Daily Archives: June 7, 2012

A Great Piece on the Real Drivers of Corruption in India over at K@W

Knowledge @ Wharton recently published a piece on the Real Drivers of Corruption in India and the Rest of the World that is a great read and great food for thought. Corruption is definitely one of the most important and topical issues in India today, and while we might like to think that the Zero Rupee Note would fix the problem, that’s just another one of Mario’s pipe dreams.

But the real insight into the article is that there is no innate difference, just differences of scale between business ethics in America and India. The differences that exist, which can be generally attributed to differences in the development, institutionalization, and capital generation stages of the two countries, are relatively minor and there are significant similarities between business in India today and business in America during the “robber barrons” age (from 1890 to 1934).

And while India has a common practice of using the politico-business nexus of “getting policies fixed, obtaining clearances, and resolving irregularities”, America lobbying, and, more recently, Super PACs (Political Action Committees), which often pour money into the pockets of potential senators and congresspeople than bribery in India ever could. After all, almost all major businesses understand the need to engage lobbyists. That is the price they pay for access to the U.S. Congress to fix policy, obtain legislative clearances, and influence political decision making. When you get right down to it, lobbying is just civilized, legalized, bribery.

However, since India doesn’t have a semi-structured “lobbying” process, the absence of institutional safeguards ensures that the process of influence peddling is a free-for-all. The authors argue that this is why the level of corruption in India is much larger than in America, but if you take a step back, there is nothing innately or structurally different between the American and Indian processes. In both countries, companies give money to people and groups they believe can help advance their cause.

However, the situation in India is now similar to the situation in America a century ago because of the recent waves of foreign capital flooding into India and the creation of a new class of billionaires — overnight — with the granting of spectrum licenses that allowed a select few to offer spectrum (mobile) based telecommunications services to a country with over a Billion people. As a result, the politicians, who made the awardees rich with the license grants, created a render unto Caesar what is Caesar’s type of demand, which was met because of the flood of money these Billionaires had at their disposal. But the truth is that, relatively speaking, the level of corruption in India is not much more than in America, the difference is that India is still in the “Wild West” phase of economic develop, and America has civilized the process of bribing through lobbyist intermediaries who, because they don’t make the Congressional vote, can’t guarantee results — but considering that the reality is that lobbyists who don’t get results don’t keep their jobs …