May 10, 2009

Is corruption the reason for economic prosperity?

Come to think of it. Over the last few years, there is more prosperity visible all around. More people have disposable incomes (even at times of global recession), more people are now travelling abroad, more people are flying around in the country, more people throng the super malls, more cars (including the luxury models) clog the roads, more restaurants are now dotting the streets, and so on. The rich have become super rich and the middle class is fast catching up.

We believe that it is all because of the unprecedented growth rate. Ever since economic liberalisation was unleashed in 1991, India seems to have found its feet. The country is witnessing an economic boom. Even at times of a global meltdown, our newspapers tell us that the growth rate would remain around an impressive 7 per cent. Isn't that surprising? After all, exports are down, manufacturing is down, industry is not looking up, business and trade are hit by recession, agriculture is down. Than what drives the country's economic growth?

Well, while you ponder over this question, let me draw your attention to a related aspect. Agreed that income levels in IT sector, and other service industries, have gone up in recent past. But don't forget, IT/BPO only employs 1.7 million people. Other sectors may also have fared well, but how come the financial standard of every other household around you is suddenly in the grip of a new-found prosperity? How come every other urban household (and I am not talking of the lower middle class and the poor) has become rich? Is it because of the higher economic growth rate? Has economic growth trickled down to the middle class in such a uniform pattern so as to benefit one and all?

I have often wondered as to what is the reason behind this new-found prosperity. I find that the reasons are all apparent. It is only that we refuse to acknowledge it. The reason is simple. We are primarily the beneficiary of a parallel economic system that has brought about this visible change in our incomes.

Think again. There is hardly a day when we don't read of a scandal or a corruption case in the newspapers. We are told that a director of health services was apprehended for stacking crores of rupees in his house. We have read in the media that the owner of a canteen in Parliament owned a fleet of expensive cars. We read everyother day how money is being squandered in the name of development, how the traffic police makes money, how the government officials move the files (unless it comes weighted with money), and how the public services have to be 'paid' for. The list is endless. And this has been going on for decades now. It is not a new phenomenon.

You will also agree that what appears in the media is not even a tip of the iceberg. We are a corrupt nation, whether we like it or not. Transparency International ranks India 85th in an index of 180 countries. Transparency International's India chairperson, R H Tahiliani, was quoted in the media as saying that police, politics and lower judiciary were the worst dens of corruption.

Rajiv Gandhi has once said that only 15 paise from a rupee that is allocated for the rural areas reaches the true beneficiary. Rahul Gandhi now says that it is only 10 paise. We have used these statements in our media debates but no one has ever quantified how much is the money that is squandered on the way, or in practical terms pocketed by the functionaries in the name of development. A recent report in Nai Duniya has made an effort to quantify the amount. It says in the past five years, Rs 2,394 billion, earmarked for rural development has simply disappeared. And this is only the money that has been officially provided for rural development in the past five years. Imagine the colossal amount that has been pocketed in the past four decades, if we were to be a little conservative in our estimates.

You will agree that not all of this has flown out of the country. In fact, only a few of us are privileged to hoard blackmoney in safe tax-havens abroad. The US-based Global Financial Integrity has ranked India fifth in a list of 160 developing countries suffering outflow of huge amounts through illicit channels. Accordingly, US $ 27 billion flows out illegally every year from India.

Now, where does the rest of the unaccounted money go? No where. It says within the country.

Let us face it. Over the years, our parents, relatives and friends (ofcourse there are exceptions, and a lot many honest people live simple lives) have made money by illegal means. Don't get angry, even if you want to deny it I will accept it. But the fact remains that if corruption is so rampant, it is quite obvious those who indulged in it were somebody's relative. And when economic liberalisation came, it provided an opportunity to take out the unaccounted money and invest. Real estate boomed. Stock market grew. People invested in expensive cars and expensive gadgets, dining out every other day, and frequent holidays abroad.

In some way or the other we are all beneficiaries of the parallel economic system that prevails in this country. You don't need the economic understanding of economist Arun Kumar to know the influence of unaccounted money in our economic prosperity. Corruption has really paid us well. We all crib at someone else's corruption, but we try to remain discreet when it comes to our own share. We think we are the only ones who are honest, rest everyone is corrupt. We know it is not true and yet we want to flaunt this image. It is all about images, my dear. We live in times where images count.

Nevertheless, it is the tainted money, the unaccounted wealth that has propelled this country into a new-found economic prosperity. Economists will not accept this because it falls outside the gambit of their textbooks. Policy makers will remain quiet because like politicians they too are beneficiaries of this corrupt system. Private sector will only tarnish the public sector as corrupt, maintaining complete silence at the massive swindles that place in government approvals and acquisitions. I have often said that what makes corruption in a developing country like India different from the rich and industrialised countries is that in India corruption is decentralised. Every one can make money the illegal way. In the developed countries, there is massive corruption but at the top level only. Corruption is centralised in developed countries.

Does it mean that a democratically-elected but corrupt country has a better distribution pattern for the unaccounted wealth? Does it not mean that corruption can lead to economic prosperity?

Of course, it doesn't trickle down to the majority. In India, 77 per cent of the population is able to spend only Rs 20 a day. They may be victims of corruption, but certainly are not the beneficiaries. It is the remaining 23 per cent, and that includes the middle class, that has benefitted. The country's economic growth is measured in the purchasing power exhibited by the middle class. This is the real Shining India. Let there be no qualms about it.

Isn't it time we change our perception about economic prosperity?


Yayaver said...

Devinder Sir,I changed as person after reading your blog. The state of ignorance most of us living is quite shocking to me.The line in the blog is mistaken truth taken by us in perspective of India. "The country's economic growth is measured in the purchasing power exhibited by the middle class. This is the real Shining India."

Also,I request you to reply back any comments /questions as it will make your point in fair discussion than certain ideological essays.

Anonymous said...

Corruption is institutionalized in India. Every department of the public sector has its 'fees' fixed and it is proportional to the 'size' of the fact there even exist certain 'clubs' within the office which collect fees in exchange for trouble-free work...this does not mean that the private sector is unblemished as altering the account books, purchasing without bills, opening up multiple firms for carrying out illegal transactions are just the norm.
Another question i would like to ask modern economists as Mr. Sharma has very aptly pointed out that: is the increase in purchasing power tantamount to economic prosperity? and is economic prosperity all that we, as humans, wish for?

Dr Ernest Albert said...

Suno Devinder...and I am not taking any stance here.It is extremely,repeat extremely important to delve and scratch the religious matrix/psychology of our people here. For thousands of years we have been oriented(became accustomed) to "offering" things to our hundreds of Bhagwans. Who actually seek nothing.But their stone icons have been showered/loaded with ordinary laddu, barfi and ghee agni to silver,gold,precious stones.The Mukut,the Kanth-haar,the armlets,the anklets,bangles.You say it they have it.eversince printing came,our calenders have never printed any Hindu God without ornaments/jewels.Even Bajrangbali ji has them.(I just hope that my hindu brethren do not take offence).
Coming to the point, we just cannot live without "offering" something. The 'chai paani syndrome' has become eloquently bizzare and "volatile".It is absurd that an offering of a crore of rupees to this that temple becomes a news in a country of people who believed in gupt Daan.And NOW the murari- grari bapu log rule the religious pockets.I myself was given a 10 gram gold ring as Baba's prasad who was made to think I was some big guy,and I politely kept that ring at his feet.
When I have this much illgotten wealth I go and offer this much/I go and make this Bhagwaan Moorti....etc etc.Has there ever been any news THAT THIS OR THAT BIG GUY planted five,ten thousand trees.Well exceptions may be there.Let us read Chaucer's Pardoner's Tale where this Christian Pardoner keeps visiting vilages and for money,for gold, for cows and horses he issues PARDON certificates.But that was hundreds of years ago there.But in my, your India IT HAS COME TO STAY my friend.Is it Funny my friend that we load our stone icons with real expensive jewellery and turn Ganga Maiyya into a sewer.Here is a question :
who is polluting Ganga...SARKAR??Why cant I stop my factory's affluent here and now?And amidst all this I too am talking about "unaccounted,tainted" money.No wonder Ghazni looted us 9 times and his main targets used to be the hindu temples.He knew us soo well.Do carry on,I am learning many things.

Devinder Sharma said...

And it doesn't end here. If you stand up and tri raise awareness about these critical issues, you suddenly get a warning from the blogger unit saying tha your blog has been identified as a scam!

Well, this is what I have heard from the Google blog team !!

Deepanjali said...

Sure makes everyone think. Well, a certain number of people who made some money were those who worked in the Middle East. But once in India, they willy-nilly are party to this chai-paani system.
It is a shame, but it doesn't look like its going to change. There is absolutey no accountability in our governance.


Prasad said...


Hard hitting and opening up new doors in measuring our prosperity.

Weird wish! Our scientific community should be the first to make an attempt! A device which would beep loudly like the one used for security checks indicating the extent of corruption one is invloved in!!

Sunny Narang said...

I guess you have heard the statement " 100 main 99 beiman,mera desh mahaan". You obviously know that 18 million of 27 million employed in the organised sector are employed by government.These were part of the corrupt state socialism system till the 90's.I have been working in rural areas with artisans since 16 years and I believe corruption is now inherent in the practice of most Indians.From drought relief programs where bad cement is used to make watersheds,I asked the labourers in tribal Udaipur why do they not protest against such construction,they replied, that next year if the structure is not destroyed by rain,they will not get work.The running joke in Rajasthan is that there are three "fasals-rabi,kharif and sookha".
I do not know of one home-owner in this village of Rajasthan I have been now going to for 15 years who has no illegaly occupied public land,like roads,pathways to extend their homes. Also built new homes on gauchar.In the NREGA program,daily wages are shared by the Sarpanch and the labourer for not showing up for work,allowing really old and infirm people to show up for work.Corruption is the grease which runs our state, it is a parallel system of a welfare state, where everyone is allowed a little "chori" so no one protests against big "chori", "hamam main hum sab nange hain".
We will not create cheap public housing in our urban and metro areas,but allow slums to proliferate as they give regular income.Legally only few thousand cycle rickshaws are allowed,only so many pavement "tehbazari" is allowed, but the police and politician allow many times more.That in itself is an democratisation of corruption,giving a chance to a new entrant to the city.According to me the whole concept of collective society is corrupt or "maya" as Indians call it.Even after World War II the winning states did not go after illegal funds in Swiss banks, now after the meltdown they are saying anything between 1-12 trillion dollars exist in these "offshore banking" centres.All societies exist on lies,they have to to maintain the class/caste structure.It was said in France that revolutions eat up their own children, and we have seen such in most societal experiments from USSR to China.
So is there any possibility of a transparent society.Not till the central value is psychic/spiritual, and satisfaction/success is not measured in how much material ownership one has.And ecological sustainability defines our extraction from earth.So many dams were made all over India to increase food crops production,only to later grow sugarcane and flowers.Water levels have fallen to historical low levels and now wheat is grown in sandy soils which take nine waterings instead of 3-4 in clayey soil regions.Who wants to eat bajra,jowar even in villages today?
Today India has 400 million mobile phone connections,and everyone is aspiring the good life.There are so called "lower-middle class" everywhere who want to be middle class.The system is sustained because most want the same lives as the elite.Gandhi was right, that political revolutions are no use without spiritual ones.Lohia said Marxism was the last resort of the western world to finally stamp out the cultural diversity with one "Moral Church" and ideology.We have to create our own revolutions based on our cultural strengths.

Anonymous said...

As I said jokingly before ,we need to isolate the gene which make man greedy and corrupt and silence it. There is no other way.


Anonymous said...

Well written article on Taineted Money and economic prosperity of the middle class.