Corruption: Nature of the disease

No country has ever been able to eliminate corruption. It exists even in the most developed nations. US economist Alan Greenspan noted that it is regrettably the way human nature functions, whether we like it or not. What successful societies do is keep it to a minimum. 

We haven't been able to do that. Despite having an extraordinary development story, Bangladesh ranks 13th among the most corrupt countries in the world, Transparency International has said in its Corruption Perception Index. The TIB National Household Survey 2015 reveals that corruption hounds passport, law enforcement, transport, land administration, judiciary, health, local government, power, agriculture, taxation, gas, insurance, banking and NGOs. What's left? 

Total bribery in the service sectors in 2015, the report said, amounted to Tk 8,821 crore which amounted to 3.7 percent of Bangladesh's annual budget. The foreign minister himself, at a recent seminar organised by the Bangladesh Institute of International and Strategic Studies, identified corruption as one of the biggest challenges in implementation of the Sustainable Development Goals (SDGs) across the globe. "Bangladesh is no exception," he reportedly said.  

And yet very little is spoken about or written on how to reduce it beyond the call for tougher laws and their enforcement. But is that enough?  When has the death penalty stopped people from killing?  Countries that have managed to keep corruption, embezzlement and fraud under control have done so by adopting a three-pronged approach: the lawyer's approach, the economist's approach and the businessman's approach. It is the first - tougher new laws and tougher enforcement of existing laws - that is usually the topic of discussion in the media and other circles. 

The economist's approach is the least talked about. There are reasons for that. A lack of data on corruption to analyse the theoretical contributions have allowed conflicting theories on the causes and consequences of corruption to coexist. As a result, the  field  has  failed to  provide   consistent   policy  guidelines  to  tackle corruption  and  has  remained   somewhat   disconnected   from  the  discussion arena. One of the reasons often cited for the relative neglect of corruption as a research topic in economics is that a bribe is simply a transfer and therefore entails no serious welfare losses. 

The economist's approach basically entails unleashing the forces of competition against corruption and has the least cost in terms of civil liberties. In laissez-faire societies market forces effectively drive away rent-seeking. How? The primary objective of firms is to maximise profits. Their actions are affected by rules and regulations the public decides to impose on the private sector. A second factor that determines the behaviour of firms results directly from a direct monitoring by the public to ensure compliance with its regulations.  Lastly, there is the market  structure  in which companies operate,  something  that  is the product both  of natural  technological  possibilities and of deliberate policy choices of the public,  such as the level of the tariff rates  on  foreign  trade.  The market structure will have an effect on the extent of the control right owned by the bureaucrat. Typically, the ability to extract bribes in exchange for softer regulations will be higher in environments in which firms enjoy monopoly rents. 

The businessman's approach entails paying higher wages to bureaucrats. Two of the least corrupt countries of the world, Singapore and Hong Kong, are usually cited as examples of successful applications of the lawyer's approach, as they have extremely tough laws on corruption. But they are also examples of countries that pay their bureaucrats exceptionally well. However the level of political competition and civil liberties in these countries is quite poor, something that has allowed exceptional levels of pay in the bureaucracy without too much political opposition, and has often bestowed the anti-corruption agencies with sweeping powers that amount to a 'guilty until proven innocent' principle, or even the right to violate the privacy of individual citizens. 

But it is difficult to distinguish how much of their clean record should be attributed to their policy of higher wages in the bureaucracy and how much to their tough law enforcement. Thus, what is required is an assessment of the relative impact of each policy option based on a wider empirical basis.

The businessman's approach is not showing much promise in Bangladesh. The country should put more focus on the other two.

The writer is a member of the editorial team at The Daily Star.