency, Hazare asserted that the prevalence of corruption in the Indian political and legal system would cripple his proposed agency if external influence were brought to bear. Hazare may very well be justified in this opinion, yet that is not sufficient to assuage fears of the Lokpal agency’s ability to abuse the immense power endowed upon it. In the words of veteran Indian social activist Aruna Roy, the biggest “threat to democracy…[is] a powerful, non-elected agency” whose power cannot be regulated by the rest of the government.

Comparing and contrasting Hazare’s proposed system with the American system of government best illustrates the outrageous degree to which the democratic principle of separation of powers is compromised by the Jan Lokpal bill. In order to approve surveillance on a politician suspected of criminal activity, the executive branch needs to file a surveillance request to a FISA court, which is under the auspices of the judicial branch. The judges serving on the FISA court, as well as those presiding over the eventual trial, need to be confirmed by the legislative branch. Thus, not only does Hazare’s proposed agency combine the roles of the executive and judicial branches in the American form of government, it entirely obviates the involvement and influence of the legislative branch. As Roy summed up the matter, the Jan Lokpal Bill, while no doubt written with the noblest of intentions, “derails the checks and balances between the judiciary, executive and other organs of the democratic structure”.

Cornell University Professor Robert Orttung succinctly captures the likely impact of the Jan Lokpal bill on India’s democratic system: “[once] there is no longer an internal system of checks on the administration, there is no external balance either”. That is to say, once a government loses its ability to internally regulate its division of power, the floodgates open to the projection of this power onto the nation at large and the breakdown of democratic limits on authoritarian governmental influence.

Although many may view this line of reasoning as fear mongering and succumbing to the slippery slope fallacy, the issue of curtailing the authoritarian power of the Indian government is especially pertinent today given the ideological leanings of the BJP, the ruling right-wing political party. Influenced heavily by fundamentalist Hindu doctrine, the BJP has enacted blatantly anti-Muslim measures with the unabashedly stated goal of a fundamentalist Hindu India. There has even been credible evidence implicating BJP party officials in the organization of communal violence and pogroms against Muslims. As journalist Ananya Vajpeyi frames the matter, the BJP government represents the “culmination of decades of Hindu nationalist ideological development”.

Given the current political landscape in India – the BJP won re-election a mere two years ago in a landslide victory with a clear mandate to govern – any additional empowerment of the government could spell disaster for the tens of millions of ethnic and religious minorities all over the country who are already facing persecution. Although some may argue that the goal of ending corruption justifies these consequences, history has shown time and time again, in instances such as Nazi Germany and post-revolution Iran, that granting authoritarian power to aggressive, ideologically charged governments has often been a very slippery slope.

The upshot is that Hazare’s proposed anti-corruption agency can be characterized as what philosophers often term a ‘ruse of solvency’ – a superficial solution that entrenches the very problem that it purports to solve; the insulated power that it grants to an extrajudicial entity unaccountable to anyone else could very well become a vessel for corruption itself. India simply cannot afford to compromise democratic limits on the power endowed upon its government in an effort to place a short-term bottleneck on corruption; the long-term effects of this decision would likely be disastrous. As a result, a more measured approach to governmental reform, such as the wage increases for bureaucrats and civil servants proposed above, is more preferable than Hazare’s vision on the basis of its ability to maintain democratic limits on the Indian government’s ability to wield authoritarian power.

Summary
There are few people who reject Hazare’s claim that the malaise of corruption is perhaps the most significant developmental challenge facing India in the 21st century. Given that this issue continues to stunt India’s economic growth and cost taxpayers hundreds of billions of dollars each year, it is not difficult to empathize with the fervent calls for change that Indian citizens are finally voicing. However, they must be careful to embrace reform only if it tackles corruption in a meaningful, sustainable, and appropriate manner.

While Hazare’s intentions are no doubt sincere, his approach to tackling this issue undermines fundamental democratic principles of governance and separation of powers. By insulating his proposed agency from existing governmental entities, his system is likely to simply breed corruption amongst those tasked with eliminating it if they are given free rein to operate without any external oversight. Furthermore, Hazare’s proposed reform fails to reflect the lessons learned from the demise of the Soviet Union; if it is to learn anything from the mistakes of Mikhail Gorbachev, the Indian government must be careful to not artificially disrupt a fragile ecosystem that is not ready for change. A large-scale disruption of economic activity could prove even more costly to Indian taxpayers than corruption is today.
The solution, thus, is not to impose jarring external forces on the tenuous relationship between government and enterprise in India, but rather to adopt a gradual approach to reforming the nature of that relationship from within the Indian government. An approach defined by internally-driven reform, such as that proposed above in the form of increased governmental wages and benefits, is much more likely to give way to sustainable, long-term solutions to weed out corruption without threatening the balance of power amongst existing branches of government.