Mr. Rebates

Saturday, November 27, 2010

The role of business in governmental corruption

Nov 16, 2010

The great hope of economic liberalisation was that government will be less intrusive and dominant and that this would end not just the vice-like grip of politicians and bureaucrats over the lives of people but also mean less corruption.

But this is one great hope that has been betrayed. It looks like that politicians and bureaucrats are still enjoying their power to dole out favours, whether it is mining or telecom licences, and that business folk find it useful and even profitable to cultivate the politicians and their minions in the government. Right from the Enron episode in the 1990s to the 2G spectrum allotment just goes to show that business is deeply involved in the corrupt system.
The captains of industry and their spokespersons are sure to argue that they are caught in a vicious circle and that they have no other option but to play along. The business stakes are a little too high to take unrealistic ethical positions.

That is an argument of expediency, plausible but not convincing enough. It is not necessary to pinpoint Indian businesses — and here we are not speaking about the honourable exceptions but about the majority who follow corrupt practices out of necessity, if not out of sheer villainy and cynicism — as the only culprits. It is quite evident from the time of Enron, that multinational corporations learned only too quickly the bad ways of doing business in developing countries including China, Indonesia, Nigeria and of course India.

While it is necessary to nail politicians and officials, is there some way of pinpointing the culpability of private businesses? After the Volcker report on Iraq’s oil-for-food scam, Congress politician and then minister for external affairs Natwar Singh was forced to step down. But the Volcker report cited many Indian business houses which paid their way to get at the oil barrels. Similarly, while DMK’s A Raja is being rightly cornered for his brazen indiscretions, the business houses which got special favours are not even mentioned.

Someone has to pick up enough courage to look squarely at the issue of complicity of businesses in the great public corruption system. While there are laws to punish businesses for violating the law in their business dealings, there are no explicit ones for penalising them in trying to win favours from the government. The issue should not be seen in ideological terms or as a socialist attack on the free market system. Even an ardent free market advocate cannot deny that private business is not above the temptation of giving bribes and soliciting privileges.

The private sector has kept out of the political debate on corruption under the mistaken assumption that that is an issue to be settled by the people and the politicians and there is not much that they can do about it. The truth is that politicians are indeed dependent on businesses to fill the coffers of their respective parties as well as their personal war chests. If business can bring itself to say no to the politician because it has sufficient clout to do so then it could be contributing to curbing corruption in the Indian public sphere.

As a matter of fact, the demand for best corporate practices should include provisions of not bribing public representatives and officials. This will place greater pressure on governments to be fair and impartial and for a transparent rule-based system, so essential for the functioning of an efficient free market system, to emerge.


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