Let the professionals tackle corruption
Andrew Sheng says it pays to utilise the problem-solving approaches of engineers and doctors
India has the most wonderful bookshops, full of the latest global best-sellers but also local books not easily available abroad. Indian writers have a flair for the English language that is inimitable and lyrical, reflecting the deep cultural respect for articulation.
One such book is the latest by the former chief executive of Procter & Gamble India, Gurcharan Das, India Grows at Night: A Liberal Case for a Strong State. He basically asks: "How can a nation become one of the world's emerging markets despite a weak, ineffective state?" The view that "India grows at night while the government sleeps" is what he calls a tale of private success and public failure.
Das talks of China and India's economic rise, saying that a common mistake is to think that the race between the two is about who will get rich first: "The truth is that both countries will become prosperous … The race is about who will fix its government first. India has law, and China has order, but a successful nation needs both. If India fixes its governance, before China fixes its politics, India will win the race, as Raghav Bahl says. If neither succeeds, then both may get stuck in the 'middle-income' trap. To avoid that fate India needs a stronger state and China needs a stronger society."
China's new Communist Party leader Xi Jinping has talked of the need to tackle corruption. Dealing with corruption is important in all economies, more so in emerging markets. Market forces alone will not solve the problem. The state has to take a lead, but which policeman can police himself?
At Mumbai airport, I picked up a remarkable new book, Ending Corruption? How to Clean Up India, by N.Vittal, a former central vigilance commissioner in India. His post was created to investigate corruption among Indian civil servants, including those in state-owned enterprises and banks. Vittal's book is a valuable practitioner's handbook on how to tackle corruption in large and complex bureaucracies.
Corruption is often tackled using the "policeman method", as it is a crime, but he argues for the use of a "doctor and engineer method" by treating corruption as a disease of the body politic of society, adopting engineering principles to design an efficient and robust system of governance. All engineering systems need maintenance. Tackling corruption, Vittal argues, requires the combined approach of "breakdown maintenance" - that is, fixing the machine in case of a breakdown - and a medical and engineering method. When I first started thinking about corruption while working at the World Bank, I thought it was a problem of income transfer. If public servants are badly paid, they simply extract a "rent" from those who want public services and this equalises the income between the underpaid public servants and the more highly paid private sector. Such transfers are unfortunately highly regressive, meaning the poor pay more than the rich.
There are really two types of rent - one bureaucratic, and the other political. For most technical and administrative jobs, it is possible to make a reasonable comparison between public service and private salaries. However, for political jobs that wield very large power, the cost of politics can be very high indeed. The recent US presidential and congressional elections were estimated to have cost US$6 billion, and since the US Supreme Court has ruled that there is no limit on political donations to parties, this means the democratic process may favour those willing to buy influence.
Vittal examines the treatment of corruption from the perspective of politics, bureaucracy, the judiciary, the media, corporate sector, and citizens and non-governmental organisations. He argues that the best antidote is transparency. The medical approach is to strengthen the "doctors", such as the judiciary, the election commission, the auditor general and anti-corruption agencies. The engineering approach requires IT, media, education and bureaucratic reform to address the twin deficits of governance, the "trust deficit in government credibility", and the "ethical deficit" requiring people in power to uphold the values of protecting the public interest.
In the end, Vittal recognises that corruption is about dealing with the weaknesses of people and how to select strong, ethical officials to put in positions of power. Making the right choices depends on each and every member of society.
Every Chinese knows the saying that it doesn't matter whether the cat is black or white, as long as it catches mice. Vittal tells the Indian story of a rat being harassed by a cat. It consults a wise owl, who advises that since the rat is weaker than the cat, it should become another cat, so it can fight back. The rat ponders this and comes back the next day to ask: "But how do I become a cat from a rat?" The owl says: "I am here to give you policy directions - implementation is your problem!"
As the Hong Kong and Singapore experiences have shown, when society feels strongly about corruption, something can be done. Change begins by taking the first step.
Andrew Sheng is president of the Fung Global Institute