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LATEST NEWS UPDATES | Concern over Corruption by Prabhat Patnaik

Concern over Corruption by Prabhat Patnaik

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published Published on Jul 30, 2011   modified Modified on Jul 30, 2011

There is no gainsaying that corruption breeds cynicism which undermines the democratic foundations of our polity. There is no gainsaying, too, that corruption results in a net shift of resources away from the poor. There can therefore be no two opinions about the need for controlling corruption through an appropriate lok pal bill. But the impression is unavoidable that the current hullabaloo about ‘corruption’ constitutes a case of mistaken identity: what is being attributed to ‘corruption’ should really be laid at the door of something else.

One should distinguish between corruption within any particular property regime, and corruption associated with a change in the property regime. Corruption arises because the prices of certain commodities are below their ‘worth’ to some users. There is, of course, nothing wrong with this: certain public services are provided free to all; some essential commodities like foodgrains are deliberately under-priced (that is, their issue price is less than the market-clearing price), and are distributed through a system of rationing. The scope for corruption arises in all these cases: since some will be willing to pay for public services that are available free, public officials can extract a ‘bribe’, threatening a withdrawal of such services otherwise; similarly in the case of under-priced and rationed commodities, there is scope for altering the way they are distributed, for a ‘bribe’.

Corruption of this sort was typically associated with dirigiste regimes which believed in making a variety of goods and services available to the people at low prices and which also believed in ‘rationing’ investment opportunities (licensing) and subsidized finance. It was thought, therefore, that ‘liberalization’, no matter what its social costs in terms of increased inequalities, would reduce corruption. But corruption paradoxically has assumed unprecedented proportions precisely under ‘liberalization’. The reason lies in the fact that ‘liberalization’ has been accompanied by substantial ‘privatization’, that is, a change in the property regime. Even if we assume, for argument’s sake, that ‘liberalization’ has indeed reduced ‘old’ corruption, that is, corruption within the earlier existing property regime, it has vastly increased the scope for ‘new’ corruption that arises because of the change in the property regime via ‘privatization’.

There would be no scope for corruption even with privatization if such privatization occurred at appropriate prices. If government assets were sold to the highest bidder in a fair auction, then no matter what one’s other objections to such a process, one would not expect it to generate corruption. But all privatization everywhere in the third world that has accompanied the introduction of neo-liberalism has been at ‘throwaway’ prices, certainly at prices way below what a fair auction would have fetched. Indeed, the Bretton Woods institutions enjoin upon third world countries embarking on neo-liberalism the need, ostensibly, to entice private buyers for public assets by deliberately offering such assets at throwaway prices. In our own country, there have been numerous instances of privatization at such deliberately low prices, from the case of the Bharat Aluminium Company Limited to that of the Centaur Hotel in Mumbai (which was resold within a short time for a much larger price than that charged by the government).

Once public property is offered at throwaway prices, those who succeed in buying it within such a ‘rationing’ regime constitute a privileged lot, and for this privilege they are willing to offer a bribe. The recent upsurge in corruption is thus a fallout of ‘privatization’, of a change in the property regime (apart of course from the fact that a culture of ‘money-making’ has gained currency under ‘liberalization’).

Some may argue that privatization itself is motivated by corruption, that the appetite for bribes is what makes public officials privatize government assets. This is strictly not true; the pressure for privatization comes from international finance capital (the recent Greek austerity plan confirms it), though the lure of bribes may make public officials fall in line more readily. Even though these factors are thus intermingled, two conclusions stand out: first, what adversely affects the people is not the corruption that is associated with privatization, but privatization itself. And second, no lok pal bill can possibly help the people unless privatization of this sort, which constitutes a drain on the exchequer, is prevented.

Consider the case of the 2G scam. The loss to the exchequer from the government’s refusal to take the auction route has been variously estimated: let us, for argument’s sake, take the oft-quoted figure of Rs 1,76,000 crore. It is this sum which represents the loss to the people: it could have been spent on their benefit but was diverted to private pockets. The bribe taken, allegedly by the minister concerned, came out of this sum, and it was taken to determine to which particular pockets the remainder of the sum should go. But the bribe was not necessarily an additional burden on the people. If no bribe had been taken, and the first-come-first-served policy had been strictly and ‘honestly’ implemented without going through the auction route, even then the loss to the people would not necessarily have been less than Rs 1,76,000 crore. Corruption associated with privatization determines in short the distribution of the amount filched from the people rather than the amount itself. It follows that the people are adversely affected not by the corruption that goes with privatization, but by privatization itself.

As long as privatization at throwaway prices occurs, this loss to the people will continue to occur, even if there is no corruption, and even if the strongest possible lok pal bill is passed. The definition of ‘corruption’ given in the Prevention of Corruption Act 1988, upon which all current drafts of the lok pal bill are based, refers to “gratification” (not necessarily only monetary) that a public servant earns for services rendered, in addition to his or her legal emoluments. The privatization that occurs at throwaway prices under neo-liberal regimes of the third world will not fall under the purview of the lok pal if no “gratification” is involved. And since the loss to the people arises from the fact of such privatization, and not from corruption per se, the lok pal will not be in any position to prevent the loss to the people.

In the 2G case, for instance, no lok pal would have entered the picture at all if some alleged “gratification” had not accrued to some public officials. The loss to the exchequer, and hence to the people, would have remained. True, the comptroller and auditor general would have still passed strictures the way it did, but the CAG’s strictures scarcely overturn policy. If they did, then the neo-liberal regime could not have been sustained for so long.

Obtaining public property at throwaway prices is an instance of what Marx would have called the “primitive accumulation of capital”. Corruption associated with privatization is like a tax imposed for personal gain by the corrupt public officials upon this “primitive accumulation”: it determines how the proceeds of this “primitive accumulation” are distributed, not their magnitude. This is not true, of course, of all types of corruption, but it is true of the big corruption that has been surfacing of late. The prevention of such corruption will not ameliorate the conditions of the people; what will do so is the prevention of “primitive accumulation” itself. (The prevention of other forms of corruption that add to the magnitude of “primitive accumulation” will, of course, help the people, but these are not the big-ticket corruption cases we have seen of late).

Focusing on corruption alone, it follows, is a case of mistaken identity. The fallout of the process of privatization, which is an integral part of the neo-liberal regime and which constitutes a form of “primitive accumulation of capital”, is being mistakenly attributed to corruption as such. Such fallout, however, will continue to be there, even if all corruption as defined by the 1988 act is completely eliminated. If those agitating against corruption were also asking for an end to all privatization of public property, or, at the very least, for an end to all privatization that does not take the auction route, in addition to asking for a strong lok pal, then their claims of representing the people’s interests would have carried greater credibility. But the fact that there is all this talk of corruption but a deafening silence on the issue of privatization with which it is enmeshed, and of “primitive accumulation” in general, is suggestive of intellectual naivete on the part of the anti-corruption crusaders, if not of reluctance in confronting neo-liberalism.

The author is a former professor, Centre for Economic Studies, Jawaharlal Nehru University, New Delhi

The Telegraph, 27 July, 2011, http://www.telegraphindia.com/1110727/jsp/opinion/story_14278936.jsp


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