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Push the envelope

Kaushik Basu’s proposal of legalising bribery may not prevent the next big scam. But it has underlined the need for creative thinking to address social ills. Abhijit Banerjee writes.

india Updated: Jun 05, 2011 23:28 IST
Abhijit Banerjee

Kaushik Basu’s proposal of legalising bribery may not prevent the next big scam. But it has underlined the need for creative thinking to address social ills.

Kaushik Basu is easily the most distinguished economist to occupy the position of chief economic advisor in modern memory. And it shows. He invites us (as a nation) to think of economic ideas as things to be discussed and debated, rather than as a ritual to be gotten through before we get to the more interesting business of making policy, to which our reaction is mostly that of bewilderment.

We expect him to be reassuring us with empty catchphrases (“growth needs to be people-centric”, “balancing the demand for liquidity with the risk of spiraling inflation” and so forth).

Instead, he turns around and asks us to think! The slightly moralistic reaction in much of the press to his suggestion that perhaps some forms of bribe-giving should be legalised, mostly points to how unused we are to being forced to think economics.

What is a bribe and what is a legal payment is mostly a matter of the law. The American supreme court recently decreed that it’s essentially okay for any company to give unlimited amounts of money to any political party as long there is full disclosure.

In India (or France or Germany) this would constitute illegal purchase of political influence. Take another US example: Former American vice-president Dick Cheney continued to have strong financial connections with government contractors while in office. While the amorality of that was evident to everyone, except certain Republicans, it wasn’t considered enough to try to impeach him.

No British politician could dream of getting away with something like that.

The point is not at all that the US’s rather lax attitude towards public rectitude is somehow better, but that there are two sides to this argument.

For example, the legalisation of unlimited corporate donations to political parties (something, for the record, I think is a bad idea) can be justified by arguing that it’s better for the voters to know who buys whom, as that will happen in any case, just under the table.

But there is a counterargument: it’s too complicated for voters to figure out who is paying whom even when that information is publicly available and this, therefore, just lifts the cap on how much influence you can buy.

This is exactly the kind of debate that we should be having about Basu’s proposal. His case is very simple: suppose I want to register a deed and I have all the papers and come prepared to pay all the legal fees. The man at the counter demands a bribe. He reminds me that he can make me come back, or even lose my file.

Do I pay him or not? Basu’s point is that once I choose to pay him, I have no recourse whatsoever — paying bribes is illegal and therefore if I complain about having had to pay a bribe, I risk ending up in jail.

Why not offer me immunity from prosecution and a bribe refund as long as I can prove it? This is what Basu calls a “harassment bribe”. Then I would have an incentive to step forward and declare the bribe once I have paid it, and anticipating that the man at the counter would presumably desist.

This proposal makes eminent sense but under one condition: it has to be relatively easy to demonstrate that there was harassment. Suppose I pay the bribe and then complain. The man at the counter denies taking any bribes and instead accuses me of doing it to get back at him for being careful about scrutinising all the documents, which got me delayed.

What could I say? Or what would be even worse, I could actually accuse an honest bureaucrat of taking a bribe, just as a way to get the claimed bribe refunded by the government.

One possibility is that we have cameras at every counter recording every transaction. Banks and businesses already use cameras to monitor transactions and, recently, some police stations in Rajasthan were fitted with cameras as a way to pick up any wrongdoing. As such there is no direct connection between Basu’s proposal and using video monitoring.

In principle, we could try to discover malfeasance by just looking through all the videos — but who has the time to go through millions of hours of recordings? The advantage of combing it with his idea is that we will only need to look at the recording when there is an accusation of malfeasance. Since everyone expects the camera to expose any fraud, only genuine claims will be made.

Moreover, the camera could also be used for the opposite purpose of encouraging bureaucrats to report clients who offer them bribes to break the rules. There could be a fixed bonus given to any bureaucrat who can prove that he was offered a bribe and correspondingly, a penalty for the client.

Of course, there are problems with this scheme — we discovered in Rajasthan that machines intended to monitor absence of government nurses have a way of getting broken. The cameras will probably have to survive in a similar hostile climate.

On the other hand, it may not be too hard to arrange things so that the computer at the counter automatically freezes up as soon as the camera feed stops. There will also be attempts to move the transaction away from the counter, but at least that negotiation will get recorded, and could be used later to back up a complaint.

None of this will stop the next 2G scam or protect the poor truck drivers who get shaken down at street corners. We will also need to be careful in identifying situations where the problem is harassment rather than collusion between the bureaucrat and his client (in the latter case, making bribing legal is clearly counter-productive).

But all that should not obscure Basu’s most important point: that there are many problems like this where there are potentially huge gains from thinking creatively and thinking hard.

(Abhijit Banerjee is Ford Foundation International Professor of Economics and Director, Abdul Latif Jameel Poverty Action Lab, MIT. The views expressed by the author are personal)